Push-pull strategy
From Wikipedia, the free encyclopedia
The business terms push and pull originated in the marketing and advertising world,[citation needed] but are also applicable in the world of electronic content and supply chain management. The push/pull relationship is that between a product or piece of information and who is moving it. A customer "pulls" things towards themselves, while a producer "pushes" things toward customers.
[edit] Content
In a "push" system the consumer does not request the product to be developed; it is "pushed at" the end-user by promotion. An example of this is a perfume product. Women do not request to smell a fragrance they never smelled before; it is simply "pushed" at them, through the right advertisement.
- Applied to that portion of the supply chain where demand uncertainty is relatively small
- Production & distribution decisions are based on long term forecasts
- Based on past orders received from retailer’s warehouse (may lead to Bullwhip effect)
- Inability to meet changing demand patterns
- Large and variable production batches
- Unacceptable service levels
- Excessive inventories due to the need for large safety stocks
In a "pull" system the consumer requests the product and "pulls" it through the delivery channel. An example of this is the car manufacturing company Toyota. Toyota only produces cars when they have been ordered by the customers.
- Applied to that portion of the supply chain where demand uncertainty is high
- Production and distribution are demand driven
- No inventory, response to specific orders
- Point of sale (POS) data comes in handy when shared with supply chain partners
- Decrease in lead time
- Difficult to implement
[edit] Supply chains
With a push-based supply chain, products are pushed through the channel, from the production side up to the retailer. The manufacturer sets production at a level in accord with historical ordering patterns from retailers. It takes longer for a push-based supply chain to respond to changes in demand, which can result in overstocking or bottlenecks and delays (the bullwhip effect), unacceptable service levels and product obsolescence.
In a pull-based supply chain, production and distribution are demand driven so that they are coordinated with actual customer orders, rather than forecasted demand.
A supply chain is almost always a combination of both push and pull, where the interface between the push-based stages and the pull-based stages is known as the push-pull boundary. An example of this would be Dell's build to order supply chain. Inventory levels of individual components are determined by forecasting general demand, but final assembly is in response to a specific customer request. The push-pull boundary would then be at the beginning of the assembly line. At this point on the supply chain timeline, it is typically coordinated through a buffer inventory.
[edit] See also
- Supply and demand
- Push technology
- Pull technology
