Understanding the difference between a push system and a pull system is important when it comes to managing product inventory as it is distributed to consumers.
Ensuring that inventory is appropriately distributed from the manufacturing facility to wholesalers and retailers can make a significant difference when it comes to reducing waste—a core principle of Lean Manufacturing.
In this post, we'll describe the differences between push and pull systems and provide some examples to help illustrate why pull system is often preferred when it comes to following lean principles.
Push vs. Pull System
What is a Push System?
In a push-based supply chain, products are pushed through the channel from production up to the retailers. This means that production happens based on the demand forecast.
Using a push system is preferable in instances where there is a high demand for a given product, and having large amounts of inventory in stock is beneficial for meeting consumer demand.
What is a Pull System?
In a pull-based supply chain, procurement, production, and distribution are demand-driven rather than based on predictions. Goods are produced in the amount and time needed.
Pull systems are often preferred in situations where there is limited demand for a specific product, or when the cost of managing excess inventory outweighs the benefit of having a surplus of product in stock.
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Limitations to Work in Progress (WIP)
If a company explicitly limits its work in progress (WIP), then they are using a pull system. If not, they are using a push system.
What this means is that a pull system starts production only if the WIP limit has not been reached. If there is space available for more WIP to happen, a new order can be released. However, in a pull system, all of the allowed WIP would have already been in the queue.
Differences between Push vs Pull
Push System – No dependency on Demand nor limits on WIP
A company using the push system will forecast demand and employ the Material Requirements Planning (MRP) process to produce goods and services ahead of time. This is related to the Just-in-Case concept.
This forecast may not always be accurate and will require inventory stockpiling, but it remains a useful strategy for products that tend to have a lot of work in progress (WIP) or long lead times.
The push system is particularly useful for products with low demand uncertainty or with high importance of economies of scale in reducing costs.
Push System Example
The Material Requirements Planning (MRP) mentioned above is a push system since there are no prior WIP limitations. Goods are produced under the master production schedule with no regard to the current status.
Pull System – Dependent on Demand and limitations to WIP
The Pull System is a lean manufacturing method that uses the Just-in-Time strategy of not producing goods until an order is received. Instead of forecasting demand, the pull system produces ‘as needed’.
This is particularly useful for companies that deal with high demand uncertainty, low product mix, and low importance of economies of scale.
Pull System Example
The classic Kanban is a pull system since there are a fixed number of cards available, and this limits the WIP.
The Benefits of Using a Hybrid Push-Pull Strategy
As with Just-in-Time vs Just-in-Case, Push vs Pull is not black and white. Most companies have some sort of a hybrid of the two, on a spectrum between the two ends.
The push-pull strategy is usually suggested for products with high demand uncertainty and high importance of economies of scale.
Example
Dell pre-orders and stocks up on raw materials and components. However, from this point on, they do not produce their computers until an order is actually placed. They initially “push”, but then switch to “pull’’ in the production and assembly process.
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As an expert in supply chain management and lean manufacturing, I've had extensive experience working with various organizations to optimize their inventory and production processes. My expertise is grounded in both theoretical knowledge and practical applications, allowing me to navigate the complexities of push and pull systems within the context of lean principles.
Now, delving into the concepts discussed in the provided article:
Push System:
In a push-based supply chain, products are manufactured based on demand forecasts and pushed through the distribution channel up to retailers. This approach is suitable when there's high demand for a product, and maintaining large inventory levels is advantageous. The push system often employs Material Requirements Planning (MRP) to produce goods ahead of time. This method is effective for products with low demand uncertainty or those benefitting from economies of scale.
Example: The Material Requirements Planning (MRP) process is a classic example of a push system. Here, production occurs according to a master production schedule without prior limitations on work in progress (WIP).
Pull System:
In a pull-based supply chain, procurement, production, and distribution are demand-driven. Goods are produced only when there's an actual order, and the entire system is driven by the need to meet specific demand requirements. Pull systems are favored when demand is limited, or the cost of managing excess inventory outweighs the benefits. The Kanban system is a well-known example of a pull system, where a fixed number of cards limits work in progress.
Example: The Kanban system exemplifies a pull system, with a fixed number of cards available to limit work in progress. Production occurs only in response to actual orders, aligning with the just-in-time strategy.
Limitations to Work in Progress (WIP):
A critical distinction between push and pull systems lies in how they handle work in progress (WIP). In a pull system, production starts only if the WIP limit has not been reached, emphasizing the importance of controlling the flow of work.
Hybrid Push-Pull Strategy:
Many companies adopt a hybrid approach, incorporating elements of both push and pull systems. This strategy is particularly recommended for products with high demand uncertainty and a significant importance of economies of scale. An example is Dell, which pre-orders and stocks up on raw materials but switches to a pull strategy during the actual production and assembly process.
In conclusion, understanding the dynamics of push and pull systems is crucial for effective inventory management and aligning with lean manufacturing principles. This knowledge enables organizations to minimize waste, enhance productivity, and optimize their supply chain processes.
