Product-Customization and Payment Policy with Postponement Strategy


Manufacturers adopting postponement strategy can lower operational cost and quickly respond customers’ personalized demands. Adopting postponement strategy, however, has often led manufacturers to situations of higher risk of holding exclusive material in the customization stage. For example, customers prefer to order flexibly from manufacturers so as to be able to respond flexibly to their custom changes. Manufacturers, on the other hand, prefer customers to place full orders as early as possible so that they can hedge against the risks of under-production, especially in the customer order decoupling point (CODP) downstream. Motivated by this problem, we model a dynamic cost model in this paper to evaluate the risks and benefits. Using the Logistic curve, we develop a payment policy for manufacturer adopting postponement strategy in the CODP downstream. Our research demonstrates that, compared with the payment policy of product completed, payment in stages according to product-customization can coordinate conflict between manufacturers and customers in the process of adopting postponement strategy manufacturing system. We also discuss variation of CODP positioning, total cost and payment when rate of return changes.

Share and Cite:

J. Luo, "Product-Customization and Payment Policy with Postponement Strategy," Journal of Service Science and Management, Vol. 6 No. 1, 2013, pp. 1-10. doi: 10.4236/jssm.2013.61001.

Conflicts of Interest

The authors declare no conflicts of interest.


[1] J. Chod and N. Rudi, “Resource Flexibility with Responsive Pricing,” Operations Research, Vol. 53, No. 3, 2005, pp. 532-548. doi:10.1287/opre.1040.0191
[2] A. O. Brown, H. L. Lee and R. Petrankan, “Xilinx Improves Its Semiconductor Supply Chain Using Product and Process Postponement,” Interface, Vol. 30, No. 4, 2000, pp. 65-80. doi:10.1287/inte.
[3] R. I. Van Hoek, “The Rediscovery of Postponement a Literature Review and Directions for Research,” Journal of Operations Management, Vol. 19, No. 2, 2001, pp. 161-184. doi:10.1016/S0272-6963(00)00057-7
[4] B. Yang, N. D. Burns and C. J. Backhouse, “Postponement: A Review and an Integrated Framework,” International Journal of Operations & Production Management, Vol. 24, No. 5, 2004, pp. 468-487. doi:10.1108/01443570410532542
[5] C. A. Boone, C. W. Craighead and J. B. Hanna, “Postponement: An Evolving Supply Chain Concept,” International Journal of Physical Distribution & Logistics Management, Vol. 37, No. 8, 2007, pp. 594-611. doi:10.1108/09600030710825676
[6] W. Zinn and D. J. Bowersox, “Planning Physical Distribution with the Principle of Postponement,” Journal of Business Logistics, Vol. 9, No. 2, 1988, pp. 117-136.
[7] B. Yang, N. D. Burns and C. J. Backhouse, “The Application of Postponement in Industry,” IEEE Transactions on Engineering Management, Vol. 52, No. 2, 2005, pp. 238-258. doi:10.1109/TEM.2005.845223
[8] J. Li, T. C. E. Cheng and S. Y. Wang, “Analysis of Postponement Strategy for Perishable Items by EOQ-Based Models,” International Journal of Production Economics, Vol. 107, No. 1, 2007, pp. 31-38.
[9] S. W. Bibhushan, K. S. Bhoon and F. T. S. Chan, “Postponement Strategies for Re-Engineering of Automotive Manufacturing: Knowledge-Management Implications,” International Journal of Advanced Manufacturing Technology, Vol. 39, No. 3-4, 2008, pp. 367-387. doi:10.1007/s00170-006-0679-z
[10] D. Kisperska-Moron and A. Swierczek, “The Elected Determinants of Manufacturing Postponement within Supply Chain Context: An International Study,” International Journal of Production Economics, Vol. 133, No. 1, 2011, pp. 192-200. doi:10.1016/j.ijpe.2010.09.018
[11] R. I. Van Hoek, “Postponed Manufacturing: A Case Study in the Food Supply,” Supply Chain Management: An International Journal, Vol. 2, No. 2, 1997, pp. 63-75. doi:10.1108/13598549710166113
[12] H. L. Lee, C. Billington and B. Carter, “Hewlett-Packard Gains Control of Inventory and Service through Design for Localization,” Interfaces, Vol. 23, No. 4, 1993, pp. 1-11. doi:10.1287/inte.23.4.1
[13] M. Reimann, “Accurate Response by Postponement,” European Journal of Operational Research, Vol. 220, 2012, No. 3, pp. 619-628. doi:10.1016/j.ejor.2012.02.022
[14] E. M. Jewkes and A. S. Alf, “A Queueing Model of Delayed Product Differentiation,” European Journal of Operational Research, Vol. 199, No. 3, 2009, pp. 734-743. doi:10.1016/j.ejor.2008.08.001
[15] H. L. Lee, “Effective Inventory and Service Management through Product and Process Redesign,” Operations Research, Vol. 44, No. 1, 1996, pp. 151-159.
[16] H. L. Lee and C. Tang, “Modeling the Costs and Benefits of Delayed Product Differentiation,” Management Science, Vol. 43, No. 1, 1997, pp. 40-53. doi:10.1287/mnsc.43.1.40
[17] C. Yeh and H.-C. Yang, “A Cost Model for Determining Dyeing Postponement in Garment Supply Chain,” International Journal of Advanced Manufacturing Technology, Vol. 22, No. 1-2, 2003, pp. 134-140. doi:10.1007/s00170-002-1453-5
[18] H. Haapasalo, “Fast Production for Order Fulfillment: Implementing Mass Customization in Electronics Industry,” International Journal of Production Economics, Vol. 90, No. 2, 2004, pp. 213-222. doi:10.1016/S0925-5273(03)00214-7
[19] J. Uskonen and A. Tenhi?l?, “The Price of Responsiveness: Cost Analysis of Change Orders in Make-To-Order Manufacturing,” International Journal of Production Economics, Vol. 135, No. 1, 2012, pp. 420-429. doi:10.1016/j.ijpe.2011.08.016
[20] J. C. P. Su, Y.-L. Chang and M. Ferguson, “Evaluation of Postponement Structures to Accommodate Mass Customization,” Journal of Operations Management, Vol. 23, No. 3-4, 2005, pp. 305-318. doi:10.1016/j.jom.2004.10.016

Copyright © 2023 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.