Pull and Push Strategy in Supply Chain Management

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In supply chain management, a push strategy and a pull strategy are two different approaches to managing the flow of goods and materials.

A push strategy focuses on predicting demand and producing products in advance to meet that demand.

A pull strategy focuses on responding to actual customer demand by producing goods only when they are ordered.

Push and Pull Strategies: What’s the Difference?

Push and pull strategies are two different approaches to managing the flow of goods and materials in a supply chain. The key difference between the two strategies is when production is triggered.

Push strategy:

1. Production is triggered based on forecasts of future demand.
2. Products are pushed through the supply chain to intermediaries (e.g., distributors, retailers) and end customers, even if they have not yet been ordered.
3. Push strategies are often used for products with predictable demand and a long shelf life.

Pull strategy:

1. Production is triggered by actual customer orders.
2. Products are pulled through the supply chain only when they are needed.
3. Pull strategies are often used for products with unpredictable demand or a short shelf life.

Here is a table that summarizes the key differences between push and pull strategies:

Examples:

1. Push strategy: A manufacturer of canned goods produces a certain number of cans each week based on forecasts of demand. The cans are then pushed through the supply chain to distributors and retailers.
2. Pull strategy: A manufacturer of custom-made furniture only begins production of a piece of furniture once it has received an order from a customer.

Which strategy is better?

The best strategy for a business to choose depends on a number of factors, such as the type of products it sells, the predictability of demand, and the level of customer service it wants to provide.

Businesses that sell products with predictable demand and a long shelf life may benefit from using a push strategy. This can help them to reduce inventory costs and improve customer service levels.

Businesses that sell products with unpredictable demand or a short shelf life may benefit from using a pull strategy. This can help them to reduce the risk of overproduction and increase flexibility.

Many businesses use a hybrid approach, combining elements of both push and pull strategies. For example, a business may produce a certain number of products in advance to meet anticipated demand, but also have a process in place to quickly increase production if demand exceeds expectations.

Ultimately, the best way to choose the right strategy for your business is to carefully consider your specific needs and goals.

Benefits of a Push Strategy:

A push strategy can reduce inventory costs, improve customer service, and achieve economies of scale by anticipating demand and producing products in advance.

1. Reduced inventory costs: By producing products in advance, businesses can reduce the amount of inventory they need to hold. This can save money on storage costs and reduce the risk of obsolescence.
2. Improved customer service: By having products in stock when customers order them, businesses can improve customer service levels and reduce lead times.
3. Economies of scale: Businesses can achieve economies of scale by producing larger quantities of products in advance. This can lead to lower production costs and higher profits.

Drawbacks of a Push Strategy:

A push strategy can lead to overproduction, reduced flexibility, and increased costs due to its reliance on demand forecasting.

1. Risk of overproduction: If demand forecasts are inaccurate, businesses may produce more products than they can sell. This can lead to excess inventory, which can be expensive to store and may eventually have to be sold at a discount.
2. Reduced flexibility: Push strategies can make it difficult for businesses to respond to changes in demand. For example, if demand for a product suddenly decreases, businesses may be stuck with excess inventory.
3. Increased costs: Push strategies can lead to higher costs, such as the cost of carrying inventory and the cost of lost sales if demand is not met.

Benefits of a Pull Strategy:

A pull strategy minimizes overproduction, maximizes flexibility, and lowers costs by aligning production with actual demand.

1. Reduced risk of overproduction: Pull strategies can help businesses to reduce the risk of overproduction by only producing goods when they are ordered. This can lead to lower inventory costs and higher profits.
2. Increased flexibility: Pull strategies can make it easier for businesses to respond to changes in demand. For example, if demand for a product suddenly increases, businesses can quickly increase production to meet that demand.
3. Reduced costs: Pull strategies can lead to lower costs, such as the cost of carrying inventory and the cost of lost sales.

Drawbacks of a Pull Strategy:

Pull strategies may result in longer lead times, increased complexity, and stockouts due to demand-driven production.

1. Increased lead times: Pull strategies can lead to longer lead times, as businesses need to wait for customer orders before they can start production.
2. Increased complexity: Pull strategies can be more complex to implement and manage than push strategies.
3. Increased risk of stockouts: If demand for a product unexpectedly exceeds supply, businesses may experience stockouts. This can lead to lost sales and damage customer relationships.

Which Strategy to Choose:

The best strategy for a business to choose will depend on a number of factors, including the type of products it sells, the predictability of demand, and the level of customer service it wants to provide.

Businesses that sell products with predictable demand and a long shelf life may benefit from using a push strategy. Businesses that sell products with unpredictable demand or a short shelf life may benefit from using a pull strategy.

Many businesses use a hybrid approach, combining elements of both push and pull strategies. For example, a business may produce a certain number of products in advance to meet anticipated demand, but also have a process in place to quickly increase production if demand exceeds expectations.

Conclusion:

Pull and push strategies are two different approaches to managing the flow of goods and materials in a supply chain. Each strategy has its own benefits and drawbacks. The best strategy for a business to choose will depend on a number of factors, such as the type of products it sells, the predictability of demand, and the level of customer service it wants to provide.