The current issue and full text archive of this journal is available at

www.emeraldinsight.com/0960-0035.htm

Postponement strategy from

a supply chain perspective:
cases from China
Jeff Hoi Yan Yeung
Department of Decision Sciences and Managerial Economics,
Faculty of Business Administration, The Chinese University of Hong Kong,
Shatin, Hong Kong, Peoples Republic of China

Postponement
strategy

331
Received September 2006
Revised January 2007
Accepted February 2007

Willem Selen
Institute for Logistics and Supply Chain Management, Victoria University,
Melbourne, Australia, and

Zhou Deming and Zhang Min

Department of Decision Sciences and Managerial Economics,
Faculty of Business Administration, The Chinese University of Hong Kong,
Shatin, Hong Kong, Peoples Republic of China
Abstract
Purpose This research widens the scope of the use of postponement by addressing how the generic
supply chain structure and information sharing/relationship among supply chain actors affects the
postponement decision, based on empirical data of Chinese manufacturers in the Pearl River Delta.
Design/methodology/approach Case analysis, cross-case comparisons, semi-structured
interviews.
Findings A cross-case analysis including study of the downstream structure, downstream
relationship, upstream structure, upstream relationship, production method and inventory position
produced a postponement classification into five categories: balanced structure without customer
information; customer dominated; manufacturer dominated; balanced structure with loose suppliers,
and finally virtual supply chain. Based on this classification, two propositions are postulated: when a
supply chain has a balanced structure, it should use speculation or production postponement. When
the supply chain has an unbalanced structure, it should use purchasing postponement or product
development postponement.
Research limitations/implications This study is exploratory in nature, and more empirical data
is needed to further validate the postulated results. Another limitation of the study is in its
measurement of postponement, measured in this instance by the production method and inventory
positions used. Other characteristics of postponement may be included in future research.
Practical implications This research has extended the scope of the use of postponement by
addressing how the generic supply chain structure and information sharing/relationship among
supply chain actors affects the postponement decision.
Originality/value Addresses postponement on the level of the supply chain, rather than
company-level. Addresses how the supply chain structure (balanced/unbalanced) and information
sharing/relationship among supply chain actors affect the postponement decision.
Keywords Supply chain management, Information exchange, Supplier relations, China
Paper type Research paper

This research was supported by Li & Fung Institute of Supply Chain Management and Logistics.

International Journal of Physical

Distribution & Logistics Management
Vol. 37 No. 4, 2007
pp. 331-356
q Emerald Group Publishing Limited
0960-0035
DOI 10.1108/09600030710752532

IJPDLM
37,4

332

1. Introduction
Postponement is defined as a strategy that intentionally delays the execution of a
task, instead of starting it with incomplete or unreliable information input (Yang et al.,
2004a). It is widely used by many industrial giants, such as Xilinx, HP, Mars,
Motorola, Toyota, Gillette, Benetton (Brown et al., 2000; Peter, 1992; Van Hoek, 2001;
Yang et al., 2004a). The reasons underlying the use of postponement and how to
implement it successfully have been of great interest to many researchers (Appelqvist
and Gubi, 2005; Aviv and Federgruen, 2001; Bucklin, 1965; Bowersox and Closs, 1996;
Van Hoek, 2001; Su et al., 2005). These studies initially focused on building theories on
postponement from a single companys perspective, but have expanded to include the
use of postponement on a supply chain level (Huang and Lo, 2003; Nair, 2005; Pagh
and Cooper, 1998; Yang and Burns, 2003). In this context, research topics have
addressed the relationship between manufacturer and downstream companies
(Cvsa and Gilbert, 2002; Wouters et al., 1999), full supply chain integration (Ernst
and Kamrad, 2000; Mikkola and Skjott-Larsen, 2004), and coordination of
postponement and other supply chain strategies (Van Hoek, 2000; Waller et al., 2000;
Yang et al., 2005a).
Postponement strategy has been widely applied across the world. In the
literature, for instance, there are postponement studies focusing on the fast
moving commercial goods in Italy (Battezzati and Magnani, 2000), the supply
chain producing mobile phones in Denmark (Catalan and Kotzab, 2003), the
information technology industry in Taiwan (Chiou et al., 2002), the manufacturing
procedure in Poland (Kisperska-Moron, 2003), and the bicycle industry in the USA
(Randall and Ulrich, 2001); but Chinese applications of postponement still need
further study.
This research will extend the investigation of postponement application into
mainland China by empirically examining how Chinese manufacturers adopt
postponement as a supply chain strategy, based on eight cases in the Pearl River
Delta (PRD), including the cities of Dongguan, Guangzhou, Shenzhen and
Zhongshan in Gong Dong province. Besides examining the application of
postponement strategy, the objective of this paper is also to classify varying
typologies of postponement applications, and derive some postulations for future
testing.
This paper is structured as follows. Firstly various types of postponement and
underlying determinants are reviewed in the literature. Secondly, the data
collection is described, followed by within and across-case analyses and
comparisons. This results in a classification of five postponement practices
according to the supply chain structure and information sharing and relationship
practices. Next, a number of research propositions are postulated for further
empirical testing, based on the cases studied. Finally, conclusions are listed and
areas for future research identified.
2. Literature review
2.1 Definitions of postponement
Postponement first appeared in the marketing field. Anderson (1950) defined
postponement as a strategy that changes the differentiation of goods (form, identity and
inventory location) to as late a time as possible. After 15 years, Bucklin (1965)

developed the complementary concept of postponement, namely speculation, which

means changing form and moving goods to inventories as early as possible to reduce
the cost of supply chain. Today researchers view postponement differently. Van Hoek
(2001) views it as an organizational concept whereby some of the activities in the
supply chain are not performed until customer orders are received.
Management began to understand the value of postponement when the production
philosophy changed from mass production to mass customization. Some researchers
believe that postponement is mainly a pragmatic means to move towards mass
customization (Feitzinger and Lee, 1997; Kotha, 1995; Lampel and Mintzberg, 1996).
Other people regard postponement as a useful tool in the configuration of global
supply chains and virtual logistics to gain the benefits of both leanness and agility
(Clarke, 1998; Christopher, 1992; Christopher and Towill, 2001; Cooper, 1993; Van
Hoek, 1998). Different types of postponement have been identified, and are
summarized in Table I.
Some less obvious types of postponement are further clarified in order to get a
deeper understanding of the richness and complexity of the concept of postponement.
logistics postponement is delaying the forward movement of goods as long as possible
in the chain of operations (time postponement) and keeping goods in storage at central
locations in the distribution chain (place postponement), whereas form postponement
relates to delay product finalization until customer orders are received (Van Hoek,
2001). Full postponement is defined as using make-to-order (MTO) in manufacturing
and centralized inventories and direct distribution in logistics; in contrast, full
speculation is defined as using make-to-stock (MTS) in manufacturing and
decentralized inventory in logistics (Pagh and Cooper, 1998). Product postponement
refers to design the products so that the products specific functionality is not set until
after the customer receives it, whereas in process postponement, a generic part is
created in the initial stages of the manufacturing process and in the later stages, this
generic part is customized to create the finished product (Brown et al., 2000). On a
supply chain level, upstream postponement means manufacturers wait to order raw
materials form suppliers until they receive the customer order, in contrast to

Literature

Classification

Zinn and Bowersox (1988)

Labeling postponement, packing postponement, assembling

postponement, manufacturing postponement and time postponement
Time postponement, place postponement, manufacturing/form
postponement
Full postponement, logistics postponement and form postponement
Full speculation, logistics postponement, manufacturing
postponement and full postponement
Product postponement and process postponement
Upstream postponement, downstream postponement, product
postponement and place (distribution) postponement
Engineering-to-order, buy-to-order, MTO, assemble-to-order, MTS,
ship-to-stock and make-to-forecast
Product development postponement, purchasing postponement,
production postponement and logistics postponement

Bowersox and Closs (1996)

Lee (1998)
Pagh and Cooper (1998)
Brown et al. (2000)
Waller et al. (2000)
Yang and Burns (2003)
Yang et al. (2004b)

