The pull or push and push or push systems are two approaches to management of operations, in the first the items will be manufactured or purchased in response to demand, in the second they will be manufactured or purchased based on what is plan or anticipate.
The push approach is associated with MRP (Material Requirement Planning) systems and is considered a rigid system. The pull approach is associated with JIT (Just in Time) systems and is considered a flexible system.
Push and Pull production planning. Source: Cuatrecasas
Pull systems
When product demand determines how much to produce (pull approach), production order sizes are small, low inventory costs are generated, and low risk of product obsolescence. This approach is convenient when competing for innovation and flexibility, and its implementation requires rapid information from the points of sale, as well as a fast and flexible production system. The disadvantages of this approach are the need to have capacity for peak demand periods, lower economies of scale and transportation than the traditional push approach. (Muñoz)
Distributors individually determine the specific replacement needs of their stock. calculating the required quantity and placing the order at the regulatory warehouse. The advantages of this system are the following: better knowledge of the market and proximity to the client by the delegation. But it also has drawbacks: • Lack of coordination with the company's global stock, the regulatory warehouse stock and the manufacturing program. • In times of scarcity, the regulatory warehouse serves the first order. • Increase the safety stock. The delegation tends to overprotect itself and accumulate stock. (Mauleón)
In the pull, pull system, the movement of materials and products is adjusted at all times to the demand - nothing will be produced until it is really required. In the big picture, manufacturers will not produce anything unless there is a market demand and it will pull products from the manufacturing plant. Operationally, the first operation (demand) will create the requirements to produce, while the second (production) will make it possible to manufacture the products. (Casanovas)
Pull systems are characterized by the fact that the warehouses or different points of sale individually determine the specific needs for replenishment of their stocks, calculating the required quantity, which they order directly from their supplying warehouse. The advantages of pull systems, in relation to push systems, are fundamentally centered on the possibility of operating autonomously, with a better knowledge of the facts (decision on site). as well as the possibility of using more rudimentary computer tools, which involve less communication and data processing costs. The main disadvantages are mainly focused on: - Uncoordination of the global needs of the company, with the consequent difficulty to carry out a delivery plan. - Orders are placed without taking into account the total available stock:manufacturing schedules, etc. - There is a "sub-optimization" in the sense that the central warehouse serves following the order of "the first to order, the first to deliver." - Increase in the safety stock as we will see in due course. (Anaya)
Push or push systems
When planning pushes production (push approach), production order sizes are based on medium or long-term forecasts, so they are generally large and variable, and generate high inventories, the cost of which is offset by economies of product scale. This approach is convenient when the manufacturing of the product faces important economies of scale and, in particular, when demand is seasonal, the strategy of maintaining inventories for the peak season is applied, thus avoiding investing in very high production capacities. The risk faced by the push approach lies in the occurrence of radical changes in demand patterns, which make the product in inventory obsolete,therefore, this approach only works in the case of poorly differentiated (marketable) goods or when there are supply contracts that ensure the sale of the product. (Muñoz)
The central warehouse determines the quantities to be sent to each branch based on: • global sales forecasts, both at branch level and monthly, • the stock available in each linen in the warehouses, • the manufacturing program. It is the system that usually prevails (centralized control of the stock) since it entails better control, lower stock and storage costs and, normally, a higher quality of customer service. (Mauleón)
The traditional management system begins with manufacturing, regardless of market requirements, and then, in order not to stop the means of production, it will continue to be produced until it has a high stock of products and subsequent storage, until it is pushed for sale in the market. (push strategy). That is to say, everything that productivity allows is produced and it is pushed towards the next process, and so on until it reaches the final consumer, who will decide on the purchase or wait until a product or service that meets their needs appears. (Casanovas)
In push systems, it is the central warehouse, or the factory, that takes center stage, determining the quantity to be sent to each warehouse or point of sale, based on a consolidated calculation of the anticipated needs (forecast), as well as knowledge of the stock available in each warehouse and established distribution rules. Stocks are literally being pushed to peripheral warehouses and outlets. (Anaya)
Which system is best
Whether to adopt a push or a pull approach depends fundamentally on the importance of economies of scale and the uncertainty in demand. The existence of economies of scale makes the push approach more attractive, which allows the production of large batches, while greater uncertainty in demand favors the pull approach, which minimizes the risk of losses due to obsolescence of inventory stocks. (Muñoz)
Convenience of Pull and Push Systems. Source: Muñoz
Bibliography
- Anaya Tejero, Julio Juan. Comprehensive logistics: Operational management of the company, ESIC Editorial, 2011. p.179Casanovas, August and Cuatrecasas, Lluís. Comprehensive logistics, Profit Editorial, 2012. p.158Cuatrecasas Arbós, Lluis. Organization of production and operations management, Ediciones Díaz de Santos, 2012. p.390Mauleón Torres, Mikel. Stock Management.: Excel as an analysis tool, Ediciones Díaz de Santos, 2008. pp.103 and 104Muñoz Negrón, David. Operations Management, Cengage Learning Editores, 2009. p.149
