Push and Pull Strategy in Supply Chain: Meaning, Examples, Differences

Push and pull supply chain strategies are two basic methods for controlling the flow of goods between the manufacturing unit to the end consumer. Each strategy has advantages and disadvantages, and the applicability is based on the product type, business objective and market demand. In this article, we will explore what is push and pull strategy in supply chain. We will also look at the difference between push and pull in supply chain to help you choose the right strategy for your requirements.  

1. What is Push Strategy in Supply Chain Management?

In supply chain management, a “push” strategy involves preplanning and controlling inventory levels and activities based on future projections. It entails warehousing and transportation activities directed towards meeting anticipated demand.

Push Supply Chain Strategies

Push supply chain strategies include several steps. First, companies predict demand to determine inventory levels. Then, they ensure sufficient raw materials are purchased for manufacturing. Efficient inventory management stores items based on this expected demand. Lastly, distribution planning ensures that products reach retailers or end users on time. These moves help optimise warehouse space utilisation as well as handle changes in consumption patterns.

When to Use Push Strategy in the Supply Chain?

Usually, it is recommended to use a push supply chain strategy in cases where products have low levels of demand uncertainty meaning that the forecast will be able to accurately predict what needs to be produced and kept in inventory. Additionally, this strategy is suitable for products where economies of scale play a crucial role in cost reduction.

Examples of Push Strategy in the Supply Chain

Unilever and Coca-Cola are examples of suppliers who use the push strategy in their supply chain. These fast moving consumer goods (FMCG) companies estimate consumer demands, they then take preemptive measures to push stock into retail stores to match demand levels that are increasing. Likewise, toy maker Lego uses a push strategy very well by preparing high quantities of popular toys even before the peak times such as holidays approach. Additionally, major book publishers like Penguin Random House, HarperCollins and Simon & Schuster use push strategies to forecast demand for new releases and ensure books are stocked before they hit shelves or online platforms like Amazon.

Advantages and Disadvantages of Push Strategy

Advantages of a push strategy include reduced inventory costs, improved customer service by ensuring products are available when ordered, and achieving economies of scale through bulk production. By anticipating demand and producing in advance, businesses can lower storage expenses and enhance service levels. 

However, push strategies also have drawbacks. They can result in overproduction if demand forecasts are inaccurate, reduce flexibility to respond to changes in demand, and increase costs associated with carrying excess inventory.

2. What is Pull Strategy in Supply Chain Management?

A pull strategy in supply chain management operates on customer orders rather than predictions. This means raw materials are purchased, and production starts only when an order is placed. By doing so, companies avoid excess inventory and reduce storage costs.

Pull Supply Chain Strategies

Pull supply chain strategies involve several steps. First, companies wait for customer orders before buying raw materials. Next, they start production only after receiving orders, ensuring no unnecessary inventory is held. Inventory is managed using just-in-time principles to maintain minimal stock. Finally, products are assembled and shipped directly in response to customer demand, cutting down on warehouse needs and costs.

When to Use Pull Strategy in the Supply Chain?

A pull strategy in supply chain management is employed when products have uncertain demand patterns and when economies of scale do not significantly lower costs. By doing so, businesses can avoid the risk of producing excess inventory that may not be sold, thereby reducing storage costs and improving overall efficiency in their supply chain operations.

Examples of Pull Strategy in the Supply Chain

Examples of pull strategy in the supply chain include Toyota's Just-in-Time (JIT) manufacturing approach, where products are produced only in response to actual customer demand, reducing inventory costs and waste. Similarly, companies like Vistaprint manufacture printed products such as t-shirts and business cards only after receiving customer orders, thereby reducing waste and inventory costs.

Advantages and Disadvantages of Pull Strategy

The pull strategy is advantageous because it reduces chances of overproduction, allows firms to be flexible in response to demand shifts, and minimises production costs by manufacturing ordered goods only. This approach assists businesses in evading inventory costs and maximising their profit levels. 

However, pull strategies come with their drawbacks. It may take more time before the production process begins as customers have to place orders first thereby complicating management operations for the company. Also, if there is a sudden surge in demand beyond supply capacity, stock outs can lead to missed sales opportunities and customer dissatisfaction. Companies may also lose out on the economies of scale.

3. Differences Between Push and Pull Strategy

Push and pull strategies in supply chain management differ primarily in when production is triggered and how goods flow through the chain. With push strategy, production starts based on forecasts of future demand, and products are pushed through the supply chain to distributors and customers, even without specific orders. This method is suitable for products with predictable demand and longer shelf lives. 

In contrast, pull strategy starts production in response to actual customer orders, ensuring goods move through the supply chain only as needed. This approach is beneficial for products with unpredictable demand or shorter shelf lives, minimising inventory costs and improving responsiveness to market fluctuations.

4. Which Strategy is Better Between Push and Pull Strategy in the Supply Chain?

The choice between push and pull strategies in supply chain management depends on various factors such as product type, demand predictability, and desired customer service levels. For products with stable demand and longer shelf life, a push strategy may be advantageous, ensuring products are readily available. Conversely, products with volatile demand or shorter shelf life can benefit from a pull strategy, reducing inventory and adapting production to actual orders. Many businesses adopt a hybrid approach, blending aspects of both strategies to balance efficiency and responsiveness. This allows them to maintain a buffer of pre-produced goods while also adjusting production based on real-time demand fluctuations.

5. Conclusion

In conclusion, push and pull strategies in supply chain management offer distinct approaches to managing production and inventory. Each strategy has unique strengths tailored to different product types and market dynamics. Select the strategy that aligns best with your product demand patterns and operational objectives to maximise efficiency and responsiveness in meeting customer requirements.