Postponement Strategies for Global Downstream Supply Chains: A Conceptual Framework

• DOI: http://doi.org/10.1111/jbl.12250
• Date: 01 June 2020
• Author: Lorenzo Bruno Prataviera,Marco Melacini,Emilio Moretti,Sara Perotti
• Published date: 01 June 2020

Postponement Strategies for Global Downstream Supply Chains: A

Conceptual Framework

Lorenzo Bruno Prataviera , Sara Perotti , Marco Melacini , and Emilio Moretti

Department of Management, Economics and Industrial Engineering, Politecnico di Milano, Milan, Italy

Postponement is a well-known organizational concept and usually relates to the deferment in time of manufacturing and/or logistics opera-

tions. In the current global competitive landscape, situations where postponement can be applied are rapidly increasing. Faced with the

wide range of customs duties and free-trade agreements currently in place, companies need to (re)design their postponement strategies to cus-

tomize their products appropriately, and to the proper degree, in each market. As the actual location where operations take place has a major

impact on a company’s overall performance, the spatial perspective must also be taken into account when designing global postponement strate-

gies, alongside the conventional temporal perspective. Heretofore, the academic literature does not offer any comprehensive framework on a

global scale either for handling what is known as the postponement boundary problem, or for conceptualizing the related postponement strate-

gies. Building on previous research, the aim of the present study was to investigate the postponement concept in a global environment with a

downstream focus. The intended purpose is twofold: first, to review and expand previous studies on the subject and, second, to provide some

guidelines for conceptualizing global postponement strategies. A structured literature review was first conducted, followed by the development

of a framework that combines both the temporal and the spatial dimensions. Finally, the framework was applied to a group of 28 business cases

taken from the literature, to act as a bridge between academic theories and practitioners’current business operations.

Keywords: postponement; global supply chain; international distribution; downstream network design; conceptual framework

INTRODUCTION

First proposed in the mid-20th century (Alderson, 1957) as the

“simple but powerful idea that timing matters in marketing and

distribution”(Zinn, 2019; p. 66), postponement is currently a

well-known organizational concept that can be applied to differ-

ent parts of the supply chain. It describes the strategy whereby

any movement or final configuration of goods is delayed for as

long as possible (Bucklin, 1965; Garc



ıa-Dastugue and Lambert,

2007), if not explicitly until receiving the customers’orders

(Zinn and Bowersox, 1988; van Hoek, 2001).

Several different postponement strategies have been proposed

within the context of supply chain management and logistics

(Zinn and Bowersox, 1988; Yang et al., 2004b; Boone et al.,

2007), all of which involve a combination of three basic ele-

ments: form, time, and place postponement (Bowersox and

Closs, 1996; Pagh and Cooper, 1998). According to the part of

the supply chain considered, a further distinction between

upstream and downstream postponement emerges (Ernst and

Kamrad, 2000; Waller et al., 2000). From a strictly downstream

perspective (i.e., from factories to customers), postponement

refers to light manufacturing operations (such as assembly, pack-

aging, or labeling) where no product redesign or change to the

work sequence comes into play (Zinn and Bowersox, 1988). It

affects the representation of either the customer order decoupling

point (CODP; van Hoek, 2001) or the differentiation point (DP;

Garc

ıa-Dastugue and Lambert, 2007). Several frameworks have

been proposed as blueprints for studying postponement strate-

gies. Concerning downstream postponement, it would appear that

the most popular framework was the one suggested by Pagh and

Cooper (1998). They associated form postponement with manu-

facturing, and time and place postponement with logistics, link-

ing them to customers’orders and thus referring to a temporal

perspective (as per Zinn and Bowersox, 1988).

A global approach toward postponement is not new to the

research agenda (Cooper, 1993; van Hoek, 1996; van Hoek,

2001). Nevertheless, global supply chains have evolved over

time, being affected by factors such as government regulations,

subsidies provided by governments, customs tariffs, international

trade and transport considerations, differences in workers’knowl-

edge and expertise, and differences in international production

costs (MacCarthy and Atthirawong, 2003; H€

antsch and Huchzer-

meier, 2016). Therefore, in the current competitive landscape,

new opportunities for implementing postponement strategies are

on the rise (Lee, 2010; Olhager et al., 2015). Faced with the

many customs duties and free-trade agreements currently in

place, companies need to (re)design their postponement strategies

if they intend to achieve the right level of product customization

in each market region (Choi et al., 2012). According to Lee

(2010), the key question is “what should be the portion of the

product to be built at the factory, and what should be the portion

to be built at the (multiple and distributed) distribution centers

that are in the market regions. [...]Defining what is to be

assembled in the factory and what is to be assembled in distribu-

tion is termed the postponement boundary problem”(p. 178 and

182).

The importance of introducing a spatial perspective alongside

the temporal one has been already acknowledged in the literature

(van Hoek, 1996), but the existing contributions mainly deal with

specific cases/strategies of global postponement (Choi et al.,

2012; Guericke et al., 2012), and no general framework is avail-

able for conceptualizing postponement on a global scale from a

downstream perspective.

The present study aimed to build on previous research, specifi-

cally the work undertaken by Pagh and Cooper (1998) and Lee

Corresponding author:

Lorenzo Bruno Prataviera, Department of Management, Economics

and Industrial Engineering, Politecnico di Milano, via Lambruschini

4/B, 20156, Milan, Italy; E-mail: lorenzobruno.prataviera@polimi.it

Journal of Business Logistics, 2020, 41(2): 94–110 doi: 10.1111/jbl.12250

© 2020 Council of Supply Chain Management Professionals

(2010), and develop an original framework that conceptualizes

postponement in a global environment while also addressing the

postponement boundary problem. Following Waller et al. (2000),

this study intends to pave the way for future research on the

topic and provide the basis for further studies on different strate-

gies in relation to cost-effectiveness and fields of application.

