Between the on-going COVID-19 pandemic and last year’s holiday season that saw record-high demand, companies everywhere are expecting significant shifts1 in how to get products directly to customers. But last-mile delivery isn’t the only part of the supply chain experiencing something of an overhaul – global supply chains have been in the process of “rebalancing,”2 pulling away from heavy manufacturing and sourcing in China and considering alternatives. Reevaluating from top to bottom, from sourcing and manufacturing to delivering to a customer’s doorstep, requires professionals to employ strategies to optimize the supply chain, and strategies that have centered upon a domestic rather than global supply chain often employ ideas that aren’t suited to the demands and needs of working across multiple countries.
While much advice pertains to the upstream portion of supply chains, what about the impacts downstream? In their co-authored article, “Postponement Strategies for Global Downstream Supply Chains,”3 Lorenzo Bruno Prataviera, Sara Perotti, Marco Melacini, and Emilio Moretti of Politecnico di Milano present an alternative framework for thinking about how to utilize postponement on a global scale.
Postponement was first proposed as a method for improving efficiency in marketing systems that aimed to reduce costs related to uncertainty and the physical movement of goods by delaying changes to the product’s form or inventory’s location to the last possible moment, or until receiving customer orders. But with supply chains no longer remaining within a centralized, domestic space, the expansion necessitates an introduction of “where,” not just “when” – where to postpone and for how long. There’s also the issue of “what,” or what operations to perform within the global distribution network, also known as the postponement boundary problem. Expansion of supply chains across countries requires companies to consider issues such as customs duties and tariffs, trade barriers and cross-border trade processes, transfer prices and corporate tax rates, government regulations and local content requirements, different transport modes, and the fluctuating costs of production factors and of raw materials. Sourcing and manufacturing in another country might be more cost-effective, but now requires companies to consider the price of getting it from point A to point B.
Prataviera, Perotti, Melacini, and Moretti all propose a new theoretical framework for examining global supply chains that draws a bridge between the existing postponement strategies and associated global challenges. By expanding the traditional vertical axis to include all operations related to both manufacturing and logistics, this opens up the horizontal axis to include where operations should be performed, resolving the postponement boundary problem. Their framework also includes operations that can be undertaken before or after customers’ orders.
What does this mean for professionals? Managers should use the framework as a basis for analyzing their global supply chains and decide where and when to perform each operation, allowing them to evaluate the suitability of their various strategies and investigate future developments that might improve efficiency and profit across the board.
2. Redesigning your global supply chain? Be smart about it | 2020-09-22 | CSCMP's Supply Chain Quarterly