Postponement and Information in a Supply Chain

Krishnan S. Anand and Haim Mendelson

No 1222, Discussion Papers from Northwestern University, Center for Mathematical Studies in Economics and Management Science

Abstract: We model a supply chain consisting of a production facility, a distribution center and two differentiated markets. Demand information is used to mitigate the effects of uncertainty in the output markets. We study the firm's operational performance under alternative business processes, comparing early and delayed product differentiation. The comparison yields the value of postponement. Our results show that informational considerations have a paramount effect on the effectiveness of postponement strategies. They enable researchers and decisionmakers to performa cost-benefit analyses and quantify the anticipated effects of implementing postponement strategies. They also provide qualitative guidance regarding factors that affect the value of postponement.

Date: 1998-07
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