Postponement strategy for international transfer of products in a global supply chain: A system dynamics examination

Abstract This paper contributes to research on “postponement” strategy in the context of a global production–distribution system of an automobile manufacturer. It proposes a model that integrates multiple considerations germane to global supply chains. Postponement is important in this context because it is necessary to consider international transfers and tariffs, and it is important to appropriately account for the impact of postponement on total costs. Consideration of several key variables such as shipping point, customs tariff, and cost differences between countries is essential to derive full benefits from postponement strategy in global supply chains. International transfer of goods among countries in global automobile industry is complex and dynamic because of the multitude of factors that must be considered. The paper develops insights regarding postponement strategy in global supply chains via a system dynamics simulation model. The model draws on the experiences of a Korean automobile manufacturer with operations in developing and developed countries. The results of the system dynamics simulations show that the choice of optimal shipping point and the right level of postponement under the “decoupling points” strategy in global operations has a significant effect on overall cost efficiency, when decoupling point and postponement timing are considered simultaneously. The results also show that there are key differences in executing the postponement strategy when shipping to a developing country as opposed to a developed country. This insight has practical implications for global operations and is helpful in developing a sophisticated framework for executing the postponement strategy as manufacturing firms expand their operations globally.