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Postponement Strategy in Business

Introduction

A “postponement” strategy is a business strategy that defers investment until the last possible moment. It is believed that this strategy reduces the risk of unsuccessful investments and the potential profit increases. This approach has several advantages. For example, in supply chain management, in cases where it is impossible to predict the demand, only the bulk of the product is purchased, which may subsequently undergo various modifications. This strategy is used in many industries and is constantly evolving along with mathematical modeling methods.

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Benefits

For example, multi-station manufacturing uses a two-machine design to explore optimal manufacturing policies with deferral policies and product quality checks (Chiu et al., 2019). With the help of numerical methods and mathematical modeling in production, the possible profit is improved, and the distribution of energy resources, materials, and a reduction in the production cycle. It is a manifestation of the classic “postponement” strategy when one of the machines produces the goods, while the second machine, according to the incoming customer requirements, finishes them.

The postponement strategy is often used in conjunction with a service-oriented manufacturing approach. These methods’ goals are similar, and their work mechanisms complement each other (Luo & Zhang, 2019). This approach is widely popular in online stores, where it is much easier to control demand “here and now.” The most successful application cases of the postponement strategy were found precisely in the technology of online sales, e-commerce, and service-oriented manufacturing approaches.

In addition to the prominent areas of applying this strategy listed above, the collection of complex technical goods is carried out according to the client’s requirements. This approach is called “vanilla boxes” and is widely used among online stores of computers and laptops (Zinn, 2019). It should also be noted that in many industries, this strategy is either used implicitly or requires research. For example, a group of scientists from Brazil analyzed winemaking from the perspective of postponement. The postponement strategy is applied in the filling and labeling stages (Ferreira, Toledo, & Rodrigues, 2020). Other stages of production and those mentioned require a more profound analysis for a more practical application of this strategy in new directions.

Problems

However, this method is not ideal and has several problems. The ever-growing retail sales demand the same rate of growth in the delivery of logistics companies. Suppose the use of a postponement in appropriate cases has almost no drawbacks in the case of the production of goods. In that case, the delivery of goods to the client faces such a problem, dictated, among other things, by the dominance of online stores and online sales. Current research focuses specifically on the issue of the delayed warehouse (WPS) and last-mile delivery. The development is carried out to create a universal intelligent system for debugging the logistics process (Leung et al., 2017). The postponement process is unsuitable in some cases, for example, in the production of branded products. On the other hand, restaurants, and cafes that deliver food use this strategy as the only correct one.

Conclusion

Even though this approach has several problems and unsolved problems in logistics and other stages of the chain, it is increasingly scalable and applied at various stages of production and sale. Perhaps, in the future, using this strategy, many industries will be able to optimize costs and profits, allowing more efficient management of investments.

References

Chiu, S. W., Kuo, J. S., Chiu, Y. S. P., & Chang, H. H. (2019). Production and distribution decisions for a multi-product system with component commonality, postponement strategy and quality assurance using a two-machine scheme. Jordan Journal of Mechanical and Industrial Engineering, 13(2).

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Ferreira, K. A., Toledo, M. L., & Rodrigues, L. F. (2020). Postponement practices in the Brazilian Southeast wine sector. The International Journal of Logistics Management.

Leung, K. H., Cheng, S. W., Choy, K. L., Wong, D. W., Lam, H. Y., Hui, Y. Y.,… & Tang, V. (2017). A process-oriented warehouse postponement strategy for e-commerce order fulfillment in warehouses and distribution centers in Asia. In Managerial strategies and solutions for business success in Asia (pp. 21-34). PA, USA: IGI Global.

Luo, J., & Zhang, Q. (2019). Operations mechanism of postponement strategy for service-oriented manufacturing. The International Journal of Advanced Manufacturing Technology, 104(9), 3335-3341.

Zinn, W. (2019). A historical review of postponement research. Journal of Business Logistics, 40(1), 66-72.

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