Postponement
strategy

333

Table I.
Types of postponement

IJPDLM
37,4

334

downstream postponement which is defined as delaying some sort of physical change

to the product after it leaves the primary manufacturing stage (Waller et al., 2000).
Finally, purchasing postponement is the practice of postponing the incoming
components or raw material until demand is known (Yang et al., 2004b).
The above classification highlights the diversity in postponement practices, as well
as the underlying complexity of the issues addressed by management, both on a
company and supply chain level. Next, the underlying determinants of varying
postponement strategies are reviewed.
2.2 Determinants of postponement
Many researchers have used mathematical models to study the effects of particular
determinants on postponement strategy, such as demand uncertainty (Aviv and
Federgruen, 2001; Gary and Tang, 1997); product variety (Eric Johnson and Anderson,
2000; Su et al., 2005); and production characteristics (Ma et al., 2002; Van der Vilist et al.,
1997). Table II summarizes the underlying factors as identified by the respective
authors.
Another stream of research identifies determinants affecting postponement, using
empirical evidence of case studies and surveys. Pagh and Cooper (1998) find
determinants of postponement strategy include product characteristics (life cycle,
monetary density, value profile, product design characteristics); the market and
demand (the relative delivery time and frequency, demand uncertainty), and the
manufacturing and logistics system (economies of scale and special knowledge). Van
Hoek et al. (1998) obtain similar results, grouping the determinants into three
categories:
(1) technology and process characteristics (feasible to decouple primary and
postponed operations, limited complexity of customizing operations, modular
product designs, and sourcing from multiple locations);
(2) product characteristics (high commonality of modules, specific formulation of
products, specific peripherals, high value density of products and product cube
and/or weight increases through customization); and
(3) market characteristics (short product life cycle, high sales fluctuations,
short and reliable lead times, price competition and varied markets and
customers).
Using empirical data, Van Hoek (1998) also argued that external application of
information and communication technology, variability in demand, complexity in
manufacturing and modularity are highly positively related to the application of
postponement.
Using cases of the Taiwanese information technology industry, Chiou et al. (2002)
empirically test four kinds of postponement strategies (labeling, packing, assembling
and manufacturing) and identify the following factors as important determinants of
postponement practice: experience in implementing a particular postponement
strategy; customization; modularity in construction; product value and product life
cycle. Skipworth and Harrison study the postponement applications of a company
producing high-voltage cabling equipment (Skipworth and Harrison, 2004) and
another electric motor manufacturer (Skipworth and Harrison, 2006). In these studies,
the motivations for postponement include product demand profile (demand mix,

Literature

Factor

Gary and Tang (1997)

Van der Vilist et al. (1997)

Demand variability and correlations; lead times

Assembly batch; delivery frequency; planning and scheduling
mechanisms
Product characteristics; the market and demand; the
manufacturing and logistics system
Information and communication technology application;
competitive market environment; operating characteristics
Technology and process characteristics; product
characteristics; market characteristics
Logistics cost; lead time; customization considerations
Product type; degree of customization; supply chain strategy
The traditional links between the supply chain partners; the
points at which inventory is held in the chain and the point at
which end-customer orders are placed
Manufacturing cycle time; product variety; production lead
time; demand unpredictability
Derivative products and high forecast error
Product customization and speed of production
Statistical economies of scale; risk polling via a common buffer
and learning effect
Required delivery reliability; required delivery time;
predictability of demand; specificity of demand; lead times and
costs of steps in the process; controllability of manufacturing
and procurement; cost of stock-holding and value added
between stock points; risk of obsolescence
Experience in implementing one postponement strategy;
customization; modularity in construction; product value and
product life cycle
Demand uncertainty
Process time and procurement lead time
Unit value of the product; sales fluctuations in the industry;
number of distribution warehouses and product variety
Market related factors; product factors and production
The position of decoupling point; supply chain integration and
control of the supply chain
Delivery speed requirement; product value; product variety and
shop size
Interface compatibility effects; component customization; value
inputs and supplier-buyer interdependence
Product demand profile; demand amplification; product design;
excess capacity and throughput efficiency
Demand uncertainty; expect range of variability; information
availability
Uncertainty and modularity
Capacity management and market orientation through
strategic positioning of the customer order decoupling point
Magnitude and frequency of allowable quantity changes;
predictability of the timing of the authorized shipments and the
interval between schedule revisions
Uncertainty; information complexity; operation independence;
replenish volumes and supplier integration
(continued)

Pagh and Cooper (1998)

Van Hoek (1998)
Van Hoek et al. (1998)
Van Hoek and Weken (1998)
a
Mason-Jones and Towill (1999)
a
Wouters et al. (1999)
Brown et al. (2000)
Eric Johnson and Anderson (2000)
Waller et al. (2000)
Aviv and Federgruen (2001)
Von Donk (2001)

Chiou et al. (2002)

Cvsa and Gilbert (2002)
Ma et al. (2002)
Huang and Lo (2003)
Olhager (2003)
Yang and Burns (2003)

Appelqvist and Gubi (2005)

a

Mikkola and Skjott-Larsen (2004)

Skipworth and Harrison (2004)

Yang et al. (2004a)
Yang et al. (2004b)
Ashayeri and Selen (2005)

Krajewski et al. (2005)

a

Prasad et al. (2005)

Postponement
strategy

335

Table II.
Summarization of the
literatures

IJPDLM
37,4

Literature

Factor

Su et al. (2005)

The number of different products; arrival time and process time

variations; interest rates
Customization cost; demand variability; regular product cost;
expected value and salvage of generic product; cost of buying
and holding generic product
Environment uncertainties and managerial practice
Supplier delivery performance; direct customer interaction;
culture and organization change; involvement of suppliers in
engineering and operations; product characteristics; production
characteristics; operational control; market policies;
incompatible communication/information system with
suppliers and customers; intricate and direct distribution; the
implementation of postponement would be too costly; the
ability to handle product configuration in the distribution
channel and governmental regulation
Product demand profile; demand amplification; product design;
excess capacity; throughput efficiency and production variety

Tibben-Lembke and Bassok, 2005)

336

Yang et al. (2005a)

Yang et al. (2005b)

Skipworth and Harrison (2006)

Table II.

Note: aMeans supply chain characteristics are considered

demand variability, demand volume); demand amplification (bullwhip-effect); product

design (product standardization, product modularity); excess capacity and throughput
efficiency.
The above research efforts do not yet address the use of postponement from a
supply chain perspective as such, the importance of which was raised by Van Hoek
(2001). While some earlier research studies have addressed postponement from a
supply chains perspective, some lack empirical evidence (Mikkola and Skjott-Larsen,
2004; Olhager, 2003; Yang and Burns, 2003); others do not include the supply chain as
an antecedent (although companies are put in a supply chain environment, the focus is
still on the single company, not the supply chain characteristics) (Appelqvist and Gubi,
2005; Ashayeri and Selen, 2005; Brown et al., 2000; Huang and Lo, 2003; Yang et al.,
2005a). Other researches use analytical models which do not consider the impact of the
supply chain relationship (Ernst and Kamrad, 2000); whereas some researchers play
down the role of determinants (Cvsa and Gilbert, 2002; Nair, 2005; Svensson, 2003); and
yet another only considers the effects of the supplier part, not the whole supply chain
(Prasad et al., 2005).
Using a survey of 106 British manufacturing companies, Yang et al. (2005b)
empirically investigate 13 factors that might impede on the application of
postponement. Their results show that most of the highest ranking factors are
related to how a company manages its suppliers and customers (supplier delivery
performance and direct customer interaction). However, this paper does not consider
the effects of different supply chain structures and relationships.
In summary, the majority of the existing literature on postponement addresses
postponement on a company level, identifying that market environment and product
and production characteristics impact the postponement strategy. Till now, little work

