| Traditionally, manufacturers who try to meet the demand for customized products attempt to do so by carrying large finished-goods inventories to keep service levels high. However, high demand uncertainty and forecast inaccuracy often result in obsolete inventories of some products while stockouts of others occur. One way to address this problem is through the use of postponement, in which a product is kept in generic form until an order is received and then is completed to the required specifications.; One value of postponement is flexibility in product variety. This study is cast in an environment where a consumer item is not packaged for shipment to a retailer until an order is received. A variety of packaging alternatives exists that differ only in the quantity of the unique, common item contained in each. This type of postponement is referred to as packaging postponement . Delaying the packaging for shipment requires that an inventory of the unique item be managed providing an alternative to high inventory levels of all possible packaging alternatives. The benefits include reduced inventory levels due to the risk-pooling effect.; Very limited work has been done on this specific topic, although this topic falls into a group of literature on delayed product differentiation that copes with product variety. This research identifies the conditions under which packaging postponement is an appropriate supply chain strategy, and if appropriate, the extent to which it should be done.; Mathematical models are constructed to gain insight into the effects of variability of demand, correlated demands, the number of products being postponed, and the number of items per product have on the benefit of postponement. A decision cost model is constructed to aid in determining when total postponement is an appropriate supply chain strategy. The effects of increasing amounts of postponement capacity on the benefits are measured as a function of various levels of selected model parameters. Managerial issues that influence the postponement decision and may be cumbersome to model are also addressed. |
