Operating in the supply chain environment can be quite challenging, trying to balance customer expectations with the company’s operational needs. To address common supply chain challenges, two fundamental strategies are employed: push and pull manufacturing. These terms denote two different approaches to demand planning, and can be highly effective when applied appropriately. Let’s delve into the details of each strategy.
The push strategy is common in mass production industries. Goods are “pushed” through the chain to ensure availability for customers.
This approach is based on customer forecasted demand, even if the demand has not been placed yet, using historical sales data and market trends to predict future needs. While this can streamline large-scale production, it carries the risk of overproduction if demand is overestimated. However, purchasing raw materials in bulk can secure better prices from suppliers.
Imagine you have a toy company and expect high demand for puppets during the holiday season.
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Deploying the push strategy can lead to several benefits: it ensures products are available during peak seasons, and reduces large-scale production costs, allowing for competitive pricing.
However, overestimating demand can lead to excess inventory, while inaccurate predictions may result in stockouts or surpluses.
The pull strategy, on the other hand, is based on actual consumer demand. Here, products are “pulled” through the supply chain once an order is placed. This approach minimises waste and maximises efficiency by restocking raw materials post-production.
With this strategy, maintaining stocks becomes unnecessary. Also known as make-to-order, this manufacturing strategy initiates production only after a customer order has been confirmed, thereby eliminating the need for large inventories. While this reduces stock holding costs, it can present challenges if you are unprepared for larger orders.
Your company manufactures custom wooden furniture. Production begins only when a customer places an order.
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When using the pull strategy, production is tailored to customer needs, minimising excess inventory and reducing waste. However, some challenges might be encountered. Customers may experience longer wait times, and delays in obtaining materials can slow production.
A recent development in supply chain management is the hybrid push-pull strategy, which combines elements of both approaches. This strategy involves producing goods based on forecasted customer demand, while maintaining a small inventory buffer to handle unexpected large orders.
With this hybrid approach, you can get the best of both worlds: you avoid excessive costs of stock maintenance, while being ready to fulfil sudden large orders. This balance optimises efficiency, ensuring you’re well-prepared for any demand fluctuations.
Choosing the right manufacturing strategy, whether push, pull, or a hybrid approach, can significantly impact your supply chain efficiency and overall business success. Understanding these strategies and how to implement them effectively can help you optimise production, reduce costs, and better meet customer expectations.
But don’t forget to overlook another critical component of the supply chain: the shipping process. This represents the vital link between you and your customer, making it an essential aspect of your business operations.
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