has been done on how supply chain structure and relationship will affect the
postponement decision. Furthermore, there is no empirical data about Chinese
manufacturers. In this paper, we try to fill this gap.
3. Data collection and case analyses
In this research, postponement strategy is extended to its application on a supply chain
level, culminating in a classification of postponement strategies and the building on
research propositions based on supply chain characteristics. A grounded theory
building approach (Strauss and Corbin, 1990) is used, with case studies as the
principles of theory building (Eisenhardt, 1989; McCutcheon and Meridith, 1993; Miles
and Huberman, 1994; Wu and Choi, 2005; Yin, 1994). Next, the data collection method is
discussed, followed by the case descriptions and cross-case comparisons.
3.1 Sampling and data collection
The PRD was selected as the sampling frame for this study. Guangdong province
accounts for over one third of the total import and export in China. The PRD accounts
for 90 percent of the gross industrial output and 95 percent of the total export value of
Guangdong as a whole (China Statistical Yearbooks, 2003, Guangdong Statistical
Yearbooks, 2003). Most of the manufacturers in PRD have overseas customers and/or
suppliers and actively participate in global supply chains, and as such are embedded in
sophisticated supply chain structures and relationships. A number of 22 companies
were initially selected and contacted. Based on the postponement strategy and supply
chain characteristics of the companies, eight organizations were eventually used.
Eisenhardt (1989) suggests seven cases for theory-building purposes, based on the
notion that fewer pose a problem with generalizability, while too many cause too much
of a burden to researchers to process the data.
In order to ensure external validity of our case-based study, a wide spectrum of
postponement strategies is to be included. According to different positions of the
push-pull boundary and degree of postponement, Yang et al. (2004b) identified four
types of postponement (product development postponement, purchasing postponement,
production postponement and logistics postponement). Given the manufacturing focus
of the selected companies, the first three types have been included.
Semi-structured interviews were conducted with senior executives in charge of
supply chain management and/or customer and supplier relationship management. In
addition, the operations sections of these companies were visited to gather first hand
information on their supply chain characteristics. Each company was only identified
by main product group to ensure anonymity.
The interviews were subsequently transcribed and coded for analysis. Following
the procedure suggested by Miles and Huberman (1994), this analysis includes two
parts: within-case descriptions and cross-case comparisons. In the first part, key
constructs are derived based on the case data, resulting in the identification of the
supply chain structure and relationships of the eight distinct organizations. In the
second part, the supply chain structures and relationships, as well as postponement
strategies across the eight cases, are classified into five groups. The eight selected
organizations are briefly described in Table III. The within-case and across-case
analyses are discussed next.

Postponement
strategy

337

10 to less than 50

100 or above

100 or above

1 to less than 5

5 to less than 10

50 to less than 100 5,000 or more

Hair dryer

Shirt

Shaver

Boot

Soft toy

Plastic doll

1,000-4,999

500-999

1-49

1,000-4,999

1,000-4,999

Marketing and design,

outsource manufacturing
activities
Marketing, design and
manufacturing (owning the
brand)
Marketing, design and
manufacturing (owning the
brand)
Manufacturing (OEM)

Marketing, design and

manufacturing (owning the
brand)
Marketing, design and
manufacturing (owning the
brand)
Marketing, design and
manufacturing (owning the
brand)
Manufacturing
European countries

Electronic and
equipment

Toys

Toys

Initial sourcing,
design,
procurement
Footwear

American and
European countries

American countries

Twain and South

Africa

American and
European countries
and Japan
Asian and European
countries

American and
European countries

Electronic and
equipment

Garment and
accessories

Mainland China

Number of Number of
Major product market customersa suppliers b

Electronic and
equipment

Industrial type

Notes: Only customers that account for over 10 percent of total sales; only suppliers that account for over 10 percent of total purchase

50 to less than 100 50-249

MP3

250-499

10 to less than 50

Number of full
time employees Nature of business

ATM

Table III.
Overview of sample firms

Annual sales
(million US $)

338

Cases

IJPDLM
37,4

3.2 Within-case analyses

The within-case analyses shed light on the underlying supply chain characteristics of
each firm, and cover downstream structure, manufacturer-customer relationship,
upstream structure, manufacturer-supplier relationship, production method, product
characteristics, lead time and inventory position. Each of the sample companies is
discussed next.
3.2.1 ATM. Automatic teller machine (ATM) is in the business of producing ATM,
and has three large customers. Customer 1 is its largest customer and accounts for
50 percent of total sales, followed by Customer 2, responsible for 20 percent, and
Customer 3 with 10 percent of total sales. ATM does not integrate its process with its
customers, but it shares some information with them. For example, customers can
obtain product design and new product introduction information from ATM. The main
communication methods are face-to-face, telephone and e-mail. There are no special
arrangements with key customers. The relationship is totally based on personal
relationships, which profoundly impact whether or not the firm wins the order. Most
customers have to go through a formal bidding process.
The largest supplier is a European company which accounts for 36.37 percent of the
total purchase. The two remaining main suppliers reside in mainland China and
account for 12.95 and 11.42 percent of total spend, respectively. ATM does not
integrate its process with its suppliers either, but shares production plan, production
design and demand forecast information. Telephone and e-mail are the major
communication methods, including face-to-face as well for Chinese suppliers. There is
higher degree of trust with key suppliers. On the one hand, ATM gives these suppliers
more responsibilities including outsourcing of some assembly work, and inspection
and testing. Through outsourcing and changing the process, ATM was able to reduce
lead-time and cost. Suppliers also participate in the product design process of the
company. On the other hand, ATM participates in the suppliers day-to-day running
through training and process improvement. Sole sourcing and vendor management
inventory (VMI) are currently being looked at, but no official partnership program
exists as of yet. ATM evaluates the performance of suppliers based on a quarterly
index. The performance criteria include quality, delivery, and service.
An ATM has multiple parts and complex bill of material. Of the products, 95 percent
are produced MTS. For the overseas supplier, the purchase lead time is 20-45 days, and
one week less for the domestic suppliers. The production lead time is about seven days.
Of the inventory, 30 percent is raw materials; the other 15 percent is work-in-process,
and 50 percent is finished goods.
ATM does not use a postponement strategy and keeps most inventories in the form
of finished goods. The top three customers account for 80 percent of total sales,
resulting in an oligarchic structure for the downstream part of the supply chain. Since,
ATM shares little information with its customers and has no special relationship with
key customers, it only loosely connects with its customers. The top three suppliers
account for 60.74 percent of the total purchase, so the upstream part of the supply chain
is characterized an oligarchic structure as well. Yet, ATM closely connects with its
suppliers.
The above example shows that a competitive market structure emerges along which
customers and suppliers of goods and services are organized. Such market structure
could take on the form of a monopoly, defined as a situation in which a single

Postponement
strategy

339

IJPDLM
37,4

340

company owns all or nearly all of the market for a given type of product or service
(www.investorwords.com/3112/monopoly.html); an oligarchy, or Rule by a few or a
small exclusive group (www.mises.org/easier/O.asp); or a free market structure,
defined in this context as one in which any individual may exchange their products or
services by competitive bidding, open to all, without constraint (www.google.com.
au/search?hl en&lr &defl en&q define:Free ^ market&sa X&oi
glossary_definition&ct title).
Hence, the supply chain structure of ATM with its close trust relationship with its
suppliers and loose connection with its customers is denoted as
oligarchy-close-oligarchy-loose (OCOL).
3.2.2 MP3. The second organization manufactures MP3s, and is denoted as MP3.
MP3 has only one client, but does not integrate its process with this customer. Yet, the
customer shares demand forecasts with MP3, whereas MP3 provides information
about its production plan, product design, new product introduction, the status of
customer orders in the production process and transportation and status of the goods
in transit to customers. Telephone and e-mail are the main information sharing
methods.
MP3s largest supplier is a Hong Kong-based company which accounts for
20 percent of total spend. Rank 2 and 3 suppliers are all located in mainland China and
account for, respectively, 15 and 10 percent of total purchase. MP3 does not integrate
its process with its suppliers either. Nevertheless, suppliers share information about
production capacity, the status of orders in the production process and transportation
and status of the goods in transit with MP3. In turn, MP3 shares its production plan
and demand forecast with its suppliers. Telephone and e-mail are the major
communication methods. MP3 has built a partnership with its suppliers, but till now
has not implemented VMI.
MP3 operates in a MTO environment for all its products. The MP3 product is
characterized by a complex bill of materials with multiple parts that can be customized
to customer requirements. The lead time from purchase of raw material to product
delivery is about 42 days; with a production lead time of about 14-21 days. Half of the
inventory is composed of raw materials, 30 percent work-in-process, with the
remainder in finished goods.
MP3 uses postponement as part of its supply chain strategy. It produces highly
customized products and reduces the inventory of finished goods by the keeping
materials as long as possible in raw material and work in process-status. MP3 has
only one customer, so it is a monopoly structure for the downstream part of the supply
chain. There is a lot of information exchange between MP3 and its customer, and they
are closely connected. On the other hand, the top three suppliers account for
44.5 percent of the total purchase, so it is an oligarchy structure for the upstream part
of the supply chain. MP3 closely connects with its suppliers. As such, the supply chain
structure of MP3 with its close sharing of information with its suppliers and its close
relationship with its sole customer is described as oligarchy-close-monopoly-close
(OCMC).
3.2.3 Hair dryer. The third case study involves a manufacturer of household
electronics, with hair dryers as their main product line. The company has numerous
customers, with only two customers accounting for more than 10 percent each of total
sales. The company does not integrate its process with its customers, but shares

