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The New Age of Business Postponement Strategies

Date posted: March 26, 2015

Indeed it is better to postpone, lest either we complete too little by hurrying,
or wander too long in completing it.
— Tertullian

 The identification of postponement as a strategic business concept is often attributed to Zinn and Bowersox in a paper they published in 1988 in the Journal of Business Logistics. I feel compelled to point out that Tertullian made the comment above in the second century.

Postponement is a business strategy that maximizes possible benefit and minimizes risk by delaying further investment into a product or service until the last possible moment. The idea at postponement’s core: forecasts are more accurate the closer they are to real time (i.e., it’s easier to see 10 days into the future than 10 years) and the greater they are aggregated (i.e., umbrellas versus pink umbrellas). Postponement strategies raise the level of aggregation that must be forecasted and reduce the timeframe of the forecast by moving the act of finishing the product as close to the point of consumption as possible.

One successful example of postponement, delayed differentiation, is the use of vanilla boxes. Semi-finished computers are stored in advance of the actual demand for the finished products. Upon seeing the demand, thus with no residual uncertainty, the vanilla boxes are finished by adding (or removing) components. The three key interrelated decisions: how many different types of boxes to stock, in what quantities, and how to finish them to meet the order most effectively.

A recent post on the E2open blog notes that technology is taking postponement strategies to higher levels of effectiveness:

Think about it—you are postponing the final finishing of a product until you are closer to its end user, possibly in distance and certainly in time. In order to successfully balance supply and demand, you must have the ability to get accurate, timely information about both supply and demand—and you must be able to do so quickly.

This is where the business network comes in, by providing a platform for collecting, processing, analyzing, sharing, and acting upon information. The business network brings together the demand signals, so you know what you need to build, and inventory positions at all of your locations (including in-transit), as well as those of your partners who are supplying parts, performing contract manufacturing, or carrying out key logistics functions, so you know what you can build.

By having the technology you need to balance supply and demand in a robust, reliable fashion, you can replace buffer inventory with information, atoms with bits (which are a lot easier to move around). Postponement strategies have always been a powerful way of dealing with the problem of imperfect knowledge of the future. Now, with cloud-based business networks linking all of the participants in the value chain on a common, integrated platform, these strategies are the easiest and most effective to implement they have ever been.

This is taking an old idea to a whole new level of execution. The ramifications of this strategy are increasingly evident in make-to-order products available online that appease customer demand and raise satisfaction while driving down risk for manufacturers.

It seems today’s postponement has been … well … well worth waiting for.