Description
SCM Presentation on Postponement Strategies
SCM Presentation
On
Postponement Strategies
By
1. What is a postponement strategy? 2. What are the types of postponement strategies? 3. Why use a postponement strategy? 4. How a postponement strategy works? 5. Case Studies on Companies using Postponement. 1. General Motors 2. Honda 3. Reebok
Presentation Outline
1. What is a postponement strategy? 2. What are the types of postponement strategies? 3. Why using a postponement strategy? 4. How a postponement strategy works? 5. Companies following postponement strategy
1. 2. 3. General Motors Honda Reebok
What is a Postponement Strategy?
Introduction
? Postponement is a supply chain strategy that Delays product differentiation at a point closer to the customer
? This involves designing and developing generic configurable products that can be customized quickly and inexpensively once actual consumer demand is known
? Postponement also entails inventory strategies to deploy inventory farther away from the customer while fulfilling service level objectives and reducing inventory costs and minimizing risks i.e., strategies for holding the right inventory, at the right place, in the right form
Supply Chain
Traditional Supply Chain (Non-Postponement)
Supply Chain with a Generic Product (Postponement Case)
What are the types of postponement Strategies?
Major types of postponement strategy
? Purchasing postponement ? Delay purchasing of some expensive and fragile materials
? Manufacturing postponement ? Products in semi-finished forms and can be customized quickly in production facilities
? Logistics postponement ? Products in semi-finished forms and can be customized quickly in production facilities close to customers
Major types of postponement strategy
Purchasing Postponement Manufacturing Postponement
Logistics Postponement
Other Postponement Strategies
? Product development postponement
? Delay critical product development decision
? Price postponement
? Delay the pricing decision until customer demand is known
? Postponement of passage of title
? Delay the transfer of product ownership from seller to buyer
Why to use Postponement Strategy?
Reasons for Postponement
High Product Variety
High Value-add at the end of supply chain
High Demand Uncertainty
Postponement
Customization not costly
Short Product Life Cycles
Global Supply Chain
Advantages
? Reduce inventory cost ? Reduce transportation cost ? Reduce risk of obsolescence ? Reduce demand variability ? Improve competitiveness by offering customized products quickly
How A Postponement Strategy Works
Requisites for a postponement to occur
? High product variety ? Modular and standardized product design ? Flexible manufacturing system ? Real time information and communication ? Fast response logistics ? Strategic supplier relationship
Case: GM
Introduction
? As of 2004, GM produced 68 different models in North America Over 200 facilities constituting 52 percent of its revenues Over 600 million combinations possible
?
?
?
Excess inventory showed that forecasting is very difficult
The only way out is the postponement strategy
?
Contd..
GM looked at postponement strategy considering three verticals: ? Software configuration ? Entertainment ? Aesthetic features
Software Configuration
? Before postponement, the ECUs came to GM in finished form with all the software pre-loaded Suppliers charged GM a premium for customer software installation To solve this, GM had to redesign both the assembly process and the ECU hardware Today, the ECU comes from suppliers to GM in a generic form The hardware is a common platform which receives customized software in just 81 seconds GM dealers also acquired the capability of flash programming for each car
? ?
? ?
?
Entertainment and aesthetic features
? Post sale “accesorization” has become a key differentiator Entertainment systems have become far more sophisticated The plug-and-play capability enables them to be uploaded directly at the dealer Dealers also put in the desired wheel-set on an individual basis The customers can log on to GMbuypower.com and choose the car with desired features
?
?
?
?
Benefits of Postponement Strategy for GM
? Inventory cost savings estimated to be around 10-15 percent Maintenance cost savings due to highly communized ECU hardware
?
?
GM software engineers solve repair issues now instead of sending parts back
Subassemblies are outsourced to suppliers having quality and expertise This has led to GM being on the way to a build-toorder manufacturing system
?
?