information on product design, new product introduction, and transportation and

status of goods in transit from the hair dryer company. The main communication
methods are face-to-face and e-mail. Key customers have higher priority and the
company is currently working with these customers on setting up a VMI system to
manage their inventory in the future.
The largest supplier only accounts for 10 percent of total sales. There is no process
integration, but the hair dryer company shares its production plan and demand
forecast with suppliers, as well as pricing information and negotiates price targets with
key suppliers; whereas suppliers share information on transportation and status of
goods in transit with the hair dryer organization. Telephone is the only communication
method. No VMI or sole supplier arrangement are in place.
All products are produced MTO. The hair dryer company does not produce very
complex products, and the products can be either standardized or customized to
customer requirements. The lead time from the purchase of raw material to product
delivery is about 45 days; with a production lead time of about 5-7 days. Of the
inventory, 40 percent is raw materials; 10 percent work-in-process, and 50 percent
finished goods.
The hair dryer company postpones its production until it receives the customer
order, but surprisingly keeps a large amount of finished goods. This is because there is
only one way information sharing with its customer. The company cannot see the
customers inventory level and production schedule, and hence keeps a large amount of
finished goods stock to balance risk of possible demand surges and acceptable service
levels. It would like to have access to customer inventory levels, which can help them
manage their own finished goods inventory more efficiently. The largest two
customers only account for 55 percent of the total sales, so it is considered a free market
structure for the downstream part of the supply chain. The company does share
important information with its customers and works together to set up some advanced
cooperation programs, so they are closely related. On the other hand, the largest
supplier only accounts for 10 percent of total purchase, so suppliers are not in a strong
bargaining position and it is comparable to buying from a free market. Although the
hair dryer company shares information with its suppliers, it is limited to price
negotiation only, so the company loosely connects with its suppliers. As such, the
supply chain structure of the hair dryer company with its many suppliers and limited
information shared with them, along with its many customers and deeper information
sharing, is described as free market-loose-free market-close (FLFC).
3.2.4 Shirt. The fourth case study is an apparel company producing shirts, and
denoted as shirt. Its largest customer only accounts for 15 percent of total sales,
followed by a second ranked customer at 10 percent. Shirt does not integrate its process
with its customers and customers only share demand forecasts with shirt by e-mail.
There is no special arrangement for key customers.
The largest supplier only accounts for 10 percent of total sales. There is no process
integration, but shirt shares demand forecasts with suppliers and in turn suppliers
share information on status of orders in the production process, and transportation and
status of the goods in transit with shirt. Telephone and e-mail are the tools for
communication. Shirt does not provide special programs for key suppliers. Actually,
they do not think of their suppliers as close suppliers.

Postponement
strategy

341

IJPDLM
37,4

342

Shirt operates solely in a MTO-environment. Its major products can be fully

customized. The lead time from the purchase of raw material to product delivery is
about three months; with a production lead time of about 21 days. Of the inventory,
70 percent, comprises raw materials, 25 percent work-in-process, and 5 percent finished
goods.
Shirt actively uses postponement. The largest two customers only account for
25 percent of total sales, hence shirt sells in an open market environment. There is very
little information exchange between shirt and its customers and there is no special
arrangement for key customers, so the relationship in the downstream of the supply
chain is loose. Similarly for the upstream part of the supply chain where the largest
supplier only accounts for 10 percent of total purchase, so it resembles buying on the
open market. Shirt only shares limited information with its suppliers, and there is no
close supplier. Hence, this supply chain, with many suppliers and limited information
sharing and many customers with little information exchange, can be described as free
market-loose-free market-loose (FLFL).
3.2.5 Shaver. This electronics manufacturer will be denoted as shaver, its main
product line. Its largest customer only accounts for 10 percent of total sales, but the
company fully integrates its processes with its customers. Customers share point of
sale (POS) information and demand forecasts with shaver, whereas shaver shares its
production plan and transportation and status of goods in transit with customers. EDI,
a web-based system and global conferences are the ways of communication. Shaver
integrates its order system with its customers and orders can be placed automatically
based on forecast. Shaver would be willing to carry in-transit inventory for some key
customers.
On the supply side, shavers largest supplier only accounts for 12.5 percent of total
purchase, followed by a second-ranked supplier at 12 percent. Shaver also integrates its
processes with suppliers, who share their production schedule, production capacity
and the status of orders in production process with shaver, whereas shaver shares its
production plan, production design and demand forecasts with suppliers. Shaver uses
e-mail, fax, telephone and monthly meeting to exchange information with suppliers.
The design process is fully integrated with suppliers. Furthermore, a partner supplier
program has been implemented which aims to coordinate business interests, share risk
and develop capabilities.
Shaver also operates wholly in a MTO environment. All of its products have a
complex bill of material structure involving multiple parts, and are mostly
standardized, rather than customized. The production lead time is about three
weeks and shaver keeps its inventory completely in the form of finished goods.
This seems an anomaly at first sight. The major advantage of operating MTO is to
reduce finished goods inventory, yet shaver keeps all its inventory as finished goods.
The underlying reason for this is that shaver is not a traditional manufacturer,
concentrating its major business around initial sourcing, design and procurement. As
such, shaver does not actually manufacture, but rather designs and procures, and
subsequently outsources the manufacturing. So shaver does not actual make things
but design and procurement and then outsourcing the production process and at last
sells finished goods to the distributor/wholesalers. That is the reason why there is no
inventory of raw material and work in process in shaver. The largest customer only
account for 10 percent of the total sales. So, it faces many small buyers, just as in the

free competition market. Shaver fully integrates its process with its customers and
there is a lot information flows between them, so the relationship in the downstream is
close. This is the same to the upstream of the supply chain. The largest two suppliers
only account for 24.5 percent of the total purchase, so it is just like buying stuff from a
free competition market. Shaver integrates its processes with suppliers and exchanges
a lot of information, which means they are closely connected. So, this supply chain,
with many suppliers and customers and full information and process integration, can
be described as free market-close-free market-close (FCFC).
3.2.6 Boot. The sixth case company produces boots as its main product line. Its
largest customer accounts for 35 percent of total sales, followed by a second ranked
customer at 30 percent, with another three major customers accounting for 10 percent
each. Boot does not integrate its process with customers, but customers share their
demand forecast with boot, which in turn shares its production plan, new product
introduction and status of customer orders in the production process with its
customers. Telephone, e-mail and face-to-face are the main methods of communication.
Boot offers many facilities for customers and tries to build good customer relations. For
instance, some customers can pay by open account within 60 days, and boot allows
customers quality control groups reside in their factory. Moreover, boot reserves
capacity and provides special designs for the key customers.
The largest three suppliers are all mainland China companies and totally account
for 65 percent of total purchase. Boot does not integrate its process with suppliers, and
only limited information is shared, including suppliers production capacity and
information on transportation and status of goods in transit. The tools for information
exchange are fax and telephone, and the larger suppliers are requested to pay by open
account in 30-50 days, whereas smaller suppliers need to pay by cash. Some suppliers
enjoy more business from boot and share price information, but there is no VMI or any
other partnership arrangement with suppliers in place.
Boot operates wholly in a MTO production environment. It produces simple goods
that can be fully customized to customer requirements. The lead time from raw
material purchase to product delivery is about 3-4 weeks, with a production lead time
of about 1-2 weeks. Of the inventory, 15 percent is held as raw materials; 55 percent is
work-in-process, with 30 percent held as finished goods.
Boot uses a postponement strategy in its production. It increases work-in-process
inventory with the capability of quickly assembling the semi-finished products into
customized goods. The largest two customers account for 65 percent of total sales, so
the downstream supply chain exhibits an oligarchy structure. Boot offers special
facilities to its large customers, so they are closely related. The largest three suppliers
account for 75 percent of the total purchase, so it represents an oligarchy structure.
Very little information is flowing in the upstream part of the supply chain, and there
are no special arrangements for key suppliers, so boot only loosely connects to its
suppliers. As such, this type of supply chain, with a few large suppliers with little
information exchange and a few large customers with close relationships to boot, is
denoted as oligarchy-loose-oligarchy-close (OLOC).
3.2.7 Soft toy. This companys market is dominated by one large customer
accounting for 90 percent of total sales. Soft toy does not integrate its process with its
customer, and only production design information is shared by e-mail. No other special
arrangements are in place for this customer.

