Geographic postponement

Geographic postponement refers to delaying the movement of product to the demand location until after demand has occurred. If the customer lead time for delivery is short, this might require premium transportation. If not, the product may be moved to the customer demand point by normal transport modes. 

The supply chain audit question is Can geographic postponement be used in this supply chain to improve performance ... 

In a distribution supply chain, products flow out in a fan-shaped structure to the retailers. Consider the example of a warehouse and retailers in Figure 2.2. Even if the retailers serve independent markets, the retail supplies are linked because the warehouse inventory policy affects the supply to otherwise independent retailers. But the presence of the warehouse may generate significant benefits to the supply chain by enabling bulk commitments by the wholesaler or plant, which can deliver to the warehouse, followed by a distribution to retailers as their demands unfold. The warehouse thus offers the benefits of demand risk pooling and enables geographic postponement of the deliveries to retailers. We will analyze the impact of such risk pooling in Section 2.3. 

Express delivery companies, such as FedEx, offer services such as critical parts supply. This service stores critical parts for OEMs at one of FedEx s hubs. As soon as there is demand for a part, FedEx will schedule to get it delivered to the desired location based on the promised guarantee. The transportation mode used may vary from a next flight out from a regular airport to a FedEx same-day shipment to a next-day shipment. While premium transport is an expense, such services permit geographic postponement and thus an opportunity to pool demand risk across locations. 

To estimate the benefit, let A be the additional cost per unit for premium transport. The benefit of a centralized location with express shipping is justified if we have hZ(T N — //V) > A/t. As the premium paid for express shipments declines and the value of such service guarantees increases, geographic postponement increases in value to the OEM. 

In the population over 65, there are substantial sex (68% female, 32% male) and geographical (2.1% Japan, 5.2% Europe and 10% USA) differences in the incidence of Alzheimer s disease (see Lockhart and Lestage 2003, for review). The disease now affects about 15 million persons worldwide, and a sharp increase in the afflicted population is expected in the future as it is estimated that the number of individuals over 65 will increase to 1.1 billion by 2050. It is therefore a pressing and no longer postponable necessity to find a safe and efficient prophylactic therapy to significantly decrease the prevalence of Alzheimer s disease as soon as possible. 

Inventory Costs. Its online sale of servers offers Dell the ability to reduce its inventories by aggregating them in a few geographic locations. Dell is able to further reduce inventories by postponing assembly of servers until after the order arrives. This allows DeU to hold inventories of components instead of finished goods. 

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