Postponed variety creation: case study in consumer electronics retail

Abstract

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.

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