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Uses of Supply Chain Postponement

Uses of Supply Chain Postponement


Uses of Supply Chain Postponement

by Brian Warren

Given a global economy distant sources can generate low cost high quality components coupled with a staggering cost of ownership for those same components if not managed effectively. Companies often find themselves warehousing depreciating finished goods that are not generating revenue. Such finished goods do not add to the value of the supply chain since they lie in the warehouse.

Simultaneously they are warehousing possibly revenue-generating sub-assemblies. The resolution of this dilemma's solutions delve directly into the bottom line. A demand-driven postponement supply chain model can assist here. This is in lieu of a regular supply chain model where demand alone does not drive it.

To have more economical global manufacturers to outsource to while simultaneously moving final assembly, configuration, testing and packaging down along the supply chain, nearer the consumers allows the minimization of enhanced instances of demand volatility. A conventional supply chain model fails to push these down the supply chain thus not assisting in controlling the effects of rapid changes in demand volatility.

Supply-chain postponement boosts profitability by decreased inventory overhead, prevention of reworking of products with low demand and reworking on high demand ones, measurably reducing excess and obsolete inventory, IP (intellectual property) protection, reduced inventory total cost (warehousing, rework, freight, obsolescence, cost of capital, etc.) By considering all these into the account, supply chain postponement reduces the down side effects considerably to add great value to the overall supply chain.

The supply-chain postponement model delivers one of the highest inventory turns across the industry. It is arrived at by closing the time gap between supply and demand. Inventory total cost of ownership is reduced, while boosting the flexible response of the customer with respect to altering market demands. This deviates considerably from the conventional supply chain model where the time gap between supply and demand is large due to the distance of the warehoused materials from the location of demand.

Unified bills of materials can be leveraged into multiple new products to service multiple customers. The result is that orders that used to take weeks to fulfill are now shipped in days, if not hours. This innovative concept connects global sources and markets in a way that finally makes sense. Supply chain postponement provides a radical new way of handling supply chains compared to the regular supply chain where the orders can take weeks to fulfill.

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