Evaluating the Role of the warehouse in postponement Strategies

Introduction

The fast changes occurring in customer-supplier marriage has resulted in shortening the product life cycle along with the product variations, that could meet the complicated customer satisfaction needs. As the customer requirements changes rapidly, it increases the complexness of planning and demand forecasting to suit the changing needs. Hence, postponement strategies have the ability to help in handling such complicated issues. The strategy includes delay in the development process to the utmost possible time, while delaying the idea of product differentiation. As the complete strategy is related to the worthiness of information, it can be maximized with delay in development decision time, providing more time to get and analyze the customer requirement and demand. Hence, the postponement strategies help in improving the quality of decision, while also optimizing the grade of product planning and demand forecast. The relevant strategy also allows for the overall flexibility in the development scheduling, where in fact the actual demand, in real terms, can play an effective role in the complete supply string network.

While Alderson introduced the idea of postponement strategy in marketing, for the very first time in 1950, the postponement applications have been long to areas like creation and circulation, as well as, process re-design. Down the road, the delayed product differentiation allowed the postponing the product design and making process, to increase the relevant product quality. Similarly, the concepts involved would include the point of differentiation and the level of postponement, which would refer to the warehousing facilities needed at different locations for saving the products.

However, the motivation for implementing postponement insurance plan in manufacturing process confined mainly to the provision of bonuses for lowering cost and improving the amount of service, while increasing product variety to match the changing needs of the customers. (Zhang & Tan, 2001)

Role of Warehouse

The role of warehouse for any processing or trading business relates to the policies involving their logistic postponement, as its main aim should be to keep up with the full anticipatory of inventory at a single or multiple warehouses located at different places. Accordingly, the process includes postponement of changing the inventory location to the maximum possible time, while using the risk pooling principle for stocking the chosen differentiated products at certain centrally located warehouses. The process would require total coordination between your suppliers and wholesalers. This strategy would also entail manufacturing businesses being performed prior to the logistical operations, which in turn are simply customer-order initiated.

With the re-organization of warehouses on the above lines, there would be smaller business lead times, while resulting in increased on-time deliveries. With centralized warehouses, the inventory costs would reduce as it could reduce the need for regular stocking of products that happen to be in more demand at the neighborhood warehouses. However, the strategy could lead to an increment of shipment costs as smaller packets may need to be transported at faster acceleration from the central locations. Regardless, this strategy requires clear definition on the role of marketers and retailers with regard on storing of products in warehouses. While distributors would be responsible for making decisions on product range and stock localization, they must be able to own and manage the central and linked warehouses. In addition, they must have the ability to measure the response time for the retail markets while the vendors should be concentrating on the full total logistics which include transportation, warehousing and customer servicing.

The sellers' duties include owning and handling local warehouses will be linking straight with the consumers and assessing the response time for the buyer demand on variety of products. (Battezzati & Coletta, 2008)

However, warehouses can play an important role for large organizations by stocking common parts and subassemblies and components in order to be readily put together as per the customer's demand. This would include undertaking all finishing just work at the warehouse center such as kitting, set up and presentation among other businesses. (McCrea, 2005)

Types of postponement Strategy

While there are extensive definite patterns of postponement procedures for creation and inventory handling, the four main postponement strategies concerning the production functions are manufacturing, set up, product packaging and labeling.

Manufacturing postponement

This strategy consists of shipping of basic materials and components to warehouses whereby the merchandise is being constructed at the appropriate time. The processing is completed according to the customer's requirements. This will saves the unnecessary transportation costs. Several soft drink companies, specifically in Brazil will send the basic syrups to the warehouse of bottling companies whereby other materials like sugar and drinking water are added and mixed at the neighborhood warehouse to get the end product. However, this could raise the delivery time of the finish product. Alternatively, you will see saving on the price for carrying the materials, like glucose etc. for the above mentioned soft drink products.

Assembly postponement

This means hold off in the assemblage of the ultimate product until the customer order is received. This sort of postponement strategy is ideal for the products that contain variety of differentiations. The essential components stay same but however, the final configuration would change based on the customer requirements. Marketing of computers is a perfect example, where assemblage is postponed till the last stage, when the ultimate product is put together as per the customer specifications. As computer systems would have different hardware and software combinations, the assembly is delayed until the customer specifies the kind of hard disk, Memory drive and other hardware required to make the ultimate product. Similarly, the program applications filled on the set up computer would differ as per the client order. This plan allows the computer being make offering the maximum selections to consumers while lowering the cost of inventory at their end for the completed goods.

The idea of set up postponement strategy was first introduced by Caterpillar, Inc, as the stable innovated offshore manufacturing by creating the required production and syndication system at different places. In so doing, the business could conquer the global competition by creating customer support capacities as tools to conquer the competition. Furthermore, the central warehouse performs an important role in this kind of strategy. The bottom product must be delivered to the warehouse whereby the excess attachments are being put together to the bottom product according to the customer requirements.

