Coping with the postponement boundary problem: an empirical investigation in global food supply chains

Abstract

PurposeThe postponement boundary problem entails that duties and cross-border trade complexity can lead companies to geographically postpone operations to downstream global facilities. The present study aims at investigating the problem to provide insights into the drivers behind the choice of different postponement strategies for global food supply chains.Design/methodology/approachA single case study was conducted considering an Italian company exporting olive oil toward the United States. Two global postponement strategies, previously formalized in the literature, were tailored for food supply chains. A multi-methodological approach was adopted, combining data obtained through exploratory case research with empirically grounded analytical modeling. A sensitivity analysis was also performed, to investigate outcomes related to the considered problem when changing key parameters.FindingsBulky and heavy packing materials account for a big percentage of finished products' volume and weight, and this can deeply affect strategies' cost-effectiveness. Postponing packaging operations could allow for taking advantage of lower tariffs levied on bulk goods, contributing to significantly lower duties to be paid. However, important trade-offs could arise related to the required investments, and the fiscal regulatory frameworks must be carefully examined.Originality/valueThis study offers an empirical investigation of the postponement boundary problem, which is largely unexplored in the current literature. It also tackles an understudied empirical context as global food supply chains. It summarizes the drivers behind and explores the costs related to the implementation of different strategies, offering an original quantitative approach that could support practitioners' decision-making. Lastly, it formalizes five propositions that could pave the way for further research inquiries.

Revisiting postponement: The importance of cross‐functional integration to understand tax implications in global supply chains

“…This also encompasses a revised focus on postponement with extended scope and revised priorities. The postponement boundary problem requires solving trade‐offs between tax‐related and traditional logistics costs (Prataviera, Moretti, & Tappia, 2022) that aim to improve time‐responsiveness and cost‐effectiveness (van Hoek, 2001; Yang & Burns, 2003). However, minimizing and balancing risk areas, and being compliant with regulations to optimize taxes represent new boundaries when addressing traditional logistics/operations and marketing trade‐offs.…”

“…Tariffs associated with increased protectionism make it increasingly attractive to conduct some portion of production—specifically customization—during distribution (Choi et al, 2012). Because components often have lower duty rates than finished products, postponing final assembly until the destination market can elicit significant duty savings (Cohen & Lee, 2020; Prataviera, Moretti, & Tappia, 2022). Consequently, in global contexts, postponement refers to not only when value‐added operations are performed but also where (Prataviera et al, 2020; van Hoek, 1996).…”

“…However, current discourse requires further theoretical development (Prataviera et al, 2020; Zinn, 2019). First, the fiscal/legal implications related to the postponement boundary problem generally have been overlooked (Prataviera, Moretti, & Tappia, 2022). Moreover, postponement decisions related to solutions that combine software and hardware elements can create new challenges and also provide additional opportunities to lower overall costs, pointing to a promising research area (Norrman & Henkow, 2014).…”

Who changes what, when and where? Elaborating postponement when integrating hardware and software objects in global supply chains

“…Different countries and jurisdictions mean that global SCs must also consider duties, taxes and other country-specific elements (Prataviera et al ., 2020), which can become additional drivers and inhibitors of postponement practices (Lee, 2010; van Hoek, 2001). Increasing protectionism and cross-border trade complexity can also motivate companies’ decisions to undertake some operations downstream in distribution facilities (Prataviera et al ., 2022a). To formalize this discussion, Lee (2010) coined the term postponement boundary problem to define what portion of a product is assembled in the factory and what in global distribution, thus focusing on what operations occur in different jurisdictions ( where ).…”