Track: Supply Chain Management

Abstract

Purpose: The purpose of this paper is to present the results of a case study on incorporating postponement in an offshoring strategy at a Singapore-based manufacturer.

Design/methodology/approach: Two SKUs are identified as being suitable candidates for postponement, based on their demand profiles. These SKUs were then assessed via a postponement/speculation (P/S) framework, the result of which suggests that manufacturing postponement is appropriate. Several decoupling points along the SKUs’ supply chain are investigated. The analysis is complicated by the fact that the entire manufacturing process straddles both Singapore and China due to equipment, capability and subcontracting constraints. A detailed cost analysis is then performed for the selected option for postponement.

Findings: The results show that postponement offers significant potential cost savings for the target company, though these are overshadowed by the savings that the company could realise from the relocation of the later part of the production process from Singapore to China.

Research limitations/implications: The findings provide managers with a view of the potential quantitative savings that are possible if postponement is incorporated into an offshoring strategy. As manufacturing costs increase in today’s “low-cost countries”, postponement can offer companies a more sustainable source of competitive advantage in the long term. The main limitation in this study is that intangible benefits and risks, such as increased flexibility in responding to changes in demand and increased complexity of coordinating international supply chains, could not be directly quantified.

Originality/value: Although postponement is a well-understood concept, recent research seems to suggest that postponement is not widespread in practice or may even be declining in importance. One reason could be that companies may take a short-term and simplistic view when adopting an offshoring or outsourcing strategy. Another possible reason is that the cost of holding inventory is often not directly observable or measured at many companies. As such, there have been relatively few cases uncovered in the literature that have focused on quantifying the benefits of postponement. These have led to gaps between the theoretical benefits of postponement versus the possible cost savings as perceived by industry practitioners. The findings of this paper fill some of these gaps by contributing a case on the continuing relevance of postponement in today’s global supply chains.