Push and Pull system within the supply chain

Push and Pull system within the supply chain

A supply chain strategy determines when a product should be:

-      

•       produced;
•       delivered to the distribution centers;
•        available in the retail channel and followed by providing them to the end customers.
  

Actual customer demand drives the process when the supply chain is designed as a pull supply chain, the company prefer to know how is the customer demand and based on it the products will be produced while push strategies are driven by long-term projections of customer demand which is more anticipated. Push system makes the companies do focuse more on the long-term KPI’s of the last period of time and based on that they will produce a number of products a weekly, monthly production which is depending on the production stratey of the company. They will push it then into the market after the prooduction.

A simple explanation of a pull systeem could be describe as:

Pull: 

“The company must almost be  sure about the customer demand orders before they take any action of production.”

Companies that operate a pull system they will begin with a customer’s order. They only make enough products which is needed and they will be quit sure about the customer’s orders before the production. An advantage of this system is reducing of cost of carrying and storing goods.

However, a disadvantage of this system is to run into ordering dilemmas; for example if the suppliers can not deliver on time that finally is followed to the customer dissatisfaction. Japanese model of JIT delivery is an good example of pull inventory control system. By using JIT system the inventory levels will be kept to a minimum by only having enough inventory, not more or even less, to meet customer demand.

Push:

“The company does focus more on the key performance indicators of the past based on the hystorical information. They will produce a certain numbers of products and bring it to the market.”

The push system of inventory control involves forecasting inventory needs to meet customer demand. The company must know which products in which quantity are needed to be purchased.

Disadvantages of the push inventory control system are that forecasts are often inaccurate as sales can be unpredictable and vary from one year to the next. Another problem would be when there are products left at the inventory because of the wrong forecasting which increase the company costs for storing those goods.

A Materials Requirements Planning (MRP) does make an important sense for a push system organized company. MRP combines the claculations for financial, operations and logistics planning. It is a computer-based information system which controls scheduling and ordering. The purpose is to make sure raw goods and materials needed for production are available when they are needed. The more accurate of working with MRP , the less risks of wrong forecasting and making costs.

Lean inventory straty:

A combination of PULL and PUSH system which is also called the push-pull inventory control system is a design of strategy that some companies have been came up with.This system will demands a more accurate forecast of sales and adjusts inventory levels based upon actual sales.

These kind of companies would like to keep any customers for themself as much as possible. By performing the lean inventory control system. They try to stablisate their supply chain and the reduction of product shortages which can cause customers to go elsewhere to make their purchases. The planners would be aware of short – and long-term productiion needs very well to make this true.

Which system might be the right system?

Its hard for the inventory managers to know what quantity of products to order and when. It will depend in large part on what type of product is being produced. It is impossible for an automobiles factory to produce with the JIT system or pull inventory control method. A large range of different items make it too complex to only produce in an amount which is needed to fulfill some specific customer orders. They need to use a PUSH system.

However a company like Dell, are integrated the push-pull system. The raw materials are already pre-ordered and stored. They will assembled the ordered computer for the certain customers when they make an order.