Question

(a) What do we mean by a “postponement strategy”? Why can it be an effective strategy for a firm engaging mass customization?

(b) Since the 2008 global financial crisis, the B/L (“bill of lading”) of container shipments from Asian factories to the United States (US) has increasingly specified US gateway ports, rather than the local RDCs (regional distribution centers) of final markets, as the stopping points (as opposed to through points). What are the main reasons behind this development, and why?

(c) Following part (b), should the phenomenon happen more often for high-value products or for low-value products? Explain your answer.

Answer 1

1)Postponement strategy is the strategy of withholding the investments until the last moment. This is done in order to minimize risks and maximize returns of investment. postponements strategy is used by supply chain managers to increase their returns. Postponement strategies can be effectively used by a firm engaging in mass customization since they can delay the customization until confirmed orders are received and can invest once the demand is known. This helps to increase the accuracy of demand fulfilment. Obsolescence of inventory is also one of the reasons firms engage in postponement strategies and mass customization firms often do it.

2)The main reason for this is the companies re-engaging in hub and spoke model where the locations of gateway ports are hub and they materials can be distributed to regional locations elsewhere. This means that they can import in large quantities at a single location rather than sending it to different RDC locations. This reduces the transit time and procedural time since all the material is unloaded at single locations.Reduction in costs is the main reason for this change.

3)The phenomenon should happen for low-value goods since they are to distribute to many places from a single gateway port and are used at many different locations compared to high value items.