Postponement
strategy

343

IJPDLM
37,4

344

The largest three suppliers account for 90 percent of total purchase (30 percent for
each supplier). Soft toy does not integrate its processes with its suppliers, and they do
not share any information either.
Soft toy operates completely in a MTO environment. Its products have a complex
bill of material involving multiple parts. They are highly standardized products that
can also be fully customized according to customer requirements. The lead time from
purchase of raw material to product delivery is about 30-50 day, with a production lead
time varying between 1 and 20 days. Of the inventory, 65 percent is held as raw
materials; 33 percent is work-in-process and only 2 percent in finished goods.
Soft toy actively uses postponement and keeps very little finished goods inventory.
It has one very powerful customer which accounts for 90 percent of total sales,
resulting in a monopolistic downstream supply chain structure. Without any process
integration and information sharing, soft toy only loosely connects to the customer.
The upstream part of the supply chain is an oligarchy structure, for there are three
major suppliers, each accounting for 30 percent of total purchase. They also loosely
connect to soft toy. As such, this supply chain, with a few large suppliers with no
information sharing and one major customer with little information sharing, can be
described as oligarch-loose-monopoly-loose (OLML).
3.2.8 Plastic doll. The final case study describes a company that manufactures
plastic dolls. Its largest three customers account for, respectively, 60, 20 and 10 percent
of total sales. Plastic doll does not integrate its process with its customers, but shares
available inventory, product design, the status of customer orders in the production
process, and information on transportation and status of goods in transit with
customers. Face-to-face, e-mail and telephone are the main methods of communication.
Plastic doll regularly meets with key customers for problem solving and provides some
special facilities to key customers, such as reserved capacity, shorter lead times and
smaller minimum order batch sizes.
The largest two suppliers account for 25 percent of total purchase each, followed by
two suppliers which each account for 10 percent of total spend. Plastic doll does not
integrate its processes with suppliers, but obtains the production schedule, production
capacity, and status of orders in the production process from suppliers. In turn, plastic
doll provides production design and demand forecast information to suppliers.
Telephone, e-mail, and face-to-face communications are widely used. Plastic doll works
with its key suppliers on annual review reports, and has a major vendor list in place.
Suppliers on this list have closer communication with plastic doll and may be inspected
in regard to plastic dolls order status.
Plastic doll operates 100 percent MTS. They produce both complex and simple
standardized products, and customers cannot request customized products. Lead time
from the purchase of raw material to product delivery is about 5-6 weeks, with a
production lead time of about two weeks. Half its inventory is held as raw materials;
20 percent work-in-process, and 30 percent as finished goods.
Plastic doll does not use any postponement strategy. It produces to forecast and
keeps an inventory of finished goods. Four customers account for 70 percent of total
sales, resulting in an oligarchy downstream supply chain structure. There is a lot of
information exchange between both parties, so plastic doll closely connects with its
customers. The same is true for the upstream part of the supply chain. As such, this

supply chain structure, with a few larger suppliers and a few large customers with
deep information sharing, is described as oligarchy-close-oligarchy-close (OCOC).
3.3 Cross-case comparisons
Each case has its own unique supply chain configuration. Some of the case companies
use a postponement strategy, while others do not. Table IV summarizes the different
supply chain configurations of the eight cases (downstream structure and relationship;
upstream structure and relationship), their product characteristics and production
orientation (MTO or MTS), and their main inventory composition.
Next, the postponement strategies used under the varying supply chain structures
and operating conditions of the eight cases are discussed. This is followed by a
comparative analysis of the downstream, respectively, upstream, supply chain
structure and the relationships built.
3.3.1 Postponement strategy. The core concept of postponement is to pull instead
of push the manufacturing process, and subsequently move inventory from finished
goods to semi-finished goods and/or raw materials. When the majority of inventory is
composed of raw materials, this is often referred to as purchasing postponement.
Production postponement, on the other hand, is when the majority of inventory is held
in semi-finished products, and when the manufacturers do not design the products
until they receive the order, it is called product development postponement. However, if
supply chain uses push method in the whole process and keeps inventory as finished
goods, it adopts speculation instead of postponement. Yet, companies may want to
balance different kinds of inventories for reasons other than postponement, such as
risk sharing, product characteristics, market environment, etc. In the eight cases
studied, ATM and plastic doll use speculation; MP3, hair dryer, shirt and soft toy are
deploying purchasing postponement; whereas boot adopts production postponement
and shaver uses product development postponement. However, the cases of hair dryer
and shaver are interesting. All of shavers inventories are finished goods. This is
determined by its underlying business model. Shaver does not actually make things;
when shaver receives an order, it begins designing the product and subsequently
outsources the manufacturing process. This is why there is no inventory of raw
materials and semi-finished products. Hair dryer is forced to keep a large inventory of
finished goods because it cannot obtain information from its customers on planned
order status.
3.3.2 Supply chain information and relationship structure. The relative power
customers have with the main organization differs among the eight cases studied. MP3
and soft toy conduct business with only one powerful customer; whereas ATM, boot
and plastic doll face several relatively equally powerful customers; and finally shirt,
hair dryer and shaver all have a lot of small customers. Table V summarizes the
intensity of the information sharing pattern between manufacturer and customer (and
vice-versa) across the eight cases.
Contrary to the downstream information structure, the upstream side does not
show any company dealing with a sole partner (supplier). ATM, MP3, boot, soft
toy and plastic doll each have several important suppliers, while the other three
companies have a lot of powerless suppliers. Table VI summarizes the information
sharing pattern between manufacturer and suppliers.

Postponement
strategy

345

OCMC

FLFC

Hair
dryer

Two way
intensive
information
sharing
A lot of
powerless
customers

One way
intensive
information
sharing (Mfg
to supplier)
No formal arrangement Several
important
but closely linked
suppliers
through the
information flow
Two way
intensive
information
sharing
A lot of
Key customers have
higher priority and hair powerless
dryer is working with suppliers
them to set up VMI

One way
limited
information
sharing (Mfg
to customer)
One powerful
customer

MP3

Complex
products, can
be
standardized
and/or
customized to
some degree

Moderately
No process
integration, only price complex
products that
negotiation
can be highly
standardized
and/or
customized

No process integration Complex and

customized
but MP3 has built
product
partnership with its
suppliers

No process integration
but ATM trusts key
suppliers and gives
them many
responsibilities

No special arrangement Several

important
suppliers

Several
important
customers

OCOL

Supplier-manufacturer Product
relationship
characteristics

Manufacturer-customer Upstream
relationship
structure

ATM

Table IV.
Cross-case comparisons

Cases

100 percent
MTO

100 percent
MTO

95 percent
MTS

(continued)

40 percent of
inventory is
raw materials
and 50 percent
is finished
goods

Half of
inventory is
raw materials

Half of
inventory is
finished goods

Production
characteristics Inventory

346

Supply
chain
Downstream
structure structure

IJPDLM
37,4

FLFL

Shaver FCFC

Shirt

Cases

Two way
intensive
information
sharing

One way
limited
information
sharing
(customer to
Mfg)
A lot of
powerless
customers

One way
intensive
information
sharing (Mfg
to customer)
A lot of
powerless
customers

Supply
chain
Downstream
structure structure

Two way
intensive
information
sharing

Full process integration A lot of

powerless
suppliers

Two way
limited
information
sharing

No special arrangement A lot of

powerless
suppliers

Two way
limited
information
sharing

Manufacturer-customer Upstream
relationship
structure

Fully integrated
processes and some
partner programs

Moderately
complex,
standardized
and
customized
products

No process integration Very simple

and
and other
customized
arrangements
products

Supplier-manufacturer Product
relationship
characteristics

100 percent
MTO

100 percent
MTO

(continued)

All of the
inventory is
finished goods

The majority is
raw materials

Production
characteristics Inventory

Postponement
strategy

347

Table IV.