However, the inventory costs and the expense of production may increase when using assembly postponement strategy. The set up and production expenditures are usually more at the warehouse level than at the making level. Nevertheless, it saves the business on travel costs that happen to be huge for the finished goods when compared with the bottom products. (Zinn, 1990, site2)

Packaging postponement

This type of strategy is most suited to the packaging of articles in several sizes. Shipment and other costs are saved employing this strategy. For example, packaging of wine beverages and other liquor bottles can be postponed before specific instructions are received from the customer end. Similarly, presentation calculators and or other electric gizmos from US to Europe may be postponed as the instruction manual needs printing in various dialects. This must be done at the localized warehouse items thus the final presentation can be delayed appropriately under such postponement strategy before previous point of delivery as the teaching manuals are imprinted in the mandatory dialect, to be crammed combined with the devices received from the centralized warehousing location. The majority shipment of the initial equipment with no manuals can cause the huge savings in transportation costs. However, the packaging cost at the average person syndication centers may rise, while packaging in various sizes would take in additional time as well. (Zinn, 1990, webpage 1-2)

Labeling postponement

This kind of strategy is helpful for the firms which send out their products under more than one brand name hence different brand product labels would be asked to meet the customer requirements. Normally the central warehouse directs the goods without any labels to the neighborhood circulation centers and after the labels are placed on the products in line with the specific order features. For example, food products may be sold by multi-national companies under different brands at various locations, the bottom manufacturing unit or central warehousing center might use the initial brand meant for the consumers of parent or guardian country. The ultimate labeling would be achieved at different warehouses or circulation centers to meet the customers' specific demands. This also helps in promoting the popular brand in a particular region. By postponing the labeling procedures, the cost of carrying the required inventory of labels would be reduced basically at the central warehousing service. However the labeling cost may increase marginally if the same is performed at the individual localized warehouses since labeling in smaller lots at such warehouses would be more expensive than adopting to the plan of large-scale labeling done at the making end. (Zinn, 1990, web page 1)

Apart from the postponement classification as stated before, Lee and Billington stressed on the form and time postponement strategies with the goal of reducing the cost at different levels related to the manufacturing of goods while Bowersox and Closs focused on the types of manufacturing and logistic postponement that aimed to reduce the risk of anticipatory product or market determination.

The following table describes the postponement strategy categories, as the same have positive impact on the working of supply chain network, for any company: (Zhang & Tan, 2001, webpages 4-7)

(Source: http://aisel. aisnet. org/cgi/viewcontent. cgi?article=1087&context=pacis2001, site 7 )

The time postponement strategy results in delaying the differentiation of product by weeks thus saving the handling and vehicles costs. The shipping and delivery of products from stock to individual circulation centers at various locations around the world can take weeks. For instance, marketing of Horsepower desk-jet printers included the strategy of "design for localization", while postponing the localization step in the procedure from manufacturer to the individual distribution warehouses. It has led to huge savings with time and cost for the business. In the same way, 'form postponement' kind of strategy enables the organization to defer the idea of differentiation in particularly when the standardization of components is required for better product integration. (Lee & Billington)

Warehouse role in assisting postponement strategies

The role of warehousing facilities has been typically limited by the stocking of inventory; the modern developments in warehousing plans have brought financial benefits to the organizations taking customer service benefits as well. While customer service benefits would include full range and place stocking, the value-added services are performed at the localized warehousing facilities. The monetary benefits include seasonal sort-age as well as consolation of goods. As inventory handling and safe-keeping have been the basic functions of the warehouse, the handling functions are now extended to aid the postponement strategies followed by the companies occasionally. These would include promoting the cross-docking, break-bulk and consolidating functions while postponement strategies are effectively backed with extended storage space facilities that balance the supply and demand while keeping the track of market targets. (Bowersox, "Supply String Logistics Management")

In addition, the role of warehousing facilities has been explained above with specific application for supporting the particular kind of postponement strategy. It's every organization's goal to achieve reduction on the inventory levels in the maximum possible while postponing the businesses at specific warehouses before time and distinct instructions from customer end are received. However warehouses have to realize that client satisfaction should be the goal of all strategies, while achieving the same is an integrated process, relating all stages of supply chain management, from product produce to delivery.

Conclusion

While discharging the original function of inventory stocking and providing good customer service to the clients, warehouses have removed beyond these basic responsibilities because they are now named the nerve centers for the firms that help the business in meeting the customer need as well as speculating the same correctly. This is in specifically true for multinational companies which operate at global level as the regional warehouses support their postponement strategies for meeting the regional demands. However the kind of postponement strategy should match with the warehouse function to create the best coordinated results. It is therefore essential that warehouse personnel has the necessary training to upgrade their skill for reaching the aim of postponement strategies, in terms of economical and service benefits.

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