Push/pull view, supply chain processes

Push/Pull View The processes in a supply chain are divided into two categories, depending on whether they are executed in response to a customer order or in anticipation of customer orders. Pull processes are initiated by a customer order, whereas push processes are initiated and performed in anticipation of customer orders. 

Push/Pull View of Supply Chain Processes... 

A push/pull view of the supply chain categorizes processes based on whether they are initiated in response to a customer order (pull) or in anticipation of a customer order (push). This view is useful when considering strategic decisions relating to supply chain design. 

Demand forecasts form the basis of all supply chain planning. Consider the push/pull view of the supply chain discussed in Chapter 1. All push processes in the supply chain are performed in anticipation of customer demand, whereas all pull processes are performed in response to customer demand. For push processes, a manager must plan the level of activity, be it production, transportation, or any other planned activity. For puU processes, a manager must plan the level of available capacity and inventory, but not the actual amount to be executed. In both instances, the first step a manager must take is to forecast what customer demand will be. 

In traditional stock managment there are two basic approaches see Chapter 7, namely the pull approach and the push approach. In a pull system a warehouse is viewed as independent of the supply chain and inventory is replenished with order sizes based on apredetermined stock level for each warehouse. The stockmanage-ment model for the pull syston is normally geared to establish re-order level (ROL) and re-order quantity (ROQ). That is, when the stock drops to a certain level, a re-order is triggered of a predetermined amount. The ROQ takes into account past danands and the lead times for a re-order to be satisfied. The aim is to have as small amount of inventory as possible on hand at any one time, and the ROQ should likewise be as small as possible. However in some processes, such as a batch system, there will be a minimum amount that can be produced and in other cases there can be economies of scale which will determine the optimal size of an order. The push method is used when economies of scale in procurement outweigh... 

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