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.
I’m seeing an uptick in coverage of Sales and Operations (S&OP) planning that supports the statement made in a recent Forbes article:
Sales and Operations planning (S&OP), the cross-functional process to align the commercial processes of sales and marketing with the operational processes of supply, is having a renaissance. It is not a new process. Companies have worked on these processes for over 35 years; but today, only two out of five companies surveyed believe that their processes are effective.
There’s the rub: despite the renewed emphasis on S&OP, its effectiveness remains an issue for many organizations. As the Forbes piece asks, why is it so hard?
A recent webinar hosted by E2open addressed the issue of S&OP effectiveness by detailing the top four actions a company can take to accelerate timely, measureable process improvement:
I found this to be a timely and very useful webinar; you can register to watch it here.
Do you know the way to San Jose?
I’ve been away so long
I may go wrong and lose my way.
Do you know the way to San Jose?
I’m going back to find some peace of mind in San Jose.
I was on the way to the Apple store the other day when Dionne Warwick came on the radio. The song was a real blast from the past. It got me thinking about Silicon Valley, and how many tech companies have found peace of mind there, or at least a good piece of the market. There’s a method to the madness in the Valley, and it’s called agility.
A recent article in the Harvard Business Review revisited AnnaLee Saxenian’s seminal work on the culture of Silicon Valley, Regional Advantage: Culture and Competition in Silicon Valley and Route 128, which recently celebrated its 20th year in print. The book looks at what differentiated Silicon Valley from the tech industry outside Boston, and ultimately points to the former’s ability to adapt to change as trumping other constraints in enabling it to grow and flourish in a way that never occurred along Route 128. Saxenian notes in the HBR piece:
The Boston area was organized around these big, vertically integrated minicomputer companies: DEC, Data General. They were classic postwar American companies, with vertical hierarchies and career ladders. Planning and research happened at the top of the organization and then funneled down. Whereas in Silicon Valley you had, really by chance not design, a series of flat companies, with project-based teams that moved around. People moved between companies much more fluidly. At a time that technology and know-how were sort of trapped within the vertically integrated companies of Route 128, they were being continually recombined in Silicon Valley. That gave them a real edge in innovation.
It also provided greater resilience to cycles of boom and bust, as the agile structure enabled regeneration in the face of accelerating change.
In a post on the E2open blog, Andrew Atkinson asserts that the “secret sauce” of Silicon Valley that Saxenian describes applies more broadly to today’s global supply networks, which also demand the ability to be agile in responding to change. He notes:
No matter how you try to quantify it, the message is abundantly clear. In today’s fast-moving pace of business, change is the only certainty, creating an environment that demands a “survival of the fittest” mindset. Adapt and you’ll be rewarded handsomely. With the right combination of agility and innovation, your supply chain (and in turn, your business) can thrive, much like the bustling Silicon Valley we know today.
That’s something very much worth remembering, whether you’re on the way to San Jose, Sao Paolo, or Shanghai.