Using 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. 

Such approaches to improving supply chain performance are common in the computer industry, where expensive parts required to fix computer systems are stored in a central location and shipped either overnight or on the next flight out to deal with mainframe failures for critical applications. For example. Federal Express (FedEx) has a division called Critical Parts Supply that permits manufacturers to warehouse product in Memphis with immediate automatic shipment by FedEx on customer demand. 

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

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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. 

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