Friday, 24 January 2014

Supply chain concepts: Push and Pull based supply chain

In this post we will discuss push and pull based supply chain concepts.  

Pull based supply chain

In this model of supply chain the products are procured when the customer ordered them.  The well-known examples are car manufacturing; many spare parts are procured only the customer orders a car.  This model is very useful in case of uncertainty in the demand and high rate of customization. It reduces the inventory holding cost.  Product is getting procured only the customer order comes. So it is cost effective. At the downside, it will affect the delivery time. The customer have to wait until the product is procured, these long delays affects the customer service quality. 

Push based supply chain

In this model, you expect or predict the demand and procure the items, even before the customer order comes.  So when the customer order comes you can ship the products immediately, at the same time the down side is inventory holding cost.  Before winter you can anticipate more winter wear and procure them, similarly umbrellas in rainy seasons,  SAT exam books before the exam time.

Push Pull Supply chain

In reality all the supply chain systems are hybrid systems, have both Push and Pull based models.  A company’s success depends on decreasing the pull based procurement at the same time having low inventory and lean ways to achieve it.  The inventory prediction system or demand forecasting should inform the predicted items in each category and procure the items (Push based model).  When the demand goes beyond it, you need to procure the items (pull based model). We will discuss more on inventory prediction in our future posts.



Wikipedia  Article-1   Article-2   Article-3