A coffee mug maker makes 15 different colors of mugs. It decides to postpone the coloring...

 

Transcribed Image Text:

A coffee mug maker makes 15 different colors of mugs. It decides to postpone the coloring step in the mug manufacturing process and instead supplies all mugs in a neutral color to its main distributors. It also supplies those distributors with color kits with different colors, who then paint mugs when customer demand for specific color mugs become clearer. This practice is called postponement and works best when: a. Demand at the customer level is uncertain b. The cost of shifting a work step in the process to a later time /another location (say cost at the distributor end-addl equipment, worker training for painting mugs and so on) is not higher than the postponement benefits of customizing products closer to the occurrence of demand (lower stockouts or excess inventories and such). c. When the mug maker can achieve high economies of scale making just one (neutral) color of mugs and/or is not saddled with high fixed costs from the painting equipment it currently owns. d. When the work step being postponed is modular (that is) can be separated from the rest of the product manufacturing process e. All of the above are important factors in making postponement decisions A coffee mug maker makes 15 different colors of mugs. It decides to postpone the coloring step in the mug manufacturing process and instead supplies all mugs in a neutral color to its main distributors. It also supplies those distributors with color kits with different colors, who then paint mugs when customer demand for specific color mugs become clearer. This practice is called postponement and works best when: a. Demand at the customer level is uncertain b. The cost of shifting a work step in the process to a later time /another location (say cost at the distributor end-addl equipment, worker training for painting mugs and so on) is not higher than the postponement benefits of customizing products closer to the occurrence of demand (lower stockouts or excess inventories and such). c. When the mug maker can achieve high economies of scale making just one (neutral) color of mugs and/or is not saddled with high fixed costs from the painting equipment it currently owns. d. When the work step being postponed is modular (that is) can be separated from the rest of the product manufacturing process e. All of the above are important factors in making postponement decisions