Postponement

1
Postponement

• How to respond to demands for
• Customized products
• Rapid delivery
• Competitive prices
• in the face of short product lifecycles.

2
The Issues

• To provide rapid delivery need to have
• capacity to make to order quickly or
• inventory of finished goods
• Capacity means high capital costs
• Inventory is expensive because customization
  means many skus.

3
Example

• Auto manufacturers could cut 2 weeks out of
  delivery time by
• building many small assembly plants with capacity
  to meet regional demand. Why dont they do this?
• Positioning inventory of finished vehicles closer
  to the customers. What are the consequences of
  this?

4
Other dangers from Inventory

• Extends time to market
• Guess what products customers will want
• Poor forecasts of demand volumes
• Slower to bring new technologies to market
• Obsolescence

5
The Third Way

• Modular design with postponement
• Modular design
• reduces the cost of customization
• Postponement
• delays the investment in customization

6
Consequences

• Aggregate forecasts for majority of product
• Detailed forecasts are restricted to
  customization modules
• Investment in customization is delayed so
  component forecasts are short
• Customization capacity needs are reduced --
  limited to adding customization modules not
  building the entire product

7
Opportunities

• Move customization closer to customer
• What are the tradeoffs?

8
Apple imac

• 5 Colors. Built to forecast.
• Indigo
• Ruby
• Sage
• Graphite
• Snow

9
Compaq

• Special panels user can apply to change color of
  the computer at home

10
Milliken Carpet

• Before
• Dozen Bases
• Several Gun Bars
• Change overs from Base to Base
• Change overs from Gun Bar to Gun Bar
• Down time on expensive printer

11
Milliken Carpet

• After
• 1 (or 2) bases
• 1 gun bar
• Changeover from one product to next requires
  seconds
• No down time

12
Whats Involved

• Product Design
• Manufacturing Process
• Supply chain design

13
Modular Design

• Standardize Components
• Identify and postpone non-standard ones
• Simultaneous assembly of different modules
  reduces critical path
• Localize problems and re-design efforts

14
Power Supply

• Option 1 More expensive supply that can convert
  voltage
• Example HP LaserJet
• Manufactured in Japan and shipped to the world.
• Change to a versatile power supply saved 5 on
  cost to manufacture, stock and deliver

15
Power Supply

• Option 2 More specialized supplies that cannot
  convert voltage installed late.
• Example HP Deskjet
• Made in Singapore
• Designed with country specific external power
  supply
• Shipped to Stuttgart
• where power supply is purchased and added
• adds manuals and packing material

16
Consequences

• Higher manufacturing costs
• Bottom line 25 lower manufacturing, shipping
  and inventory costs.
• Where did the savings come from?

17
Trade-offs

• Increased cost of materials and perhaps
  manufacturing
• Savings in inventory depend on
• Variability and uncertainty in demand
• lead time to markets and from suppliers
• life cycle
• ...

18
Conflicting Objectives

• Marketing every possible product option
• R D most functionality at lowest cost
• Manufacturing Few products and stable volumes
• Resolution should be system wide view

19
Example

• Generic Deskjet for Mac and PC rather than two
  models
• What were the arguments

20
Manuals and Information

• Printer manuals can be printed in several
  languages
• Software versions make this even simpler
• Pharmaceutical products require country-specific
  labels
• dosing info and warnings must be in local
  language
• country specific information
• what to do?

21
Home Depot Paint

• Mix and Add the Colors to Order
• What are the benefits and costs?

22
Re-sequencing

• Traditional Clothing manufacture
• Dye the yarn
• Knit with the dyed yarn
• Benetton
• Knit with grey yarn
• Dye the sweaters
• Trade-offs?

23
Standardization

• HP Disk drives
• Add customer-specific driver boards
• Test (time consuming)
• Revised process to
• Test drive
• Insert customer-specific boards
• Test board
• Trade-offs?