Postponement & Speculation in Electronics Retailing case studies on Swedish retailers Master thesis within Supply chain management Authors: Masoud M. Tabar Hamid Karimi Manjili Tutors: Susanne Hertz Hamid Jafari Jönköping: Spring, 2011 Master’s Thesis in Business Administration Title: Postponement & Speculation in electronics retailers Author: Masoud M. Tabar & Hamid Karimi Manjili Tutors: Susanne Hertz & Hamid Jafari Date: [2011-05-15] Subject terms: Postponement, speculation, logistics, supply chain management, retailing Abstract Problem: Volatility and uncertainly in the supply chain has brought forward different challenges and opportunities for retailers over the years. For consumer electronics re- tailers in particular, short product life cycles and uncertainty of demand has given rise to different approaches such as postponement and speculation in the retail channel. Post- poning different functions in the supply chain can be a source for reduced inventory costs, reduced logistics costs and greater customer satisfaction. As consumer electronics retailers face the uphill challenge of offering increased customization and services to consumers, a loss of focus on the efficiency and costs in the supply chain can be cause for less competitiveness in an already extremely competitive market. Postponement strategies can thus offer consumer electronics retailers a gateway to the conventional speculation approach and thereby reduce the heavy dependence retailers have on fore- casting. Purpose: To analyze the postponement/speculation strategies applied by consumer electronics retailers. Method: An inductive approach was undertaken with qualitative interviews and obser- vations held with three consumer electronics retailers located in Sweden. Results: The study shows that postponement activities within manufacturing and logis- tics processes is yet to be applied to a greater extent by consumer electronics retailers. The retailers tend to still speculate and forecast demand using sales forecasts and pro- jected demand prognoses. The few elements of postponement found, were in the logis- tics flows and especially in the reverse logistics flow. For the three product categories which were chosen as focus of the study, there were slight deviations found for how the retailers apply postponement and speculation. This was found to related to their pro- curement and life cycle characteristics The decoupling point was found to be down- stream, close to the retailers and hence emphasizing the make-to-stock approach which characterized the product flows in the supply chain. Reasons behind the lack of post- ponement application were found to be external market conditions and limited market scope of the retailers, making speculation and forward buying economically more justi- fiable than postponement. Volatility in demand for short life cycled products were dealt with through the use of intermediaries and a moving the material decoupling point somewhat upwards. Table of Contents 1 Introduction .......................................................................... 7 1.1 Background ................................................................................... 7 1.2 Problem discussion ....................................................................... 9 1.3 Purpose ......................................................................................... 9 1.4 Research questions ....................................................................... 9 1.5 Perspective ................................................................................... 9 1.6 Delimitation ................................................................................. 10 2 Frame of reference ............................................................. 11 2.1 Retailing ...................................................................................... 11 2.1.1 Classification of retailers ................................................... 11 2.1.2 Retail competition ............................................................. 13 2.1.3 Consumer electronics retailers ......................................... 14 2.2 Postponement ............................................................................. 15 2.2.1 Postponement types ......................................................... 16 2.3 Speculation ................................................................................. 18 2.3.1 Relation between postponement/speculation and bullwhip effect ............................................................................. 19 2.4 Decoupling point.......................................................................... 22 2.5 Classification of postponement/speculation strategies ................ 23 2.5.1 Postponement/Speculation decision making determinants ............................................................................... 25 2.5.2 P/S profile analysis ........................................................... 27 2.6 Implications of P/S-strategies ...................................................... 28 2.7 Centralized vs. decentralized inventory systems ......................... 29 2.8 Summary of Frame of Reference ................................................ 30 3 Methodology ....................................................................... 31 3.1 Epistemological stance ................................................................ 31 3.2 Research approach ..................................................................... 31 3.3 Literature review .......................................................................... 33 3.4 Research objective ...................................................................... 33 3.5 Data collection methods .............................................................. 34 3.6 Case study design ....................................................................... 36 3.6.1 Defining the population ..................................................... 36 3.6.2 Determining the study object frame .................................. 36 3.6.3 Selecting a sample method .............................................. 37 3.6.4 Determining the number of study objects ......................... 37 3.6.5 Selecting the study objects ............................................... 37 3.6.6 Non-response ................................................................... 38 3.6.7 Qualitative interviews ........................................................ 38 3.6.8 Observations..................................................................... 41 3.6.9 Method of analysis ............................................................ 41 3.7 Validity of data ............................................................................. 42 3.8 Generalizability ............................................................................ 42 3.9 Primary versus secondary data ................................................... 43 3.10 Time horizon ............................................................................... 43 3.11 Limitations of method .................................................................. 44 2 3.12 Summary of Method .................................................................... 44 4 Empirical findings .............................................................. 46 4.1 NetonNet ..................................................................................... 46 4.1.1 Retail structure.................................................................. 46 4.1.2 Product categories ............................................................ 46 4.1.3 Postponement & Speculation activities ............................. 49 4.2 MediaMarkt ................................................................................. 50 4.2.1 Retail structure.................................................................. 50 4.2.2 Product categories ............................................................ 51 4.2.3 Postponement & Speculation activities ............................. 52 4.3 El-giganten .................................................................................. 55 4.3.1 Retail structure.................................................................. 55 4.3.2 Product categories ............................................................ 55 4.3.3 Postponement & Speculation activities ............................. 56 5 Analysis............................................................................... 59 5.1 NetonNet Case Analysis ............................................................. 59 5.1.1 Product category A: Television ......................................... 59 5.1.1.1 Product replenishment for TVs at NetonNet: ................................................. 60 5.1.1.2 Profile analysis of category A: TVs.................................................................. 61 5.1.2 Product Category B: Laptops ............................................ 63 5.1.2.1 Product replenishment for laptops at NetonNet: ............................................ 63 5.1.2.2 Profile analysis of category B: Laptops ........................................................... 64 5.1.3 Product Category C: Cellphones ...................................... 65 5.1.3.1 Product replenishment for cellphones at NetonNet: ....................................... 66 5.1.3.2 Profile analysis of category C: Cellphones ...................................................... 66 5.2 MediaMarkt Case Analysis .........................................................