Case: Honda
Postponement Strategy - Honda
? Trends in early 1990’s ? Platform strategy by GM and VW – Reduction in design, engineering and manufacturing costs ? VW reduced the number of platforms from 14 to 4 - Increased platform use from 70% to 100 % by 2001 ? High focus on component standardization ? Honda did not wanted to be left behind
Flexible Manufacturing – Honda
Concept: Different models are rolled out from a plant with standardized assembly to meet multi market demand. 3 Steps: ? Programmable robots to aid in standardized assembly ? ? Increase in offline or outsourced subassembly One-size-fits-all conveyer belts
Honda Accord: Showcasing Postponement
? Same model of Honda Accord had different perceptions in different markets US Customers – too small Japanese Customers – Lacked in Style New strategy to satisfy demand in US, Europe and Japan Focus was on design of chassis, the platform or skeleton
? ? ?
?
Honda Accord: Showcasing Postponement
? Adjustable Chassis so that height, width and length can varied according to market preferences Gas tank was moved behind and wheels were connected with brackets that can be moved in or moved out More variety with less cost ($600 m) compared to Ford’s spent on Taurus ($2.8 b) 3 varieties of Accord from single platform at 20 % less Savings of $1200 per vehicle, $1000 for customer
?
?
?
?
Honda Civic
Dimension (in) Wheelbase Length 3/5 Door Hatchback 106 169 4 Door Sedan 103.6 175 Stream Minivan 107 179
Height
59
58
63
3 Door Hatchback – European 5 Door Hatchback – Japanese 4 Door Sedan – US Honda Stream - Minivan Flexibility of the chassis allowed Honda to cater to the above markets
Honda: Benefits Accrued
? High savings, first in the race for global car ? Increased facilities in the local markets ? Reduction of reliance on other plants ? Saves transportation costs ? Increased employment
Case: Reebok
Licensed Apparel Business
Situation
?
Impact
?
Reebok is a licensed apparel supplier for NFL,NBA and NHL
Highly seasonal & very uncertain demand for player jerseys
Demand is concentrated over five month period Long lead time means missing the increase in sales generated within two weeks of a big win If product is not quickly available to meet demand the opportunity is lost Lost sales cost more than inventory overstocks
?
?
?
Teams are more predictable, but correlated with success
Hot-market players and teams emerge during season
?
?
?
? ?
High margins, fashion item
Demand driven by availability Unsold jerseys can become instantly obsolete
?
Nature of Consumer Demand: Complicated !!
? Sales are highest at start of season, August – Sept. “Hot market” players and teams emerge over course of season Increase at end of season for contending teams & stars: Christmas, playoffs and Super Bowl Off season is slower, with demand spikes for big-name player movements
?
?
?
Planning Challenge
How should Reebok plan and manage inventory to manage costs while providing the flexibility required to meet demand for NFL Replica jerseys?
SOLUTION
? 1. 2. Reebok restructures its supply chain to cater to two different types of items Stable Items - Lead time 3-12 weeks
Customized Apparel - Lead time <1 week
Supply Chain Overview
Consumers
Raw Material Suppliers
Contract Manufacturers
Reebok Warehouse
Retail Distribution Centers
Retail Outlets Normal Demand
2 - 16 weeks
4-8 weeks
3-12 weeks
1 week
“Hot Market” Demand
1-2 weeks or less 1 week
Postponement Strategy
? Suppliers of Reebok are Contract Manufacturers in Central America Reebok’s finishing facility is in Indianapolis
?
?
Reebok receives two categories of supplies from its suppliers 1. Finished Goods-Team Name and Player’s name already printed on the jersey 2. Semi-Finished Goods
o o Team-Finished Jerseys Blank Jerseys
Internal Supply Chain
Contract Manufacturers (CM) Fabric Inventory Cut, sew, and assembly Blank/TeamFinished Jersey at supplier Reebok (Indianapolis) Shipping
Blank/TeamFinished Jersey
Screen Printing
Screen Printing
FG Inventory
2 - 16 weeks 4 weeks 4 weeks 1 weeks
Stephen C. Graves Copyright 2003. All Rights Reserved
Benefits Accrued
• Reebok a classic Example of Two stage production with Postponement, The advantages are: ? Lower Labor cost for production of black jerseys ? Optimize service levels by sourcing the final assembly in US ? Added Advantage: creation on local jobs in the area of textile and printing
doc_621864133.pptx
SCM Presentation on Postponement Strategies
SCM Presentation
On
Postponement Strategies
By
1. What is a postponement strategy? 2. What are the types of postponement strategies? 3. Why use a postponement strategy? 4. How a postponement strategy works? 5. Case Studies on Companies using Postponement. 1. General Motors 2. Honda 3. Reebok
Presentation Outline
1. What is a postponement strategy? 2. What are the types of postponement strategies? 3. Why using a postponement strategy? 4. How a postponement strategy works? 5. Companies following postponement strategy
1. 2. 3. General Motors Honda Reebok
What is a Postponement Strategy?
