• better utilizing resources such as production and distribution capacities
• minimizing inventory, transportation, and production costs.
– Supply Chain Planning processes are applied.
costs – more emergency production changeovers
Pull-Based Supply Chains
• Production and distribution are demand driven
– Coordinated with true customer demand rather than forecast demand.
Push-Based Supply Chains
• Longer reaction time to changing marketplace:
– Inability to meet changing demand patterns. – Obsolescence of supply chain inventory as
• Advantages and disadvantages of push and pull supply chains:
– new supply chain strategy that takes the best of both. – Push–pull supply chain strategy
Impact of the Push-Pull Strategy
• Pull portion
– High uncertainty – Simple supply chain structure – Short cycle time – Focus on service level. – Achieved by deploying a flexible and
Impact of 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 pushbased strategy.
– In the push portion, buffer inventory is part of the output generated by the tactical planning process.
production point
Impact of the Push-Pull Strategy
• Push portion
– Low uncertainty – Service level not an issue – Focus on cost minimization. – Long lead times – Complex supply chain structures – Cost minimization achieved by:
– firm does not hold any inventory and only responds to specific orders.
Pull-Based Supply Chains
• Intuitively attractive:
– Reduced lead times through the ability to better anticipate incoming orders from the retailers.
• Economies of scale are not important -- Aggregation does not reduce cost
-- A pull-based strategy makes more sense.
Discuss some additional examples of each of the four categories.
production capacity? Transportation capacity?
– Peak demand? – Average demand?
• Results:
– Higher transportation costs – Higher inventory levels and/or higher manufacturing
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.
Push-Based Supply Chains
• Production and distribution decisions based on long-term forecasts.
• Manufacturer demand forecasts based on orders received from the retailer’s warehouses.
• Summary
2
Introduction
• Effective SCM implies:
– Efficient integration of suppliers, manufacturers, warehouses, and stores.
– Coordinate activities across the supply chain.
Implementing a Push–Pull Strategy
• Achieving the appropriate design depends on many factors:
– product complexity – manufacturing lead times – supplier–manufacturer relationships.
Complexity High
Pull Maximize service level
Low
Focus Lead time Processes
Resource allocation
Long
Supply chain planning
Responsiveness Short Order fulfillment
• Many ways to implement a push–pull strategy
– location of the push–pull boundary.
• Dell locates the boundary at the assembly point • Furniture manufacturers locate the boundary at the
Bullwhip Effect in Push-Based Supply Chains
• Leads to inefficient resource utilization • Planning and managing are much more difficult. • Not clear how a manufacturer should determine
demand for certain products disappears. – Variability of orders received much larger than
the variability in customer demand due to the bullwhip effect.
• Interface between the push-based stages and the pull-based stages is the push– pull boundary.
Supply Chain Timeline
Push-pull supply chains
General Strategy
Choosing between Push/Pull Strategies
Impact of 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.
Chapter 8: Supply Chain Integration
Dr. YANG Ruina
1
Agenda
• Introduction
• Push, Pull, and Push-Pull Systems
• Choosing the Appropriate Supply Chain Strategy
• Make a part of the product to stock – generic product.
• The point where differentiation has to be introduced is the push-pull boundary.