Juggling between what is a push and pull strategy in supply chain management? Which is better than the other? Which strategy to adopt? Well, you have landed on the right page. This article will help you explain the types of strategies in supply chain management and what happens when push and pull are combined.

Every successful business relies heavily on efficient supply chain management to run its everyday operations. Some of the most successful companies in the world, like Amazon and Walmart, rely heavily on new and sophisticated techniques in supply chain logistics to run their operations.

Hence, this is a very active space that sees a lot of innovation in all aspects of the chain. Let’s look at the push and pull strategies in supply chain management and see which approach works for which business.

Push Strategy in Supply Chain Management

Under the push supply chain, the logistics are driven by long-term projections of customer demand. For example, at the end of the summer season, clothing brands start to manufacture more warm clothes. This type of planning becomes valuable to companies as it helps them plan for events in the future and be prepared when winter comes. This gives the companies time to meet their needs and time to figure out other logistics like where to store the inventory.

But instead of responding to actual demand, a push strategy relies on often wrong predictions. High variable expenses, divestments, discounting, missed sales, stock shortages, high levels of debt, and rescheduled production cycles are other drawbacks of this approach.

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Advantages of Push Strategy

Better Inventory Control

A key advantage of a push strategy in a supply chain is better inventory control. Using the push strategy, manufacturers can produce products in advance, stock them, and then sell them with rising demand. This reduces the risk of stock-outs. Notably, stock-outs can lead to lost sales and customer frustration. Further, manufacturers can also reduce the risk of overstocking and related costs by using a push strategy.

Forecasting Accuracy

A push strategy in the supply chain helps manufacturers have a better understanding of demand patterns. Using the push strategy, manufacturers can have a more accurate view of the market. This leads to improved forecasting accuracy. Improved forecasting accuracy is crucial for effective planning and decision-making.

Reduced Lead Time

Another advantage of a push strategy in the supply chain is that it can reduce lead times. In this strategy, customers receive the products faster as products are produced and stocked even before the customer places an order. This can be particularly beneficial in today’s fast-moving markets where customers are looking for quick and reliable delivery.

Alignment of Supply and Demand

A push strategy can help align supply and demand in a better way. This reduces the risk of obsolescence. Using a push strategy in the supply chain, manufacturers can respond quickly to changes in demand and make necessary adjustments to production and inventory levels.

Focus on Standard Products

A push strategy in the supply chain can allow manufacturers to focus on producing standard products in high volume. This will help in reducing costs and improve efficiency. As production processes can be streamlined using a push strategy, the production of standard products will increase.

Limitations of Push Strategy

Inaccurate Forecasting

One of the biggest challenges with a push strategy in the supply chain is inaccurate forecasting. If demand forecasts are incorrect, manufacturers may produce and stock too much or too little product. This may lead to overstocking or stock-outs. Due to inaccurate forecasting, there can be a significant loss in costs. These include carrying costs for overstocked items and lost sales for stock-outs.

Inefficient Use of Capital

A push strategy in the supply chain can also result in inefficient use of capital. Manufacturers may tie up funds in inventory to stock products that may not be sold for some time. This can reduce the amount of capital available for other investments and growth opportunities available to the manufacturers.

Reduced Customization

Another limitation of the push strategy in a supply chain is reduced customization. In a push strategy, manufacturers are focused on producing standard products in large quantities. This can limit manufacturers’ ability to respond to specific customer needs and preferences.

Real-world examples of Push Strategy

• FMCG (Fast Moving Consumer Goods) companies such as Unilever and Coca-Cola use a push strategy in their supply chain management. They predict consumer demand for their products and then push their inventory to retail stores and meet the increasing demand.

• Toy manufacturing company Lego uses a push strategy very effectively. They anticipate consumer demand for certain toys during holidays and peak periods and use a push strategy in their supply chain management to produce in-demand products in high volume.

• Book publishers such as Penguin Random House, HarperCollins, and Simon & Schuster use a push strategy in their supply chain management. These publishers forecast the demand for new releases and stock their inventory in bookstores and online retailers even before the releases are available for readers to buy.

