Concerning Postponement and the Balance of Supply and Demand
Logistical postponement allows for late stage customization, which is advantageous because units can remain in modular form longer, reducing lead times. Standard modules can be preassembled when necessary, harnessing the forward loading advantages of push style production. The higher the degree of customization required, the longer the lead times will be. MCC’s usage of standardized parts mean customization of the Smart Car involves the exchange of essentially equivalent components, whose lead times for fitting will vary little. Short lead times are therefore achievable.
The first point of postponement is the Smart Centre (POS), where a small inventory is held, providing standard units as swappable parts, which allows customers limited customization options according to stock on hand.
The second point of postponement is the factory, where the full range of swappable parts is held. Customization at this point necessitates expanded lead times but offers the customer maximum choice. Short lead times reduce inventory cost, which contributes to supply and demand balancing. Demand is not mediated by sales agents or dealerships wanting buffer stock for drive-away sales. Absence of such intermediaries helps tie supply to demand faithfully. Demand is determined at the POS (point of sale), nowhere else. This tightens supply and demand interlock further, since orders cannot enter the system via any other means. Smartville is compelled to produce very little surplus/buffer, which creates leanness and ensures that balance between supply and demand remains within acceptable and non-spiralling parameters.