Push and pull strategy in supply chain management supports the efficient use of resources to meet the current lean production trend and avoid waste. In this article, Viindoo provides valuable knowledge on the pros and cons of push and pull strategy in supply chain management.
How to implement the push and pull strategy in supply chain management
The supply chain of an enterprise includes the production process, packaging, and delivery to the customer. Businesses when applying a push and pull supply chain should go through 5 steps as follows:
Step 1: Search and select raw materials; sketch the product.
Step 2: Conduct product processing to transform them into finished products.
Step 3: Pack and deliver to genuine distributors.
Step 4: Distribute the product to wholesalers and retailers.
Step 5: Launch the product to customers.
The supply chain strategy will determine when the product needs to be made and shipped to distributors and retail channels.
In general, push and pull are important strategies to optimize resources and generate supply chain efficiency.
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With the push strategy, businesses will create products based on the expected demand of consumers and the company's supply capacity. Finished goods will then be stored and pushed to the market through the distribution system.
This means that businesses need to forecast the quantity and consumption demand, thereby determining the number of goods to be produced and stored. Products in a push supply chain will be pushed from the manufacturer, through distribution channels, to retailers, and finally to customers.
One push supply chain example is the mass production of confectionery, condiments, household appliances, etc. These products are often produced in large quantities, distributed to supermarkets, grocery stores, etc., and then sold to customers.
The advantage of a push supply chain is that customers can access a large variety of products. However, failure to meet the change in market demand will lead to excessive inventory, which negatively affects businesses and partners. This situation also causes bottlenecks or delays in supply, poor service quality, and obsolete products.
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Contrary to the Push strategy, the Pull strategy is the make-to-order production. This does not require demand forecasting and businesses only start producing when there is an order.
In other words, the Pull strategy works based on the actual needs of customers. This just-in-time manufacturing-related strategy helps significantly minimize redundant inventory and improve delivery time.
The advantages of the Pull strategy are:
- Manufacturers can be flexible in order production.
- Risks of excess stock, unsold, or lack of storage are minimized.
- The products launched are the latest goods.
However, this strategy still has disadvantages such as a long time between orders leading to inadequate supply and; difficulty in utilizing economies of scale. Therefore, this strategy requires businesses to plan in detail and logically organize tasks for each stage of production to ensure a smooth supply chain.
Hybrid Pull and Push Strategy
In a supply chain, the actual demand drives the whole Pull process while the Push strategy works based on the forecast of customer demand.
The supply chain strategy should be a combination of both Pull and Push. In fact, most businesses will combine these two strategies to coordinate production activities to achieve the best effectiveness.
- Push/Pull system: The manufacturer, once receiving the order, will immediately transfer the order to the factory and warehouse for preparation. Goods in stock will be delivered to distributors periodically.
- Pull/Push system: Products will be transferred to the warehouse before the business receives the order. The system has many levels, corresponding to the product that can appear at many business stages. This is because goods are imported at the same time.
For example, a company may choose to stock products at distribution centers and wait until they receive an order from a customer to deliver the product to the store.
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Examples of the push and pull strategy in supply chain management
Many large enterprises have successfully applied the push and pull supply chain strategy, for example, Amazon - the giant in e-commerce. How does Amazon apply this strategy to its multi-billion dollar warehouses?
- With a Push strategy, Amazon strategically locates its warehouses near city centers and metropolitan areas. This supports the Push strategy as the location generates convenience for demand forecasting.
- With a Pull strategy, Amazon sells products from third-party sellers to reduce the risk of unsold inventory.
Operational principles of Pull and Push strategy in Viindoo Software
Supply chain operational principles in Viindoo Software
A supply route of products can apply Push, Pull, or hybrid. Viindoo software will support creating Push/Pull rules to set up product routes from one location to another (source location to destination location).
For example: Product A, when there is customer demand, will be delivered from the warehouse or supplier based on convenience. The route of product A should be Supplier > Repository > Customer.
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Push and pull strategy in supply chain management
Pull Strategy in Viindoo Software
When there is a demand for goods at a specific location, the software will look for a set pull rule to pull goods from a suitable source location to the destination location.
For example, when a customer places an order, the software will find the Pull rule set up on the customer's location. Suppose, if the warehouse is set up to have a delivery to the customer location when there is a need, the system will generate a rule to deliver from the warehouse to the customer location.
And according to the Pull rule, if the warehouse has no stock, the software will continue to set the Buy to Resupply option to supply goods.
Push and pull strategy in supply chain management
Push Strategy in Viindoo Software
A rule is triggered when a product is received at the specified source location. Viindoo software will automatically create a rule to deliver the product to the destination location.
For example, with a product that applies 3-step warehouse routes. Once products reach the receiving area, they are transported to a quality control site. After the inspection is complete, the products are taken to the storage location.
Viindoo software effectively applies the Push and Pull strategy in goods supply routes, making supply chain operations more efficient and easier.
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In the above article, Viindoo has provided information about the push and pull strategy in supply chain management. For a deeper understanding of how the supply chain works, as well as how to use Pull and Push strategies in Viindoo Software, you can sign up for a trial right here.
What is the main difference between push strategy and pull strategy in supply chain management?
Push strategy emphasizes production planning based on forecasting demand, while pull strategy emphasizes customer demand as the primary driver for production and inventory control.
When is push strategy more appropriate than pull strategy?
Push strategy may work well for products with stable demand.
What are the advantages of using a push-pull strategy?
Enhanced agility, improved coordination, and reduced time-to-market.
What are the main disadvantages of using a push strategy?
Overproduction and excess inventory, reduced flexibility, and increased risk.
How can businesses find the right balance between push and pull strategies?
The answer depends on various factors such as industry.