Thankfully, “delayed differentiation” is one of those things that’s name describes what it is. Think about it this way. It’s a manufacturing technique that “delays” making a “difference” in the product until the very last step of the process. Delayed differentiation is also known as “postponement” for the simple reason that it postpones making any differences to the products being made until the last possible moment.
Delayed differentiation is a supply chain technique that helps to align supply and demand.
As a result, fewer products are made unnecessarily, cutting costs for companies that may have otherwise overproduced particular items. This process of postponement is also effective in helping companies produce customized products.
Delayed differentiation is a technique commonly used by companies that create generic and family-based products that need to be differentiated into specific end products. Paint is a commonly used example. Naturally, paint companies need to offer hundreds of different colors of paint. Often, factories that produce paint and don’t employ the delay differentiation technique find they have overproduced particular colors while under-producing other colors.
Automobile manufacturers are also known to use delayed differentiation.
That way, they are able to mass produce base models of their cars but only make alterations or add minor customizations when a car is actually ordered by a customer. Such customizations can include upgraded audio systems, air conditioning, tires or back up cameras. In some cases, these additions can be installed right at the car dealership.
Industries with high demand uncertainty utilize delayed differentiation to address their inability to make accurate predictions about demands for their products. Take t-shirt companies, for example. They may have numerous prints available for their customers to choose from. Instead of printing all of their different t-shirt designs, they ensure that they have enough plain shirts in stock to customize once specific shirts have been ordered.
Start with white and add color later.
Many clothing companies take advantage of delayed differentiation by producing their items in white. The final coloring process isn’t conducted until they know exactly what colors are bound to be the highest sellers. Just as with the automobile upgrades, many clothing items are manufactured and sent off to their distributors before the coloring process begins.
To put it into context, Scott Haliday of Acumen Information Systems offers an apt scenario: “For example, you offer an item in red, orange, green, black, and white. If you’re using delayed differentiation, you can, instead of ordering 100 items of each color to keep in your inventory, order only white ones to keep in stock. Then, when a customer orders ten green items, you take ten of your white items, turn them green, and ship them to your customer.”
Haliday highlights the fact that manufacturers that use delayed differentiation pay less for inventory and likely waste much fewer items. In addition, they save room in their warehouses to store other necessities. “It also reduces the need to have very specific demand forecasting, as speculating which colors will be the most popular is nearly impossible,” he writes.
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