Dynamic implications of customer order decoupling point positioning

Abstract

PurposeThe positioning of the customer order decoupling point (CODP) is an important strategic consideration for supply chains. Recently, research has focused only on the static effects of CODP positioning. The purpose of this paper is to expand the body of knowledge by describing the dynamic consequences that arise from shifting the CODP upstream or downstream.Design/methodology/approachA generic assembly‐to‐order system dynamics simulation model is developed and used to evaluate the dynamic consequences of shifting the CODP.FindingsPlacing the CODP downstream allows for short‐term fluctuations in demand to be absorbed by the order book, leading to a stable production rate and inventory response. This benefit must, however, be weighed against any additional safety stock a CODP placed far downstream may require.Research limitations/implicationsThe paper demonstrates the importance of considering the dynamic aspects of CODP positioning. Further research should investigate the phenomenon for different demand scenarios and supply chain configurations.Practical implicationsDownstream shifting of the CODP has been identified as a powerful way to reduce variability in assembly‐to‐order systems.Originality/valueThis paper introduces the dynamic consequences of CODP location, providing a new perspective that should be considered when positioning the CODP.