Manufacturing Trends

6 Reasons for Postponement Or Why the Rush?

Supply Chain & Logistics

By Matthias Vollmert - November 6, 2017

When we were little, many of us would enjoy lying in a field somewhere gazing up at the sky, watching the white clouds scudding by. Sometimes our mothers would scold at us for time wasting, and it was usually very difficult to convince her of the benefits of procrastination.

Convincing the organization about postponement can sometimes feel just as challenging. In our headlong rush to be productive and ‘get things done’, it’s easy to forget there may be some very good reasons for putting things off, for delaying the next activity.

What is Postponement? One of the hottest manufacturing trends of 2018

Logistics and time postponement moves the point at which forecast-driven information and demand-driven information meet. This point shifts downstream, occurring later in the progression of activities from purchasing, manufacturing, storage, light manufacturing inside the warehouse, and delivery to the end customer. It combines two winning production strategies – make-to-stock and make-to-order – and reaps the benefits of both.

While it is very common practice in many industries to keep products in central locations so they can be distributed quickly when customer orders come in (time postponement), companies can also make good use of additional manufacturing-related postponement activities. These lesser-known activities include delaying the purchase of expensive or fragile materials (purchasing postponement), creating products in semi-finished states for subsequent customization (manufacturing postponement), and finishing and customizing products in warehouses, hubs, and other facilities close to the customer (logistics postponement).

6 of the Best Reasons Why DHL Customers Use Postponement

 

1. Meet specific needs across different countries and territories

 

You may want to increase productivity and standardize processes but you realize that your product specifications are very different across countries and even for different customer groups. This is sure to negatively impact production efficiency. Also, you may be seeking a cost-efficient way to adhere to changing local regulations and specifications in product design or packaging.

Postponement can provide the manufacturing trend you are looking for. Our customer Sony uses multiple logistics postponement strategies along their entire supply chain to serve markets in Korea, Taiwan, Japan and China, switching out power plugs and product instructions as required in each country.

2. Reduce overall inventory levels, cutting inventory costs

 

Unless your forecasts are very accurate, holding inventories of all different types of SKU (stock keeping unit) results in high inventory storage costs and a high level of write-offs, particularly when production sites require a high MOQ (minimum order quantity). The right postponement strategy uses an inventory pooling principle to help cut your storage costs and write-offs while reducing your working capital.

3. Transport only what's needed & get to market fast

 

Once your final production step is based on actual demand, and perhaps you undertake final customization downstream from your manufacturing sites, your accuracy of ordering to manufacturing goes up and your order volumes to manufacturing sites go down.

Postponement typically lowers the quantity of products transported and therefore also reduces your inbound transport costs. Postponement undertaken at a location close to end-demand (known as a postponement hub) also helps you to cut order-to-market lead time – one of our pharmaceutical customers has used postponement to reduce lead time from 90 to 30 days across Asia Pacific.

4. Decide to manufacture where cheapest

 

With the right postponement strategy in place, you can make more effective use of low-cost country manufacturing. Many fashion manufacturers, for example, conduct the early stages of production in locations where labor costs are relatively low and then transport their goods for late-stage final production closer to customer demand, as this helps to reduce delivery lead times. In addition, your postponement strategy should ensure each manufacturing site concentrates on the most value-adding production activities.

5. Become the king of customization

 

Today’s customers want more product customization but are unwilling to pay extra for this. Your organization may be under pressure to increase product options, but you don’t want to significantly increase production costs. The solution to cost-effective customization is postponement, as I said, one of the hottest manufacturing trends at the moment. One of our automotive customers uses logistics postponement to provide customized color finishes to new cars just ahead of delivery to end customers.

6. Make the very best use of everything

 

Another advantage of postponement is it allows you to make the very best use of all your resources. Of course, making-to-stock by creating standardized products increases your production efficiency and optimizes resource usage at the main production site. From that great starting point, the right postponement strategy enables you to also make-to-order by modifying standardized products in a cost-effective way. One of our life sciences and healthcare customers, for example, uses postponement solutions to redress (or relabel) products and perform secondary packaging as required by local markets.

As with any strategy, not every company can benefit from time or manufacturing postponement in the same way. There’s no one-size-fits-all postponement solution.

DHL Consulting can help you to analyze your existing supply chain set-up and identify whether and how postponement can benefit your company.

 

If you are interested in discussing the topic and potential use for your company, please reach out to me.

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