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A supply chain strategy could help provide a roadmap for a company to deliver its products to customers as efficiently as possible.
Your business's approach to supply chain management may directly impact cash flow, inventory costs, and customer retention. An efficient strategy may be the one built around your customer’s needs.
That’s why understanding push vs. pull supply chain strategy can be critical. A push strategy in supply chain management produces goods based on forecasted demand, while a pull strategy waits for customer orders and produces goods in response to demand.
Learn why each matters and how small businesses may help optimize these different strategies to help improve efficiency, potentially reduce costs, and better meet market demand.
Key Takeaways
- Push and pull strategies are approaches to supply chain management, and many businesses use a combination of both.
- Each strategy has different costs, inventory, and flexibility trade-offs that may affect cash flow.
- Choosing the right mix may depend on a business’s products, demand predictability, and supplier reliability.
What Is Push and Pull in a Supply Chain?
Push supply chain strategy means that decisions about when products are manufactured and shipped are determined by anticipated customer demand. With this approach, a business makes inventory decisions before customers buy. On the other hand, pull supply chain strategy is driven by actual consumer demand. Nothing is moved through the supply chain until a customer orders the product.
Businesses that regularly evaluate their push and pull approach may be better positioned to potentially reduce costs and stay competitive.
With a push supply chain, a small business operates based on demand forecasts and may have time to build inventory in advance. Because production is planned, this strategy may be more cost-efficient. However, a business may run the risk of overproduction, excess inventory, and storage costs if its forecasts are wrong.
With a pull strategy, the business may keep inventory low and may have more flexible production because it reacts to real-time demand. However, that could drive up per-unit production costs. And if demand spikes, there are delays, or other supply chain issues, the business may not be able to meet market demand, which could alienate customers.
How Push Supply Chains Work
A push strategy in supply chain management moves products through a predictable, planned sequence. Businesses forecast demand, build inventory, and have products on shelves when customers are ready to buy.
Here’s how a push strategy could work:
Plan demand: Use historical sales data, market trends, and analytics to forecast future demand.
Plan inventory: Inventory forecasting models and warehouse planning help determine how much inventory is needed to meet demand.
Schedule production: Production estimates and resource requirements help determine the raw materials needed to create inventory.
Distribute to channel: Ship finished goods to distributors, wholesalers, and retailers.
Push to customers: Retailers stock inventory and use marketing strategies to promote products.
Real-World Examples of Push Strategy
A classic push supply chain example is a seasonal retail business. A factory doesn't begin manufacturing Christmas ornaments when consumers go to the store to buy them. The decision about when to produce twinkle lights and tree toppers is made far in advance, based on how many sets of decorations consumers are likely to want and when.
How Pull Supply Chains Work
Unlike a push strategy, a pull supply chain is driven by actual customer demand. Production doesn’t start until an order comes in, which means businesses may carry less inventory and produce less waste.
Here’s how a pull strategy could work:
Customer places order: A customer’s order triggers just-in-time production.
Gather materials: Once the order is received, the business gathers the materials to produce exactly what was ordered.
Suppliers deliver: Suppliers ship materials based on production needs.
Manufacture products: Products are manufactured to match the customer’s specifications.
Ship to customer: The finished products are shipped to customers with minimal warehouse time.
Real-World Examples of Pull Strategy
Companies that use pull strategies range from custom product makers to large-scale manufacturers. A company that prints customized designs on merchandise is an example of a company using a pull supply chain strategy. Customers order customized products, such as T-shirts or business cards, and the company begins manufacturing them only after receiving the order.
Push vs. Pull Strategies Compared
Each strategy has trade-offs that depend on your business model, product type, and demand patterns.
|
Push Strategy |
Pull Strategy |
Best For |
Stable, predictable demand |
Volatile or custom demand |
Inventory |
Built in advance |
Kept low, produced to order |
Cost Advantage |
Lower per-unit from bulk production |
Less capital tied up in stock |
Risk |
Overproduction, unsold inventory |
Out-of-stock events, longer lead times |
Requirements |
Reliable sales data and forecasting |
Reliable suppliers and real-time demand visibility |
Picking the Right Supply Chain Strategy
You don't have to pick just one supply chain strategy. Some businesses use a combination of push strategy and pull strategy to help balance efficiency and flexibility. A business may use the push approach for predictable items and a pull approach for more custom or uncertain products. The business may also keep a limited amount of stock on hand for quick sales without tying up too much cash in inventory that may not sell.
Think about a restaurant. The manager orders vegetables, bread, and meat in advance based on anticipated demand. But menu items aren’t actually made until a customer places an order. Raw materials are gathered in advance, and while some popular items are prepared in advance, others are made when they're ordered.
When choosing the right pull and push strategy in supply chain management for your business, consider:
- How predictable your demand is
- How flexible your production process can be
- Your tolerance for carrying inventory risk
- Whether your cost structure favors bulk production or made-to-order production
Suppliers matter too: A pull strategy may only work if the supplier delivers materials on short notice. If you stock staple items, they may be best ordered on a push basis, and you could order them when there’s a deep discount or stock up for busy times of year.
Mastering Push Strategy and Pull Strategy
The right supply chain strategy could directly impact a business's bottom line. Businesses that regularly evaluate their push and pull approach may be better positioned to potentially reduce costs and stay competitive.
Technology and workforce efficiency may also play a role. Learn how an augmented connected workforce could help drive supply chain efficiency.
Push and Pull Supply Chain FAQs
What is push strategy in supply chain management?
A push supply chain strategy in supply chain management uses demand forecasts to drive production and inventory decisions. Products are manufactured and distributed before customers place orders.
What is pull strategy in supply chain management?
A pull strategy in supply chain management lets actual customer orders drive production. Businesses manufacture products after receiving an order, helping to keep inventory low.
When should businesses consider a hybrid strategy?
A business might consider a hybrid strategy when it sells a mix of product types, such as some with predictable demand and others that are custom or seasonal. A hybrid approach could help balance inventory costs with delivery speed.
How do push and pull strategies differ?
Push strategies prioritize planning and bulk efficiency. Pull strategies prioritize flexibility and responsiveness. Some businesses may use elements of both.
What are the advantages and disadvantages of push and pull supply chains?
Push strategy may lower per-unit costs and keep products ready, but could carry the risk of overproduction and unsold inventory. Pull strategies could help reduce waste and inventory costs, but may result in longer lead times and depend on supplier reliability.
Photo: Getty Images
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