Bringing products to market invariably presents challenges and trade-offs in support of satisfying consumer demand. Key among these are decisions related to inventory and timing of commitments. Speculation (anticipated demand) and postponement (delayed differentiation) are concepts that derive from where and when to add value to products within the supply chain. Postponement is based on the principle that changes, in form and identity, occur at the latest possible point in the supply chain. Postponement serves to reduce marketing risk, since every differentiation that makes a product more suitable for a specified segment of the market makes it less suitable for other segments.1 Postponement can also reduce risk to obsolete product and minimize inventory risks associated with variability in demand. However, the use of postponement is not without risk and it is not appropriate in all circumstances. Postponement is not the same thing as procrastination. The strategy only works when there is rigorous business discipline around its use as a tool. It can, however, be a powerful SCM tool.
Shipping Point: “We must understand variation.”
W. Edwards Deming
The underlying factor in considering an approach to inventory models is the degree of variability inherent in the demand for the product. The further out the decision is made to commit to inventory (differentiated product), the less accurate forecasts related to product attributes ...