Timing is everything, and companies facing choices around freight transportation modes must consider transit times, inventory levels and demand forecasts when making decisions. Ease pressure on these variables and you enable companies to utilize cheaper and more carbon-efficient modes of transportation.
In many cases, companies can increase the flexibility of their supply chains by developing methods that reduce risk associated with poor demand forecasts. One way of doing so is to delay product assembly – a process known simply as ”postponement.” This allows companies to maximize the value of their inventory, respond to changing tastes and meet consumer customization demands. EDF included these two case examples of postponement in our recent report, Smart Moves:
- Bang & Olufsen, the Danish luxury video and audio maker, avoids overstocking inventory by assembling and packaging final goods at a separate facility, enabling them to meet customer specific demands for features, color and size without creating excess inventory.
- A manufacturer in the kitchen and bath industry implemented a process of kitting semi-finished goods at a regional distribution center instead of at the manufacturing plant. This change allowed the manufacturer “to ship the product’s components individually, maximizing trailer cube capacity,” and saving nearly 50% on freight costs.
Benetton was also recently highlighted for its postponement strategy by Dr. Edgar Blanco from MIT. The company delayed the final dyeing the sweaters in order to better respond to uncertainty about demand. As a result, the company was able to reduce unsold stock from 33% to 8%.
Expedited services from leading ocean and rail freight companies require nearly three weeks to move goods from Asia to North America, so shippers must plan ahead and build flexibility into their systems to maximize the use of the most carbon-efficient modes of transportation. For many products, postponement can be an effective strategy to increase flexibility and enable the use of more efficient transport.