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Labor deployment is another major consideration. Having enough full-time and part-time labor that can be mobilized when projects come in is critical for completing orders accurately and on time. That may require additional training of existing staff or hiring more people; employees who excel at picking orders and driving forklifts may not be the best ones to handle on-demand postponement activities, Hutchinson points out. "You'll need a different labor mix to sit down and run machines and monitor quality control," he says.
And there are other considerations, Hutchinson adds. For example, postponement requires information technology, such as an enterprise resource management (ERP) system, to handle not only production and shipment scheduling, but also the tracking of inventory consumption. Companies that operate private fleets rather than using for-hire capacity, moreover, may have an advantage because their dedicated drivers and equipment have more flexibility to react to fluctuating orders and delivery requirements. Finally, Hutchinson says, warehouse and logistics managers would do well to strive for good communications with both manufacturing and sales. "For postponement to run smoothly, the sales department and distribution must be structured to work well together," he advises. Costs vs. Benefits
Without a doubt, implementing postponement capabilities in the warehouse requires significant investments in facilities, equipment, and labor. Companies that have done it right say the benefits are worth it. Respondents to an Association for Operations Management (APICS) membership survey, for example, cited increased customer satisfaction, inventory-cost reduction, and improved order fill rates as top benefits of a postponement strategy. Other rewards they cited included risk minimization and lower costs for manufacturing, procurement, infrastructure, and transportation.
While compelling for the company, such benefits come with caveats for logistics managers who must orchestrate postponement activities. "The warehouse manager is the person who ends up with the extra costs, but doesn't always see the benefits that surface a little further up the supply chain," says Wilwerding. He advises planning in advance in order to avoid problems down the road. "Figure out how and where to do the postponement before getting into it, and you'll minimize the number of hoops that you'll have to jump through at the eleventh hour," he says. (For a list of other factors that contribute to a successful postponement strategy, see Figure 1 on Page 70.)
A successful postponement strategy also requires changing a mindset that's centered around manufacturing and distribution to one that's focused on customer service, says Drumm. To make that happen, he suggests, managers will need to recruit a high-level champion, such as a vice president of production, who can convince other executives of the value of postponement.
"They'll be able to break down the barriers of 'we don't do it that way, it'll never work,' " says Drumm. "[They'll] help others realize that to survive in today's competitive business environment requires a completely different business approach than the old way of holding goods in a warehouse until someone places an order for them."
Success Factors in Postponement Strategy
| Factor |
Very Important |
Important |
| Product design standardization |
39% |
41% |
| Internal cross-functional collaboration |
45% |
33% |
| Business process reengineering |
29% |
45% |
| Collaboration with customers/suppliers |
34% |
38% |
| Organizational design and accountability |
20% |
49% |
| Stringent, explicit performance measures |
24% |
42% |
| Change management and training |
24% |
24% |
| Enabling supply chain technology |
20% |
35% |
| ERP systems |
16% |
38% |
| Enabling collaborative Internet technology |
15% |
22% |
| Other |
6% |
0% |
Source: APICS Membership Internet Survey, August 2003
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| Author Information |
| Bridget McCrea is a freelance writer who often covers logistics technologies and distribution strategies. |
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In their desire to satisfy customers, well-intentioned but unrealistic sales reps may get a bit overzealous in their promises, leaving warehouse managers to figure out how to fulfill specific postponement requirements.
If all the customer wants is a "50 cents off" sticker attached to each package, then the job will likely be feasible—although it may still require reconfiguring workstations and could affect staffing and scheduling. If the salesperson tells customers they can have 10,000 brown widgets and 5,000 green widgets—but doesn't realize the time, effort, and equipment required for making that change—then both the order and internal relationships can quickly go haywire.
Before things get to the boiling point, says Bill Drumm of consultants Establish Inc./Herbert W. Davis and Co., logistics managers should step back and figure out what type of postponement activities their operations can handle, and in what kind of time frames. Then they need to communicate that to sales and marketing.
"Take sales and marketing out into the facility and show them," recommends Drumm. "If your firm makes a $5 million capital investment in packaging equipment that can handle 100,000 units a month within a five-day window, let them know that doing more than 100,000 probably isn't possible."
James Tompkins of the consulting firm Tompkins Associates says that in a perfect world, a warehouse manager would explain those capabilities and limits to the sales and marketing staff, then stand back while they communicate that information to customers. That often doesn't happen, though, and warehouses may end up struggling to fulfill unrealistic commitments.
The smart route, Tompkins suggests, is to take preemptive action. "It would behoove the warehouse manager to grab the bull by the horns and develop a postponement or customization strategic plan, then feed that information back to sales and marketing," he says. "Not the other way around." | | |
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