Introduction
? Postponement is a supply chain strategy that Delays product differentiation at a point closer to the customer
? This involves designing and developing generic configurable products that can be customized quickly and inexpensively once actual consumer demand is known
? Postponement also entails inventory strategies to deploy inventory farther away from the customer while fulfilling service level objectives and reducing inventory costs and minimizing risks i.e., strategies for holding the right inventory, at the right place, in the right form
Supply Chain
Traditional Supply Chain (Non-Postponement)
Supply Chain with a Generic Product (Postponement Case)
What are the types of postponement Strategies?
Major types of postponement strategy
? Purchasing postponement ? Delay purchasing of some expensive and fragile materials
? Manufacturing postponement ? Products in semi-finished forms and can be customized quickly in production facilities
? Logistics postponement ? Products in semi-finished forms and can be customized quickly in production facilities close to customers
Major types of postponement strategy
Purchasing Postponement Manufacturing Postponement
Logistics Postponement
Other Postponement Strategies
? Product development postponement
? Delay critical product development decision
? Price postponement
? Delay the pricing decision until customer demand is known
? Postponement of passage of title
? Delay the transfer of product ownership from seller to buyer
Why to use Postponement Strategy?
Reasons for Postponement
High Product Variety
High Value-add at the end of supply chain
High Demand Uncertainty
Postponement
Customization not costly
Short Product Life Cycles
Global Supply Chain
Advantages
? Reduce inventory cost ? Reduce transportation cost ? Reduce risk of obsolescence ? Reduce demand variability ? Improve competitiveness by offering customized products quickly
How A Postponement Strategy Works
Requisites for a postponement to occur
? High product variety ? Modular and standardized product design ? Flexible manufacturing system ? Real time information and communication ? Fast response logistics ? Strategic supplier relationship
Case: GM
Introduction
? As of 2004, GM produced 68 different models in North America Over 200 facilities constituting 52 percent of its revenues Over 600 million combinations possible
?
?
?
Excess inventory showed that forecasting is very difficult
The only way out is the postponement strategy
?
Contd..
GM looked at postponement strategy considering three verticals: ? Software configuration ? Entertainment ? Aesthetic features
Software Configuration
? Before postponement, the ECUs came to GM in finished form with all the software pre-loaded Suppliers charged GM a premium for customer software installation To solve this, GM had to redesign both the assembly process and the ECU hardware Today, the ECU comes from suppliers to GM in a generic form The hardware is a common platform which receives customized software in just 81 seconds GM dealers also acquired the capability of flash programming for each car
? ?
? ?
?
Entertainment and aesthetic features
? Post sale “accesorization” has become a key differentiator Entertainment systems have become far more sophisticated The plug-and-play capability enables them to be uploaded directly at the dealer Dealers also put in the desired wheel-set on an individual basis The customers can log on to GMbuypower.com and choose the car with desired features
?
?
?
?
Benefits of Postponement Strategy for GM
? Inventory cost savings estimated to be around 10-15 percent Maintenance cost savings due to highly communized ECU hardware
?
?
GM software engineers solve repair issues now instead of sending parts back
Subassemblies are outsourced to suppliers having quality and expertise This has led to GM being on the way to a build-toorder manufacturing system
?
?
