Logistic Postponement: Definition & Purpose

Logistic Postponement: Definition & Purpose
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  • 0:01 What Is Logistic Postponement?
  • 0:53 Why Use It?
  • 1:43 Conditions to Make Worthwhile
  • 2:26 Example
  • 3:10 Lesson Summary
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Lesson Transcript
Instructor: Kevin Newton

Kevin has edited encyclopedias, taught middle and high school history, and has a master's degree in Islamic law.

Looking for a way to keep your costs down while still offering a custom product to your clients? In that case, logistic postponement may be just the tool you're looking for.

What Is Logistic Postponement?

Let's pretend that you own a company that makes handbags. Your handbags are all the rage, and one of the most popular styles is monogrammed bags. In fact, it's so popular that you include monogramming in your price, so just about all of your customers get their bags monogrammed.

Of course, you don't pre-monogram the initials, do you? You don't have each bag available in the back room with initials from AAA to ZZZ. That would be crazy, right? You simply have the bags ready to go, and at the last minute, provide the last step of the process.

In short, you practice logistic postponement. This is when a company delays one or more of the final steps of producing a product until it has been purchased. In this lesson, we'll learn why companies use logistic postponement, what makes it worthwhile, and look at another example of it in use.

Why Use It?

There are a number of reasons to use logistic postponement. The biggest of these is the fact that you can offer customization to customers. Not everyone's needs are the same, so by offering a product that can be customized using logistic postponement, you come closer to providing everyone's ideal product. At the same time, you can accomplish that goal of providing more options to more people with a much smaller inventory. Remember, you didn't have every combination of letters on hand, but instead just a few of each style of bag that could be quickly customized.

Finally, there is the fact that this helps keep your costs low until you've secured the sale. In the opening example, monogramming costs were saved until the very end of the process, literally as the product was being sold. This helps to keep your overall costs low.

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