Evaluation of postponement structures to accommodate mass customization

Abstract

In order to meet increasing customer demands for more diverse product offerings, firms are revising their supply chain structures to accommodate mass customization. The revised structures often involve delaying the delivery of the products until after the customer orders arrive, termed time postponement (TP), or delaying the differentiation of the products until later production stages, termed form postponement (FP). We develop models representing possible implementations of the TP and FP structures and compare their performance in total supply chain cost and expected customer waiting times. We find that once the number of different products increases above some threshold level, the TP structure is preferred under both performance metrics. For the most general model, a numerical experiment was designed to investigate how different factors affect the performance of the TP and FP structures. Through this experiment we show that higher arrival time and process time variations make the FP structure more favorable while increases in the number of products and higher interest rates make the TP structure more favorable. We also offer guidance to managers using either structure on where to allocate resources for performance improvement. For example, to improve the customer waiting times under the FP structure, increasing the coverage of the generic component and reducing the number of products provide larger benefits than reducing the variability of the arrival and process times.