Case: Honda
Postponement Strategy - Honda
? Trends in early 1990’s ? Platform strategy by GM and VW – Reduction in design, engineering and manufacturing costs ? VW reduced the number of platforms from 14 to 4 - Increased platform use from 70% to 100 % by 2001 ? High focus on component standardization ? Honda did not wanted to be left behind
Flexible Manufacturing – Honda
Concept: Different models are rolled out from a plant with standardized assembly to meet multi market demand. 3 Steps: ? Programmable robots to aid in standardized assembly ? ? Increase in offline or outsourced subassembly One-size-fits-all conveyer belts
Honda Accord: Showcasing Postponement
? Same model of Honda Accord had different perceptions in different markets US Customers – too small Japanese Customers – Lacked in Style New strategy to satisfy demand in US, Europe and Japan Focus was on design of chassis, the platform or skeleton
? ? ?
?
Honda Accord: Showcasing Postponement
? Adjustable Chassis so that height, width and length can varied according to market preferences Gas tank was moved behind and wheels were connected with brackets that can be moved in or moved out More variety with less cost ($600 m) compared to Ford’s spent on Taurus ($2.8 b) 3 varieties of Accord from single platform at 20 % less Savings of $1200 per vehicle, $1000 for customer
?
?
?
?
Honda Civic
Dimension (in) Wheelbase Length 3/5 Door Hatchback 106 169 4 Door Sedan 103.6 175 Stream Minivan 107 179
Height
59
58
63
3 Door Hatchback – European 5 Door Hatchback – Japanese 4 Door Sedan – US Honda Stream - Minivan Flexibility of the chassis allowed Honda to cater to the above markets
Honda: Benefits Accrued
? High savings, first in the race for global car ? Increased facilities in the local markets ? Reduction of reliance on other plants ? Saves transportation costs ? Increased employment
Case: Reebok
Licensed Apparel Business
Situation
?
Impact
?
Reebok is a licensed apparel supplier for NFL,NBA and NHL
Highly seasonal & very uncertain demand for player jerseys
Demand is concentrated over five month period Long lead time means missing the increase in sales generated within two weeks of a big win If product is not quickly available to meet demand the opportunity is lost Lost sales cost more than inventory overstocks
?
?
?
Teams are more predictable, but correlated with success
Hot-market players and teams emerge during season
?
?
?
? ?
High margins, fashion item
Demand driven by availability Unsold jerseys can become instantly obsolete
?
Nature of Consumer Demand: Complicated !!
? Sales are highest at start of season, August – Sept. “Hot market” players and teams emerge over course of season Increase at end of season for contending teams & stars: Christmas, playoffs and Super Bowl Off season is slower, with demand spikes for big-name player movements
?
?
?
Planning Challenge
How should Reebok plan and manage inventory to manage costs while providing the flexibility required to meet demand for NFL Replica jerseys?
SOLUTION
? 1. 2. Reebok restructures its supply chain to cater to two different types of items Stable Items - Lead time 3-12 weeks
Customized Apparel - Lead time <1 week
Supply Chain Overview
Consumers
Raw Material Suppliers
Contract Manufacturers
Reebok Warehouse
Retail Distribution Centers
Retail Outlets Normal Demand
2 - 16 weeks
4-8 weeks
3-12 weeks
1 week
“Hot Market” Demand
1-2 weeks or less 1 week
Postponement Strategy
? Suppliers of Reebok are Contract Manufacturers in Central America Reebok’s finishing facility is in Indianapolis
?
?
Reebok receives two categories of supplies from its suppliers 1. Finished Goods-Team Name and Player’s name already printed on the jersey 2. Semi-Finished Goods
o o Team-Finished Jerseys Blank Jerseys
Internal Supply Chain
Contract Manufacturers (CM) Fabric Inventory Cut, sew, and assembly Blank/TeamFinished Jersey at supplier Reebok (Indianapolis) Shipping
Blank/TeamFinished Jersey
Screen Printing
Screen Printing
FG Inventory
2 - 16 weeks 4 weeks 4 weeks 1 weeks
Stephen C. Graves Copyright 2003. All Rights Reserved
Benefits Accrued
• Reebok a classic Example of Two stage production with Postponement, The advantages are: ? Lower Labor cost for production of black jerseys ? Optimize service levels by sourcing the final assembly in US ? Added Advantage: creation on local jobs in the area of textile and printing
doc_621864133.pptx