Postponement in Retailing Industry: A case study of SIBA

Master’s Thesis in Logistics and Supply Chain Management _____________________________________________________ Title: Postponement in Retailing Industry- A case study of SIBA Authors: Ahmed Kemal & Naqvi Syed Mohammad Tutor: Helgi Valur Fredriksson, Dr. Date: May, 2010 Key Words: Speculation, Postponement, Customer Order Decoupling point, Retailing, Supply Chain Flexibility, Agility ______________________________________________________________ Abstract Problem: Today's business environment is characterized by changing customer demands, increasing cost pressures on retailers, shorter product life cycles and products becoming obsolete shortly after their introduction. The above factors make it difficult for electronics retailers to balance the costs of dealing with excessive inventory and not be out of stock. To be competitive, retailers should delay some of their activities until customer demand becomes visible. This brings us to the phenomenon of postponement. Electronics market in Sweden faces continuous growth, although at a declining rate. This is indicative of a saturation that this sector, as a whole, is approaching to. The above problems are due to the speculative approaches and standardized products policies that are in practice. Loss of sales and customers result from these practices. The current study analyses the importance of postponement strategy and the benefits it offers. This study also tries to explore the potential solutions for retailers that postponement may relate to. Purpose: The scope of this study is to identify possible postponement strategies needed for SIBA. Method: A case study approach has been taken. The choice of the method is qualitative with an inductive approach. This involved personal communications during interviews with the managers of SIBA, using semi structured questions to collect data. Results: The concepts of postponement, supply chain flexibility, agility and customer order decoupling points (CODP) are closely related to one another and it has been shown that as the depth of postponement increase from right to left in the CODP continuum, the CODP changes its position, moving along the CODP continuum from right to left and towards the upstream. With this movement, the flexibility and agility in the chain increases. Our finds suggest that postponement is rather underutilized and that wastes (by way of lost sales and customers, obsolete inventory costs and storage costs) in the retailing process occur due to speculative approaches in application at the retail level. We have suggested logistics postponement for two out of three product categories and enumerated the ensuing benefits that the retailer can derive by way of enhanced flexibility, agility and reductions in wastages and satisfied customers