CASE STUDY 4.1: HOW DID EMBRAER AND IMATION IMPLEMENT POSTPONEMENT? Postponement strategies have been implemented in a wide variety of industries, including automotive, aircraft, medical equipment, textile, paper, and computers/electronics. By delaying the point of postponement to later stages in the supply chain operations, companies avoid committing to product-specific decisions early on and can benefit from a better match between customer orders and inventories on hand. As many organizations are feeling pressure to increase product variety, it is essential to maintain low inventory holding costs, which is one common strategic reason behind adoption of postponement. There are other strategic drivers for postponement, such as service level targets, long lead times, short product life cycles, and high reconfiguration/customization costs. For Embraer, a major aircraft manufacturer headquartered in So Paulo, Brazil, the need for postponement became apparent when one of its customers, US Air (merged with American Airlines in 2015), had to cancel an order for six ERJ-170 aircraft. ERJ-170, which was later designated as E170, is a narrow-body twin-engine commercial jet and is part of Embraers E-Jet family, which also includes E175, E190, and E195. The aircraft in the 170 series and 190 series share many common components, including fuselage sections and avionics. When US Air canceled its order, the production of the ERJ-170s was almost complete. The aircraft was customized according to US Airs requirements; therefore, despite component commonality with other series of aircraft, it was too costly for Embraer to reconfigure the aircraft for another order. To better respond to such demand changes in the future, the company developed a strategy to postpone introducing aircraft- and customer-specific features to a later point in the production cycle. Embraer begins production using the concept of white-tail aircraft and differentiates between the E170 and E190 series 1 year before delivery. Six to eight months later, the specific platform is introduced to distinguish the E170, E175, E190, and E195 aircraft. Finally, customer-specific features related to seating, painting, interior design and layout, and entertainment systems are added during the last 3 to 4 months before delivery. In a different industry, Imation Corporation (known as GlassBridge Enterprises, Inc. since 2017) is another company that implemented a postponement strategy, which extended throughout its supply chain. The company specialized in removable data storage devices with product lines including CDs, DVDs, USB flash devices for commercial markets, and high-end storage devices for financial institutions. In the early 2000s, Imation suffered from long lead times, price erosion, and short product life cycles. The company was manufacturing the devices in Asia, and after packaging they were shipped direct to customers. The total lead time from production to distribution was around 100 days, with around 3045 days spent in manufacturing and the remaining 4050 days in packaging and distributing the products. Facing short product life cycles and decreasing prices, Imation started to look for ways to maximize efficiency using postponement. The first step was to switch to suppliers in India who offered advantages in capacity, cost, and speed of operations. During this transition, the product was redesigned so that certain value-adding activities in its production could be moved to the Imation manufacturing site in the United States. Once the products were shipped to the United States in bulk form, Imation performed the customization of the storage devices for private companies and universities. At this stage, the first point of postponement occurred because customization of the product involved incorporation of customer-specific features, including printing logos for these customers. Furthermore, once the production was complete, the products were shipped in bulk to a packaging center in Kansas City, Missouri, to be assembled to order by using different package sizes. The new supply chain configuration enabled Imation to delay the customization and packaging of products and provided additional time for the company to get better information about its customer orders.39

Questions What are the specific benefits that Embraer and Imation generated by developing postponement strategies?

Think about an industry that suffers from long lead times or one in which responding to last-minute demand changes would be too cost prohibitive to make. How can organizations in this industry incorporate postponement into their supply chain activities and functions?