Demand pull system

If consumers only purchased their requirements in line with their use, then it would be relatively easy to reorganise the end-to-end supply chain from shelf to national warehouse using lean principles (see Chapter 6). A simple demand-pull system replenishing tomorrow that which has been sold today, direct to shelf, would streamline store operations and reduce inventories significantly. Retailers like Wal-Mart in the United States and Tesco in Britain have pursued an everyday low price policy in an attempt to maximise this steady state replenishment policy. However, in Europe, most retailers have found that customers enjoy promotions and that promotions boost sales. In any case, events like Christmas and back to school create huge surges in demand. 

BEOs are most often used for point sources or small line or surface sources. See Chapter 7 for descriptions of sources. BEOs are sometimes used for lines or surfaces when the source is moving along the line or on the surface. This naturally demands the exhaust to move with (or be moved with) the source movements (e.g., during painting or seam welding). They have also been used for side suction from baths and tanks-- and these exhausts are usually called rim exhausts see Rim Exhausts. However, for these sources push-pull systems (Section 10.4.3) are often more efficient. Side hoods can also be used, e.g., when molten metal is poured however, in these cases an enclosed exhaust is more efficient. 

Make-to-order has two interpretations. Technically, anything that is not made-to-stock is made-to-order. In aU cases there is an explicit customer order, and thus aU make-to-order systems are described as pull systems. However, it is important to distinguish make-to-demand systems, in which products are made in batches, from option-to-order systems, in which order-specific features are installed on a product-by-product basis. The distinction between make-to-demand batch planning and on-the-fly option selection using single setup and prepositioning is very important to the ERP system. 

Implementation of the Pull System There are two basic principles of production planning and control, the push and the pull principle. The push principle targets the maximum efficiency of given capacities. Hence, it is a typical representative of the ideology of mass production. One of its main characteristics is a centrally planned production schedule. While typical sellers markets of the last century could be served satisfy-ingly with this principle, today s buyers markets require more flexibility of production systems. Since real customer demands are not considered accurately by the push principle, big stocks and delivery problems - and with it waste - occur often. 

To cope with this scenario, many companies are trying to move from a pure Push strategy, produce and distribute based only on forecast, to a Pull system, operate based on actual customer demand, in order to better balance supply availability with customer demand, delivering the expected customer service level while, at the same time, achieving the required supply chain efficiency. 

As there are many definitions of Push vs. Pull systems, it is important to clear define the two concepts, as they are keystone in the demand driven concept. 

Overproduction - Producing more than the customer demands. The corresponding Lean principle is to manufacture based upon a pull system, or producing products just as customers order them. Anything produced beyond this (buffer or safety stocks, work-in-process inventories, etc.) ties up valuable labor and material resources that might otherwise be used to respond to customer demand. 

Pull System - The technique for producing parts at customer demand. Service organizations operate this way by their very nature. Manufacturers, on the other... 

In this level, the organization starts to move from a pure Push system to a hybrid Push-Pull system, through implementation of some of the demand driven... 

Based on demand variability and sales volume, planners understand SKU profile and apply appropriate forecast methods (same as in level 2) for SKUs with low variability, and make to order strategy (pull system) for SKUs and customers with high variability (less than 50% of sales volume). 

Forecast for new products is generated only for customers under the Push system. For the remaining part of the business, under the Pull system, the demand visibility allows the organization to sense demand signals and adjust based on actual demand and not on forecast. 

Products are classified to use a Push or a Pull system based on demand and/or supply variability or maturity in a product lifecycle curve. 

Often when people talk about JIT they refer to it as a pull system. By this they mean that material is pulled through the production system. The illustration in Figure 9.8 shows that inventory is replenished throughout the system only in response to customer demand. There is component inventory before each work center and only when that component inventory decreases to a certain point does the next work station start to replace the inventory. 

Push and pull systems Production control systems are often described as push, where decisions are based on forecasts, or pull, where decisions are based on actual demand. A demand-driven supply chain is an example of a puU system. Many organizations try to move from push to pull decision making. 

As indicated by Bozarth (2005), another idea embedded in his framework is that the stationary demand approaches map to pull systems, whereas the non-stationary approaches map to push systems. Although definitions tend to vary—see Hopp and Spearman (2004) for an excellent discussion—pull systems are those that execute replenishments only in response to actual demand, while push systems drive replenishments from the schedule of projected future demands, which, consistent with Bozarth s framework, will vary over time. Hopp and Spearman (2004) also point out that kanban, or "card"—controlled production systems (see, e.g., Vollmann et al., 2005, for descriptions of several examples of this), are only one, specific implementation of what they more generally describe as constant-WIP systems (where WIP stands for "work-in-process," or inventory that is not yet fully converted from raw materials into finished goods). Again, since our focus will be on independent-demand inventory management systems, the reader is referred to the Hopp and Spearman article for further details regarding such dependent-demand systems. 

Ogawa (2001) analyzed about demand pull supply chain in Japan. He pointed out that the demand pull supply chain changed the distribution system. 

Kanban Is a pull system that Is driven by the demand at the lowest point in the chain. In a production operation the aim would be to produce only that quantity needed for immediate demand. When parts are needed on the assembly line they are fed from the next stage up the chain in just the quantity needed at the time they are needed. Likewise this movement now triggers demand at the next work station in the chain and so on. 

Traditionally, the focus of healthcare providers has been the diagnosis and treatment of the sick. This is a puU (reactive) system that attempts to satisfy the consumer only when he/she falls Ul. While a reactive response to a consumer product can lead to efficient resource utilization, it may result in high costs in healthcare. An extreme example of a pull system is the emergency room (ER) -patients delay seeing a physician for various reasons and, when it becomes a life threatening case, they are rushed to ER. Demand at an ER can be uneven and the treatment very expensive. 

The above description of the flow of goods in a supply chain is characteristic of a pull system. Parts are pulled through the chain in response to demand from the end-customer. This contrasts with a push system, in which products are made whenever resources (people, material and machines) become available in response to a central plan or schedule. The two systems of controlling materials can be distinguished as follows ... 

PUSH VERSUS PULL When designing processes of the supply chain, managers must determine whether these processes are part of the push or puU phase in the chain. We discussed this distinction in Chapter 1, but we mention it again because different types of systems require different types of information. Push systems start with forecasts that are used to build the master production schedule and roll it back, creating schedules for suppliers with part types, quantities, and delivery dates. Pull systems require information on actual demand to be transmitted extremely quickly throughout the entire chain so production and distribution of products can reflect the real demand accurately. 

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