Postponed variety creation: case study in consumer electronics retail

Purpose – Postponement is known as a way to reduce risk and inventories while still providing high product variety and acceptable response times. The paper is a case study that uses simulation for quantifying these benefits for a consumer electronics company. Design/methodology/approach – Improvement potential is first evaluated qualitatively through interviews with dealers of the case company. Next, the benefit of postponement is evaluated quantitatively using discrete-event simulation with data from operational ERP systems. The conclusions identify conditions under which postponement is beneficial in retail. Findings – In the case company, shop inventory is necessary for high-volume and low-variety products. Postponing variety creation to shops has the potential to decrease inventories for these products by 40-80 per cent. The benefits of postponement depend on delivery speed requirement, product value, product variety and shop size. Research limitations/implications – Many contributions on postponement have been conceptual. This study contains a quantitative test. The study considers both the spatial dimension (where) and the temporal dimension (when) of postponement. Practical implications – The research was sufficiently successful that the company implemented the delivery concept arising from the results. Corresponding benefits seem possible for other manufacturers and retailers of consumer goods. Originality/value – The contribution is real-life quantitative evidence of how modular product architecture can be utilised to improve operational supply chain performance