Plastic OCOC
doll

OLML

Soft
toy

One powerful
customer One
way limited
information
sharing (Mfg
to Customer)
Several
important
customers One
way intensive
information
sharing (Mfg
to Customer)

Several
important
customers
Two way
intensive
information
sharing

OLOC

Boot

Table IV.

Cases

More than half

of the
inventory is
raw materials
50 percent of
the inventory
is raw material
and 30 percent
is finished
goods

100 percent
MTO

100 percent
MTS

No process integration Moderately

complex,
and special
standardized
arrangement
and
customized
products
No process integration Moderately
Annual review report complex and
highly
Inspector to monitor
standardized
order status
products

Regularly meet with

key customers for
problem solving
Provide them some
special facilities

Several
important
suppliers Two
way intensive
information
sharing

Over half of the

inventory is
work in
process

100 percent
MTO

No process integration Moderately

complex but
and special
highly
arrangements
customized
products

Several
important
suppliers One
way limited
information
sharing
(Supplier to
Mfg)
No special arrangement Several
important
suppliers No
information
sharing
Offer many facilities
and establish a good
relationship with close
customers

Production
characteristics Inventory

Supplier-manufacturer Product
relationship
characteristics

Manufacturer-customer Upstream
relationship
structure

348

Supply
chain
Downstream
structure structure

IJPDLM
37,4

Based on the supply chain structure, information sharing characteristics, and

postponement strategy, the eight cases can be classified into five groups as listed in
Table VII.
3.3.3 Case analyses. Soft toy can be considered a special case. It has only one
customer, while its relationship is loose. This is because we assessed the
relationship on the basis of the scope and degree of information sharing. Soft toy
is a traditional labor intensive factory and competes on cost. As such, it does not
invest in information systems. However, as it only serves one customer, it can
tailor its production process to its customer needs with a production lead time of
only 5-7 days. This allows the company to postpone its production until order
receipt without prior information.
For other MTO cases, information sharing is a prerequisite. Another interesting
case is boot, which only postpones the final production and keeps inventory in
work-in-process format, similarly to the well-known postponement of the dying
process at Benetton (Peter, 1992). A pre-condition is that products can be
modularized and the production process be divided into steps. Comparing boot
with the other MTO cases (except for soft toy), boot has a balanced structure and
does not share information with its suppliers. As a result, suppliers cannot
customize the raw materials for boot, and as these have to be pre-processed first,
explaining why boot uses production postponement instead of purchasing
postponement.
Next we postulate a number of research propositions based on the case analyses.

Postponement
strategy

349

4. Research propositions
The above case analyses demonstrates that, besides market environment and product
and
process
characteristics,
the
supply
chain
structure
and
supplier-manufacturer-customer relationship do influence the postponement strategy
as well.
The following two propositions sum up our findings:
P1.

When a supply chain has a balanced structure, it should use speculation or

production postponement.

In the balanced supply chain structure, no single actor is significantly more powerful
than any other actor. In order not be locked in by a specific partner and losing

Manufacturer to customer
Customer to manufacturer

Manufacturer to supplier
Supplier to manufacturer

Intensive

Limited

MP3; hair dryer; shaver; boot; plastic doll

MP3; boot; shaver

ATM; soft toy

Shirt

Intensive

Limited

ATM, MP3, shaver, plastic doll

MP3, shaver, plastic doll

Hair dryer, shirt

Hair dryer, shirt, boot

Table V.
Information sharing
pattern-downstream

Table VI.
Information sharing
pattern-upstream

Applicable cases (supply

chain structure)
ATM (OCOL); plastic doll
(OCOC)
MP3(OCMC); soft toy
(OLML)

Hair dryer (FLFC); shirt

(FLFL)
Boot (OLOC)

Shaver (FCFC)

Balanced structure without

customer information

Customer dominated

Manufacturer dominated

Balanced structure with loose

suppliers

Virtual supply chain

Table VII.
Classification of cases

Group

Product development
postponement

Production
postponement

Purchasing
postponement

Purchasing
postponement

In these two cases, neither part of the supply chain has

dominating power. Customers do not share their
information, so it is difficult for manufacturers to make
products based on order
Customers are very powerful in these two supply chains.
Manufacturers can customize their production processes for
their special customer. They respond to orders quickly and
save money by keeping inventory in raw material format
rather than finished goods
Here the powerful manufacturer will try to minimize its cost
and reduce risk by postponing production and keeping
inventories of raw materials
In this case, products can be modularized and the
manufacturer does not share information with suppliers.
Raw materials have to be pre-processed and kept in the
format of work-in-process
The virtual supply chain has an advanced information
system that connects up the supply chain. The
manufacturer postpones the design until it receives the
order, and then outsources the production function for the
customer order

Brief description

350

Speculation

Postponement strategy

IJPDLM
37,4

business opportunities and/or bargaining power, a company will not tailor their
processes for a specific partner. However, the key concept of postponement is to
produce based on actual orders instead of forecasts, and this requires a close
relationship between partners. As such, the required information exchange to facilitate
postponement may be more difficult to emerge in a balanced supply chain structure.
Information flow is very important in a balanced structure. Based on customers
POS information, demand forecast, production plan, etc.; manufacturers can schedule
their production plans prior to coordinating with customers orders. If such information
is absent, it will be very difficult to implement postponement, resulting in speculative
decision making, as is the case in ATM and plastic doll. We note that boot has a similar
supply chain structure as ATM and plastic doll, except for the fact that boot and its
customers deploy two-way intensive information sharing. This makes postponement
possible, but for some reason boot does not share its information with suppliers, so
they cannot adjust their supply to requirements of the production process. If boot were
to fully postpone its production, and therefore keep its inventory solely in raw material
format, it is possible that they may not get the required raw material from suppliers
and hence are unable to deliver the customer final products in time. As such, the best
solution is to use production postponement and keep inventory in semi-finished goods,
which can be finalized very quickly.
In the cases described above, one could argue whether it is the information
exchange that impacts the feasibility of postponement or balance in the supply chain
structure. This is a discussion along the line of the chicken and the egg, which comes
first? which may not be easily resolved. Yet in our study, the focus is on the
underlying supply chain structure with the observation that in the cases described
under a balanced structure, this required information exchange (with either customers
or suppliers) was absent:
P2.

When the supply chain has an unbalanced structure, it should use purchasing
postponement or product development postponement.

