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Process View of SCM Push and Pull Strategies

The document discusses supply chain management (SCM) strategies, focusing on push, pull, and push-pull systems. It highlights the challenges and opportunities of integrating supply chains to improve performance, reduce costs, and respond to market changes. The push-pull strategy combines the advantages of both push and pull systems, adapting to demand uncertainty and economies of scale.

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mohit
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12 views

Process View of SCM Push and Pull Strategies

The document discusses supply chain management (SCM) strategies, focusing on push, pull, and push-pull systems. It highlights the challenges and opportunities of integrating supply chains to improve performance, reduce costs, and respond to market changes. The push-pull strategy combines the advantages of both push and pull systems, adapting to demand uncertainty and economies of scale.

Uploaded by

mohit
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Process view of a supply chain management: Push and Pull View.

Supply Chain Integration


Push-Pull Strategies
Introduction
 SCM revolves around efficient integration of
suppliers manufacturers, warehouses, and
stores.
 Challenge: coordinate activities across the SC
to improve performance:
 Reduce cost
 Increase service level
 Reduce the bullwhip effect
 Better utilization of resources
 Effectively respond to changes in the market place
Objective

 Illustrate the opportunities and


challenges associated with SC
integration
 SC strategies: push, pull and push-pull systems
Push-Based SC

 Production decisions based on forecasts


 Manual purchase orders and invoices are
employed
 Ordering decisions based on inventory &
forecasts.
Takes longer to react the changing
marketplace

 Excess finished goods inventory


 Inefficient production
 Inefficient operations, high costs, low
service levels
- Excess capacity
- Low utilization of resources
- High transportation cost
Pull Strategies

 Production is demand driven


 Coordinated with true customer demand rather than
forecast demand
 Faster information flow mechanisms are used
 Inventory levels are reduced
 Distribution facilities are transformed from
storage points to coordinators of flow.
But …

 Pull systems are difficult to implement when


lead times are so long that it is impractical to
react to demand information
 Harder to leverage economies of scale
 Advantages and disadvantages of push and pull
systems led to push-pull SC strategy that takes
advantage of the best of both
Push-Pull SC

boundary
Push-pull
Raw End
Push Strategy Pull Strategy
Materials customer

Supply chain time line


Examples

 Mobile manufacturers

boundary
Push-pull
Raw End
Push Strategy Pull Strategy
Materials customer

Components inventory Assembly


Aggregate forecasts more accurate
Push-Pull Strategy
 Some stages of the supply chain operated
in a push-based manner
 typically the initial stages
 Remaining stages employ a pull-based
strategy.
 Interface between the push-based stages
and the pull-based stages is the push–
pull boundary.
Impact of Demand Uncertainty and
Economies of Scale
 Demand Uncertainty:
 Higher demand uncertainty leads to a preference for
pull strategy.
 Lower demand uncertainty leads to an interest in
managing the supply chain based on a long-term
forecast: push strategy.
 Economies of scale:
 The higher the importance of economies of scale in
reducing cost
 The greater the value of aggregating demand
 The greater the importance of managing the supply chain
based on long-term forecast, a push-based strategy.
 Economies of scale are not important
 Aggregation does not reduce cost
 A pull-based strategy makes more sense.
Identifying the Appropriate SC Strategy

 Framework for matching SC strategies


with products and industries
Demand
uncertainty
Pull H
I II
Computer Furniture

IV III
Books and CDs Grocery
Push L
L H
Economies
<------------------------------------------------------>
Pull Push of scale
Implementing a push pull strategy

 Characteristics of the push and pull


portions of the SC

Portion Push Pull Pull

Objective Minimize cost Maximize service level


Complexity High Low
Focus Resource allocation Responsiveness
Lead time Long Short
Processes SC planning Order fulfillment

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