Companies often feel that they must choose between employing a push or pull replenishment strategy. In pull model inventory is not stored in large warehouses but supplied when a new product is ordered by downstream consumers. This method is contrasted with push method of manufacturing where products are manufactured on a line without regard for the upstream demand by the end user. The objective of pull approach is to improve productivity and reduce waste and costs. One of the key steps in achieving this is to limit inventory levels by moving towards just-in-time principles. An overview of the both approaches is presented as under:
The ability to be lean (pull) but at the same time to cope with disruptions (be resilient) is the real challenge, which is associated with conflicting aims. Inventory holding costs and lost customer order costs are key components of the overall profit for any organization. Optimal pull and push combination is practiced in many organizations for getting following advantages:
Balancing pull and push strategies has the potential to help manufacturing companies improve inventory turns, resulting in profit increase.
A push-pull strategy can mitigate the risks and improve the robustness of the supply chain.
Hybrid push/pull system can create considerable production cost savings when compared to either push or pull.
It is worth noting that there is no general optimum between push and pull principles. Application of Push and Pull management system is on one hand very important for efficiency of production and on the other hand require supply chain reconfigurability or multiple supply chains. Each company must have its own criteria to determine the ideal push-pull mix. Thus, choice of the optimal solution to be applied should be based on thorough analysis of demand and capacity. Because of the dynamics and complexity of both system its management requires trained professional experts.
Supply Chain Management aims to create faultless inter-company value-added processes through the effective and efficient coordination of inter-company activities. It requires partners in the supply chain to be willing to accept an open collaboration aimed at achieving an optimal mix of push-pull principles. Traditional centralised control principles are set to be replaced increasingly by decentralised and modular networks that are cooperative-oriented, autonomous and indirectly coordinated.
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