The unbalanced supply chain is characterized by a leading company who has more
power than other companies in the supply chain. In order to improve efficiency and
provide a high service level, the leading company often demands other companies to
tailor their production process and share information. As such, it is easier to build close
relationships in an unbalanced structure than it is in a balanced one. This makes high
degree postponement possible and suitable.
If a manufacturer produces for a sole customer, it is obvious it will tailor its
production process to the specific requirements of that customer. The manufacturer
can therefore produce based on the customers actual demand instead of an imprecise
forecast, alleviating the need to keep semi-finished inventories to balance uncertainty.
Instead, they will fully postpone the production process and only keep raw material
inventory. When the products include many parts and are customized, making the
production process complex; the manufacturer needs to invest in information sharing
to support postponement (i.e. MP3 case). On the other hand, when products are fairly
standard with a relative simple production process, the manufacturer might not need to
invest in information sharing (i.e. soft toy case).
When the manufacturer is in a more powerful position, customers have two choices:
they either share information intensively with manufacturers, which in turn can help

Postponement
strategy

351

IJPDLM
37,4

352

them better coordinate their production plan (i.e. hair dryer and shaver-cases); or do not
invest in information sharing but accept a long production lead time (i.e. shirt-case). In
both situations, manufacturers can reduce cost and risk by only keeping raw material
inventory and delaying other required procurement until demand is known. On the
upstream part of the supply chain, manufacturers can easily find substitutes in the
open market, so there is no need to build close relationships with suppliers. As such,
when a manufacturer dominates in the supply chain, it should use purchasing
postponement.
Shaver, just like Nike, is not your traditional manufacturer. They do not produce
themselves, but instead design products and then outsource the production function.
Such a virtual supply chain is characterized by many suppliers and customers,
organized through projects, and generally not exhibiting long-term relationships. Each
partner in the virtual supply chain has an advanced information system which
supports intensive information sharing. Such a virtual supply chain is also unbalanced
as the organizer is more powerful than the other partners. It delays the whole process
of design, sourcing, production, etc. until receipt of a customer order. Virtual supply
chains often face high uncertainties, and it is difficult to finalize product specifications
beforehand, making the design become quickly obsolete. In product development
postponement, all production activities are driven by actual information. This will lead
to a vast reduction in costs because of fewer re-designs. As such, virtual supply chains
should use product development postponement.
5. Conclusions and areas for future research
Postponement is a widely used manufacturing strategy, used on a company level based
on market environment and product and production characteristics. This research has
extended the scope of the use of postponement by addressing how the generic supply
chain structure and information sharing/relationship among supply chain actors
affects the postponement decision, based on empirical data of Chinese manufacturers
in the PRD.
First, supply chain characteristics (OCOL, OCOC, OCMC, OLML, FCFC, FLFL,
OLOC and FCFC) were determined for eight manufacturers in China. A cross-case
analysis including study of the downstream structure, downstream relationship,
upstream structure, upstream relationship, production method and inventory position
produced a postponement classification into five categories: balanced structure
without customer information; customer dominated; manufacturer dominated;
balanced structure with loose suppliers, and finally virtual supply chain. Based on
this classification, two propositions are postulated for the use of postponement, based
on the balanced or unbalanced structure of the supply chain.
This study is merely exploratory in its methodology, and requires further work.
First of all, more empirical data is needed to further validate the postulated results.
This may be done through further more in-depth case field research, and future survey
work of supply chains in China and on a global scale. Another limitation of the study is
in its measurement of postponement, measured in this instance by the production
method and inventory positions used. Other characteristics of postponement may be
included in future research. Third, a framework needs to be developed to explain the
antecedents and consequences of using postponement in a particular supply chain
environment. The postulated propositions and classification derived in this paper

could serve as a starting point. Last, but not least, more work is needed to better
understand the relationship and interaction among postponement and other
management practices such as just-in-time, total quality management, VMI, and risk
management.
References
Anderson, W. (1950), Marketing efficiency and the principle of postponement, Cost and Profit
Outlook, Vol. 3, pp. 13-15.
Appelqvist, P. and Gubi, E. (2005), Postponed variety creation: case study in consume
electronics retail, International Journal of Retail & Distribution Management, Vol. 33
No. 10, pp. 734-48.
Ashayeri, J. and Selen, W. (2005), An application of a unified capacity planning system,
International Journal of Operations & Production Management, Vol. 25 No. 9, pp. 917-37.
Aviv, Y. and Federgruen, A. (2001), Design for postponement: a comprehensive characterization
of its benefits under unknown demand distributions, Operations Research, Vol. 49 No. 4,
pp. 578-98.
Battezzati, L. and Magnani, R. (2000), Supply chains for FMCG and industrial products in Italy
practices and the advantages of postponement, International Journal of Physical
Distribution & Logistics Management, Vol. 30 No. 5, p. 413.
Bowersox, D.J. and Closs, D.J. (1996), Logistics Management: The Integrated Supply Chains
Process, McGraw-Hill, New York, NY.
Brown, A.O., Lee, H.L. and Petrankan, R. (2000), Xilinx improves its semiconductor supply
chain using product and process postponement, Interface, Vol. 30 No. 4, pp. 65-80.
Bucklin, L.P. (1965), Postponement, speculation and structure of distribution channels, Journal
of Marketing Research, Vol. 2, pp. 26-32.
Catalan, M. and Kotzab, H. (2003), Assessing the responsiveness in the Danish mobile phone
supply chain, International Journal of Physical Distribution & Logistics Management,
Vol. 33 No. 8, pp. 668-85.
China Statistical Yearbook (2003), China Statistical Yearbook, Zhongguo Tongji Chubanshe,
Beijing, annual, various years, 1999-2003.
Chiou, J.S., Wu, L.T. and Hsu, J.C. (2002), The adoption of form postponement strategy in a
global logistics system: the case of Taiwanese information technology industry, Journal
of Business Logistics, Vol. 23 No. 1, pp. 107-24.
Christopher, M. (1992), Logistics and Supply Chain Management, Financial Times Pitman,
London.
Christopher, M. and Towill, D. (2001), An integrated model for the design of agile supply
chains, International Journal of Physical Distribution & Logistics Management, Vol. 31
No. 4, p. 235.
Clark, M.P. (1998), Virtual logistics an introduction and overview of the concepts, International
Journal of Physical Distribution & Logistics Management, Vol. 28 No. 7, p. 486.
Cooper, J.C. (1993), Logistics strategies for global business, International Journal of Physical
Distribution & Logistics Management, Vol. 23 No. 4, p. 12.
Cvsa, V. and Gilbert, S.M. (2002), Strategic commitment versus postponement in a two-tier
supply chain, European Journal of Operational Research, Vol. 141, pp. 526-43.
Eisenhardt, K. (1989), Building theories from case study research, Academy of Management
Review, Vol. 14 No. 4, pp. 532-50.

Postponement
strategy

353

IJPDLM
37,4

354

Eric Johnson, M. and Anderson, E. (2000), Postponement strategies for channel derivatives,
International Journal of Logistics Management, Vol. 11 No. 1, pp. 19-35.
Ernst, R. and Kamrad, B. (2000), Evaluation of supply chain structures through modularization
and postponement, European Journal of Operational Research, Vol. 124, pp. 495-510.
Feitzinger, E. and Lee, H.L. (1997), Mass customization at Hewlett-Packard: the power of
postponement, Harvard Business Review, Vol. 75 No. 1, pp. 116-21.
Gary, A. and Tang, C.S. (1997), On postponement strategies for product families with multiple
points of differentiation, IIE Transactions, Vol. 29 No. 8, pp. 641-50.
Guangdong Statistical Yearbook (2003), Guangdong Statistical Yearbook, Zhongguo Tongji
Chubanshe, Beijing, annual, various years, 1999-2003.
Huang, C-W. and Lo, C-P. (2003), Using postponed manufacturing to reconfigure the supply
chain in the desktop personal company industry: the case of Taiwan, International
Journal of Management, Vol. 20 No. 2, pp. 241-56.
Kisperska-Moron, D. (2003), Responsibilities for inventory decisions in Polish manufacturing
companies, International Journal of Production Economics, Vol. 81/82, pp. 129-39.
Kotha, S. (1995), Mass customization: implementing the emerging paradigm for competitive
advantage, Strategic Management Journal, Vol. 16, pp. 21-42.
Krajewski, L., Wei, J.C. and Tang, L.L. (2005), Responding to schedule changes in build-to-order
supply chains, Journals of Operations Management, Vol. 23, pp. 452-69.
Lampel, J. and Mintzberg, H. (1996), Customizing customization, Sloan Management Review,
Vol. 38 No. 1, pp. 21-30.
Lee, H.L. (1998), Postponement for mass customization: satisfying customer demands for
tailor-made products, in Gattorna, J. (Ed.), Strategic Supply Chain Alignment, Gower,
Brookfield, VT, pp. 77-91.
McCutcheon, D. and Meridith, J. (1993), Conducting case study research in operations
management, Journal of Operations Management, Vol. 11 No. 3, pp. 239-56.
Mason-Jones, R. and Towill, D.R. (1999), Using the information decoupling point to improve
supply chain performance, International Journal of Logistics Management, Vol. 10 No. 2,
pp. 13-26.
Ma, S.H., Wang, W. and Liu, L. (2002), Commonality and postponement in multistage assembly
systems, European Journal of Operational Research, Vol. 142, pp. 523-38.
Mikkola, J.H. and Skjott-Larsen, T. (2004), Supply-chain integration: implications for mass
customization, modularization and postponement strategies, Production Planning and
Control, Vol. 15 No. 4, pp. 352-61.
Miles, M.B. and Huberman, A.M. (1994), Qualitative Data Analysis: Grounded Theory Procedures
and Techniques, Sage, London.
Nair, A. (2005), Linking manufacturing postponement, centralized distribution and value chain
flexibility with performance, International Journal of Production Research, Vol. 43 No. 3,
pp. 447-63.
Olhager, J. (2003), Strategic positioning of the order penetration point, International Journal of
Production Economics, Vol. 85, pp. 319-29.
Pagh, J.D. and Cooper, M.C. (1998), Supply chain postponement and speculation strategies: how
to choose the right strategy, Journal of Business Logistics, Vol. 19 No. 2, pp. 13-33.
Peter, D. (1992), Benetton: global logistics in action, International Journal of Physical
Distribution & Logistics Management, Vol. 22 No. 6, p. 7.