Pull Strategy in Supply Chain Management

Under the pull supply chain, the manufacturing and supply process is driven by actual customer demand. In this type of supply chain logistics, inventory is acquired on a need basis. This type of planning benefits includes less wastage in the case of lower demand. The problem, however, is that the company might not have enough inventory to meet rising demands due to unforeseen factors. For example, an auto repair shop only orders the parts it needs. In this case, the business waits until it gets an order to procure the parts required for the repair.

Advantages of Pull Strategy

Enhanced Customer Relationships

Satisfied customers are the lifeline of any business. A pull strategy in supply chain management can help businesses build strong, long-lasting relationships with their customers. Businesses can use a pull strategy to demonstrate a commitment to customer satisfaction by quickly and accurately fulfilling customer demand. This can lead to increased customer loyalty and customer requisition rate.

Dynamic Response to Customer Demand

One of the key benefits of a pull strategy is that it allows businesses to respond dynamically to changing customer demand. This strategy helps manufacturers closely monitor customer behavior. It helps them to adjust production and delivery. Pull strategy helps businesses to survive even in a highly competitive market.

Better Quality Control

With a pull strategy in the supply chain, businesses can take a more hands-on approach to quality control. In a pull strategy, businesses only produce products when they are needed. This allows businesses to produce only high-quality products.

Sustainable Supply Chain 

A pull strategy in supply chain management can help businesses reduce waste, minimize surplus inventory, and improve overall sustainability. Businesses produce products as they are needed using a pull strategy. Further, using this strategy, manufacturers can closely monitor demand and reduce their environmental impact.

Better Resource Allocation

A pull strategy in supply chain management can help businesses allocate their resources more effectively. Businesses using this strategy are not tied up in surplus inventory or overproduction. They can also avoid the need for large amounts of working capital to support surplus inventory. This can result in improved cash flow and resource utilization and save costs.

Limitations of Pull Strategy

Reduced Economies of Scale

A pull strategy in supply chain management can reduce the economies of scale. You can achieve economies of scale can be achieved through mass production. However, businesses using the pull strategy produce smaller quantities of products on a more frequent basis instead of mass production.

Dependence on Customer Demand

Another limitation of the pull strategy is its dependence on customer demand. This strategy depends heavily on accurate customer demand forecasts. Any inaccuracies can result in overproduction or stock shortages.

Potential Stock Shortages

A pull strategy can result in stock shortages if demand exceeds supply. In this strategy, businesses produce products on demand rather than maintaining large amounts of inventory. This can result in lost sales and decreased customer satisfaction. Pull strategy is best suited for low-volume products.

Real-world examples of Pull Strategy

• Toyota is a well-known example of a company that uses a pull strategy in its supply chain management through Just-in-Time (JIT) manufacturing. Instead of producing large quantities of a product ahead of time and storing it in a warehouse, JIT manufacturing produces products only when there is an actual demand for them. This approach helps reduce inventory costs and waste. This pull strategy also helps in increasing efficiency by only producing what is needed.

• Many companies, such as UPS and FedEx, use a pull strategy in their reverse logistics operations. These companies pick up returned products from customers only after they have placed a return request. This helps to reduce the amount of unnecessary transportation and handling of returned products. Using a pull strategy here also helps in minimizing the amount of inventory that needs to be stored in a warehouse.

• Companies like Vistaprint use a pull strategy. They produce printed products, such as t-shirts and business cards, only after a customer places an order. This helps to reduce waste and the cost of maintaining a large inventory.

Comparison between Push and Pull Strategy

Similarities

Despite their differences, there are some similarities between push and pull strategies in supply chain management:

• Both push and pull strategies in supply chain management rely on data and technology to make informed decisions. For example, push strategies use data such as sales history and market trends to make forecasts. Meanwhile, pull strategies use real-time data from point-of-sale systems to respond to changes in demand.

• Both strategies require a certain level of flexibility and adaptability. In a push strategy, the supply chain must be able to quickly finish production to meet an increase in demand. On the other hand, in a pull strategy, the supply chain must be able to respond quickly to changes in demand by adjusting production accordingly.