The research was conducted in two main phases. The first

phase involved a structured literature review (SLR) on global

postponement with a specific focus on downstream supply chain

processes. In the second phase, a conceptual framework was

developed. As a result, 12 different postponement strategies were

identified. To validate the framework’s effectiveness in classify-

ing these strategies, as well as to highlight their application, 28

business cases taken from the literature were positioned within

the conceptual framework’s effectiveness in classifying these

strategies and to demonstrate their application, and 28 business

cases from the literature were positioned within the conceptual

framework. The framework was then expanded to focus on one

postponement strategy at a time, thereby showing how the spatial

and temporal perspectives can be combined when defining post-

ponement strategies within global downstream supply chains.

The remainder of the paper is organized as follows. The next

section contains the literature review, followed by a section on

the research questions (RQs) and methodology. The development

of the framework is subsequently described and applied to the 28

business cases taken from the literature. The contribution of this

study in the literature and its main elements of novelty are pre-

sented in the discussion section. Finally, conclusions are drawn,

together with considerations about possible directions for future

research.

LITERATURE REVIEW

Postponement has a long history in terms of its practical applica-

tions as a strategy, as well as being a concept studied within the

academic literature (Pagh and Cooper, 1998; Zinn, 2019). It was

first proposed as a method for improving efficiency in marketing

systems. The aim was to reduce costs related to uncertainty and

the physical movement of goods, by delaying changes to either

the product’s form or the inventory’s location to the latest possi-

ble moment (Alderson, 1957; Bucklin, 1965).

Building upon this concept, several studies tackled the prob-

lem by analyzing three basic elements: time postponement, form

postponement, and place postponement (Zinn and Bowersox,

1988; Bowersox and Closs, 1996; van Hoek, 1997). Furthermore,

Zinn and Bowersox (1988) introduced the concept of delaying

the final form/configuration of a product or its delivery until

receiving the customers’orders, rather than generically delaying

to the latest possible point in time. Although most of the extant

contributions looked at postponement from the perspective of

internal supply chains (van Hoek, 2001; Yang et al., 2004b),

some scholars applied postponement as part of an external sup-

ply chain approach (Yang and Burns, 2003; Garc

ıa-Dastugue and

Lambert, 2007). Table 1 summarizes the relevant literature on

time, form, and place postponement, highlighting that multiple—

and sometimes contradictory—definitions have been introduced

over time. For a comprehensive overview, refer to Zinn (2019)

or to other literature reviews available in the field (van Hoek,

2001; Yang et al., 2004a; Boone et al., 2007).

CODP versus DP

The postponement process may start at the manufacturing,

assembly, packaging, or labeling operations (Zinn and Bowersox,

1988; Kouvelis et al., 2004; Pashaei and Olhager, 2017).

Since postponement helps businesses to cope with uncertain-

ties (Yang et al., 2004a), it is closely linked to two concepts that

are also used in mass customization: the CODP and DP (Ernst

and Kamrad, 2000; Hsuan Mikkola and Skjøtt-Larsen, 2004).

CODP is the point in the flow of materials or the stage in the

manufacturing value chain (Brun and Zorzini, 2009) where a

product is linked to a specific customer order (Wong et al.,

2009). Internal supply chains usually involve a single CODP,

whereas multiple CODPs may be needed in external supply

chains (Garc

ıa-Dastugue and Lambert, 2007). The further

upstream the CODP is placed, the higher is the level of form

postponement (van Hoek, 1997).

The DP is defined as the point or stage in the production pro-

cess where semi-finished goods (i.e., work-in-process) that are

yet to be diversified are customized through specialized processes

and/or components to create a series of different end products

(Lee and Tang, 1997; Garc



ıa-Dastugue and Lambert, 2007).

There may be more than one DP within a single production pro-

cess, and each depends upon the product’s specific features and

the relative market segments and sales regions (Yang and Burns,

2003). The purpose of form postponement is to move the DP as

far downstream as possible, by redesigning the process and/or by

standardizing and/or modularizing the components.

The terms CODP and DP have sometimes been treated as syn-

onyms (Mason-Jones and Towill, 1999), although they are two

distinct concepts (Garc

ıa-Dastugue and Lambert, 2007; Zinn,

2019). From a downstream perspective, positioning the CODP

based on customer orders or forecast demand appears to reflect

the various measures employed in push and pull strategies. Start-

ing from the assumption that postponement is a strategy at the

boundaries of push and pull, postponement constitutes the deci-

sion taken by a company to delay the manufacturing of a specific

product until the customers’orders are received, or until demand

is certain or can be pinpointed more accurately (Simchi-Levi

et al., 2003). This clear link to the temporal dimension (“when”)

is not necessarily the case when applying the DP (Garc

ıa-Das-

tugue and Lambert, 2007).

Manufacturing and logistics postponement

Several frameworks have been proposed (Cooper, 1993; Pagh

and Cooper, 1998; Yang et al., 2004a) to study postponement

strategies through a combination of the three basic elements of

form, time, and place postponement. Concentrating on a down-

stream perspective, Pagh and Cooper (1998) developed a two-

axis framework whereby form postponement is associated with

manufacturing, and time and place postponement with logistics.

Manufacturing postponement refers to “what”final manufactur-

ing operations are to be performed to customize the product after

the customers’orders are received. This also means that the same

Postponement Strategies for Global Supply Chains 95