Prasad, S., Tata, J. and Madan, M. (2005), Build to order supply chain in developed and
developing countries, Journal of Operations Management, Vol. 23, pp. 551-68.
Randall, T. and Ulrich, K. (2001), Product variety, supply chain structure, and firm performance:
analysis of the US bicycle industry, Management Science, Vol. 47 No. 12, pp. 1588-604.
Skipworth, H. and Harrison, A. (2004), Implications of form postponement to manufacturing:
a case study, International Journal of Production Research, Vol. 42 No. 10, pp. 2063-81.
Skipworth, H. and Harrison, A. (2006), Implications of form postponement to manufacturing
a customized product, International Journal of Production Research, Vol. 44 No. 8,
pp. 1627-52.
Strauss, A. and Corbin, J. (1990), Basics of Qualitative Research: Grounded Theory Procedures
and Techniques, Sage, London.
Su, J.C.P., Chang, Y.L. and Ferguson, M. (2005), Evaluation of postponement structures to
accommodate mass customization, Journal of Operations Management, Vol. 23,
pp. 305-18.
Svensson, G. (2003), The bull-whip effect in intra-organizational echelons, International Journal
of Physical Distribution & Logistics Management, Vol. 33 Nos 1/2, pp. 103-29.
Tibben-Lembke, R.S. and Bassok, Y. (2005), An inventory model for delayed customization:
a hybrid approach, European Journal of Operational Research, Vol. 165, pp. 748-64.
Van der Vlist, P., Hoppenbrouwers, J.J.E.M. and Hegge, H.M.H. (1997), Extending the enterprise
through multi-level supply control, International Journal of Production Economics, Vol. 53,
pp. 35-42.
Van Hoek, R.I. (1998), Logistics and virtual integration postponement, outsourcing and the flow
of information, International Journal of Physical Distribution & Logistics Management,
Vol. 28 No. 7, p. 508.
Van Hoek, R.I. (2000), The role of third-party logistics providers in mass customization,
International Journal of Logistics Management, Vol. 11 No. 1, pp. 37-46.
Van Hoek, R.I. (2001), The rediscovery of postponement a literature review and directions for
research, Journal of Operations Management, Vol. 19, pp. 161-84.
Van Hoek, R.I. and Weken, H.A.M. (1998), The impact of modular production on the dynamics of
supply chains, International Journal of Logistics Management, Vol. 9 No. 2, pp. 35-42.
Van Hoek, R.I., Commandeur, H.R. and Vos, B. (1998), Reconfiguring logistics systems through
postponement strategy, Journal of Business Logistics, Vol. 19 No. 1, pp. 33-54.
Von Donk, D.P. (2001), Make to stock or make to order: the decoupling point in the food
processing industries, International Journal of Production Economics, Vol. 69, pp. 297-306.
Waller, M.A., Dabholker, P.A. and Gentry, J.J. (2000), Postponement, product customization, and
market-oriented supply chain management, Journal of Business Logistics, Vol. 21 No. 2,
pp. 133-59.
Wouters, M.J.F., Sharman, G.J. and Wortmann, H.C. (1999), Reconstructing the sales and
fulfillment cycle to create supply chain differentiation, International Journal of Logistics
Management, Vol. 10 No. 2, pp. 83-98.
Wu, Z. and Choi, T.Y. (2005), Supplier-supplier relationship in the buyer-supplier triad: building
theories from eight case studies, Journal of Operations Management, Vol. 24, pp. 27-52.
Yang, B. and Burns, N.D. (2003), Implications of postponement for supply chain, International
Journal of Production Research, Vol. 41 No. 9, pp. 2075-90.

Postponement
strategy

355

IJPDLM
37,4

356

Yang, B., Burns, N.D. and Backhouse, C.J. (2004a), Postponement: a review and an integrated
framework, International Journal of Operations & Production Management, Vol. 24 No. 5,
pp. 468-87.
Yang, B., Burns, N.D. and Backhouse, C.J. (2004b), Management of uncertainty through
postponement, International Journal of Production Research, Vol. 24 No. 6, pp. 1049-64.
Yang, B., Burns, N.D. and Backhouse, C.J. (2005a), The application of postponement in
industry, IEEE Transactions on Engineering Management, Vol. 52 No. 2, pp. 238-48.
Yang, B., Burns, N.D. and Backhouse, C.J. (2005b), An empirical investigation into the barriers
to postponement, International Journal of Production Research, Vol. 43 No. 5, pp. 991-1005.
Yin, R.K. (1994), Case Study Research: Design and Methods, Sage, Thousand Oaks, CA.
Zinn, W. and Bowersox, D.J. (1988), Planning physical distribution with the principle of
postponement, Journal of Business Logistics, Vol. 9 No. 2, pp. 117-36.
About the authors
Jeff Hoi Yan Yeung is a Professional Consultant at The Chinese University of Hong Kong
(CUHK), and teaches SCM and e-commerce in the MSc and MBA programs. He obtained his MSc
in Industrial Engineering from the University of Houston, and a PhD in Manufacturing
Engineering from Queensland University of Technology. Prior to joining CUHK, he was a
Business Consultant for J.D. Edwards. His research areas are SCM, e-commerce, BPR, and
Operations Management. He has published numerous articles in reputable journals, including
International Journal of Production Research, Communications of ACM, International Journal of
Physical Distribution and Logistics Management, and Total Quality Management. E-mail:
Jeff@baf.msmail.cuhk.edu.hk
Willem Selen is Professor at the Institute for Logistics and Supply Chain Management at
Victoria University in Australia. He obtained a Commercial Engineering degree from Limburg
University in Belgium, and a PhD in Business Administration from the University of South
Carolina. His broad research interests span the logistics, operations management, and e-business
areas, and he has published numerous papers in leading journals and international proceedings.
He continues to be involved heavily with industry with projects that have involved a variety of
logistics/operations management issues, including business process flow re-engineering on a
supply chain level, and studies on 3 and 4 PLs. Willem Selen is the corresponding author and can
be contacted at: willem.selen@vu.edu.au
Zhou Deming is an Assistant Professor at The Chinese University of Hong Kong (CUHK). He
holds a Bachelor of Engineer and Master of Management Science and Engineering from
Tsinghua University and a PhD in Management from the Anderson School of Management at
UCLA. His research interests are in supply chain contract design, supply chain competitions,
logistics and health care issues. He has one paper published in Management Science, and several
papers under review in other journals. E-mail: dzhou@baf.msmail.cuhk.edu.hk
Zhang Min is a PhD student at The Chinese University of Hong Kong (CUHK). He holds a
Bachelor of Management and Master of Management Science and Engineering from Nankai
University. His research interest is supply chain management. E-mail: zhangmin@baf.msmail.
cuhk.edu.hk

To purchase reprints of this article please e-mail: reprints@emeraldinsight.com

Or visit our web site for further details: www.emeraldinsight.com/reprints