• Both strategies focus on satisfying the end consumer. No matter if it is a push strategy or a pull strategy, the supply chain must deliver the right product to the right customer at the right time.

• Both strategies involve multiple stakeholders in the supply chain. These include suppliers, manufacturers, distributors, and retailers. Each stakeholder plays a critical role in ensuring that the products reach the customers properly.

Differences

While there are many similarities between the push and pull strategies in a supply chain, there are also several key differences between the two:

Lead time vs. Response time

Push strategies to have longer lead times. This is because, in this strategy, products are produced in advance based on demand forecasts. Meanwhile, pull strategies have shorter response times. In this strategy, production is adjusted quickly according to the changes in demand.

Cost Structure

Push strategies typically have higher upfront costs. Businesses using this strategy produce products in advance. However, businesses using the pull strategy have lower upfront costs. They adjust their production based on actual sales.

Inventory Management

Businesses using push strategies balance inventory levels based on demand forecasts. Meanwhile, pull strategies minimize inventory levels by only producing what is actually sold. This difference in inventory management can impact both the cost structure and the flexibility of the supply chain.

Forecasting vs. Real-time data 

Push strategies often rely on historical data and demand forecasting to determine production levels. Meanwhile, pull strategies rely on real-time data from point-of-sale systems to determine and adjust production levels.

Factors to consider when choosing between strategies

Push and pull strategies in supply chain management are two distinct approaches to managing the flow of products from manufacturers to consumers. Both pull and push strategies have their own advantages and disadvantages. You should consider several key factors to ensure that you choose the right strategy that matches your business needs:

Product characteristics

You should choose between a push or pull strategy considering the nature of the product that you are selling. You should keep the product characteristics in mind, like its shelf life, demand predictability, and variability.

Cost structure

You must determine the cost structure of your business before choosing between a push or pull strategy. Do you want to minimize upfront costs? Can you risk the cost of overproduction? Push strategies have higher upfront costs. Meanwhile, pull strategies have lower upfront costs.

Market Conditions

Before choosing between a push or pull strategy, it is important to understand the target market condition and customer preferences. You must monitor customers’ purchasing behavior and demand patterns.

Push and Pull Strategies in Practise

Push and pull strategies are usually combined in practice to meet the needs of the end consumer. The process roughly consists of the following steps:

• Determining the availability of raw materials. Even before the product can begin to be made, it is important to plan where and how the raw materials can be acquired cheaply.
• Processing the raw materials in a factory to yield the final products. This step varies from company to company, like food-based products, cloth-based products, etc.
• Then the finished product is taken to a storage facility or a distribution facility.
• The packaged product is taken to a retail store or shipped directly to the customer as needed.
• Most supply chains in the world resemble this basic outline. Now, push and pull strategies can be employed by planners by taking into account the expected demand and other factors.
• The most successful shipping companies, like Walmart and Amazon, research the various factors that determine demand and incorporate that knowledge into their supply chain.

Amazon is one of the world’s biggest online retailers, managing billions of dollars worth of inventory each year. Push and Pull logistics are a big part of their inventory management. Amazon’s warehouses are strategically placed, moving closer and closer to main metropolitan areas and city centers. As a result, it uses a pure push strategy for the products it stores in its warehouses based on the downstream demand forecast. On the other hand, it uses a pure pull strategy when it sells products from third-party sellers to minimize its own risk for unsold inventory.

Conclusion

In real life, no businesses rely entirely on either push or pull logistics but instead employ a mixture of the two to make the best use of them. Modern-day supply chain operations are very complex and consist of steps from getting the raw materials to delivering the final product to the end consumer. 

But here, it is crucial to note that, to build the optimal push versus pull combination, there is no one-size-fits-all approach to develop the ideal push vs. pull mix. When designing their specific combination of Push and Pull strategies, brands must understand their campaign objectives, target audience, and budget constraints.

You can respond effectively to evolving consumer demands by combining both pull and push approaches while maintaining economies of scale within your current operations.

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