Q. 179  Compare Push vs Pull vs Continuous Flow Systems. When should we prefer one over the other?

 

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Push Vs Pull System

 

Push :We are pushing our products to consumers
Pull :Consumers coming to us and demanding products

 

Push System : In Push system Promotional strategy makes use of Sales team and promote activities to create consumer demand for products. Producer promote  product to wholesaler, Wholesaler promotes to Retailer and then to end user from retailer
EX : Mobile Phone manufactures promote their products through retailers with different schemes to end users,

Here we are trying to convince customer this is something they need

 

 

Pull System
It Pull consumers towards products It comes in form of In bound marketing, creating valuable contents that attracts the customers. Companies who applied pull marketing are successful at identifying customers need 
 

 

Supply Chain Management:

For any organization, supply chain management is the heart of it to run the organization smoothly because it handles the entire flow of goods/service starting from raw material to the final products delivery to the end user. To manage this task, companies create a network of suppliers, distributor, retailers in which all will be linked to each other to move the product from starting of its process all the way to final output to end user.

There are six major components of Supply Chain Management which are given below:

1. Planning of resources to fulfill customer demand.
2. Sourcing to arrange suppliers for raw material in terms of goods/services
3. Making of product includes all activities done to create the final product includes input from supplier to final output 
4. Delivery includes everything which is used to deliver product to the end user
5. Returning to create a network for defective products
6. Enabling is the establishing of support processes for monitoring the information and ensuring the compliance by fulfilling all regulations. 

in any organization, wee have seen that there are functions which are interlinked and sometimes overlaps, so to run it smoothly inventory management comes into picture because every process has its own limits to produce goods and no company wants to take risk of stock out at retailer or distributor end. So inventory management is very important factor to determine the health of supply chain because at the end it will impact the balance sheet of the organization. 

 

Inventory can be seen at every step including from raw material supplier to work in process item to finished good material because at no station no one wants to stock out and wants to fulfill the fluctuating demands of customer. So at every level inventory is build up and we can understand this better with the help of Bullwhip Effect. 

 

Bullwhip Effect:  it talks about the amount of inventory at various stages of the supply chain and generalizes that as we move to the beginning or left most of the supply change, the overall inventory will be higher. It also talks about that the variation in the inventory will also be higher.

we can understand it be this example , if a customer demand is D then the distributors will hold a quantity of slightly more than D to take care the demand fluctuation of customers so the amount of inventories will be more than D and they dont produce so they will buy form the people who used to produce so the producer will be producing little more to fulfill the demand so the pressure comes on tier 1 supplier who will produce more to fulfill the uncertainty in the demand and this uncertainty builds a more pressure on tier 2 supplier to fulfill the demand. and the amount of average inventory hold by tier 2 supplier is very high

This is called Bullwhip Effect  where the average inventory hold by various supplier in supply chain increases as we move towards the supplier direction and fluctuation will also increase. 

 

So there is need to drive the supply chain efficiently without loss to the organization and the ultimate goal of supply chain is to fulfill the customer demand on time because the driving factor of any supply chain is the fulfilling of customer demand and future forecasting. So supply chain has its models or system to run it smoothly as per requirement of the type of business. The system are explained and compared below:

 

1. Push System:  it can be referred as  " Make to stock" in which production is based on the demand forecasting. in this system inventory level is high at every station and goods are produced on forecasting basis and tries to sell in the market. in this system we need to tackle with more lead time and inventory control and waste for controlling and holding the inventory at each station. for example distributors have inventory with them , as soon as goods are consumed they replenish them with new one. 

 

2. Pull System:  it can be refereed as  " Make to order" in which production is based on the actual demand.In this production starts as soon as the order is placed by the customer. for example in a restaurant, any customer is giving any order then they start to make it although they have all ingredients in advance to fulfill demand fluctuations.

  

3. Continuous Flow: it involves the continuous flow of material form one place to other or from one work station to other. in works when organizations know that demand of their product will be there and it will consumed irrespective of type of customer. and this system is used where in one processing line companies can get multiple products for example refineries in which crude oil is processed and they have petrol, diesel, and other products from the same input at various stages of process and the consumption of these products will always be there throughout the year.

 

there are various situations to prefer one over other which are explained below:

 

1. Variation in Demand : when the demand of any product is stable, certain then it can be forecasting with high accuracy and in this scenario Push system will work very well. On the other hand if demand is fluctuating then consider for pull system. low variation in demand leads to a highly efficient system that minimize the cost per unit. for example ice-cream manufacturing, soft drinks manufacturing they know that consumption of their product is high in summer and low in winter so they plan accordingly to meet customer requirement rather than to produce the same number of output throughout the year and hold the inventory.  

 

2. Types of Product : it means about the products which are either customized or produced as a mass production as per designed. 

when a product is customized personally by customer then pull system is followed . These products are with high brand value and customer also have their emphasis to personalize the product.  for example car manufacturing companies like Rolls Royce, Lamborghini, Ferrari, Porsche produce cars as per customer demand. so this is a pull system as and when customer demand is raised they start to work to deliver it.

 

3.Manufacturing:  when we are seeing that manufacturing setup for a product is very expensive then go for push system to have proper ROI and we can consider Pull in which we can change the setup very quick without affecting efficiencies. 

 

4. Lead Time:  here we are dealing with lead time to fulfill the demand of customer. it can be manufacturing, replenishment lead time or any combination which depends on situation. push system is favored by higher lead time to build inventory so that our end customer will get goods as per their demand. Short lead time goes to pull system . for example in Domino's Pizza, when any order is placed then it is must for them to deliver within 30 minutes and they start to work accordingly. another example is of steel processing for automobile industry, process is continuous an dis very critical so they follow push system to make inventory in advance to run the customer main line as per the grade, size of steel for the various parts of the final product. 

 

5. Production Method : in the production is continuous  we used to follow Continuous flow of manufacturing rather than to push or pull because we can not start from beginning if any order comes or we cant make inventories in between work station. Situation where we need to handle continuous production like assembly line, refineries, cement industry, chemical industry. in these type of industry CFM works very well with Just In time by following FIFO and products transfers to next work station when finished at previous station so the continuous production will finish the product as soon as it passes from all work station. like in automobile assembly line, all products are going in line and a specific work is done at a single work station, so by maintaining takt time we used to produce our final product out of assembly line. 

 

6. Marketing Strategy :   when any company is going to launch its new products in market they follow push strategy to do marketing of their product. the basic idea of the company is to push the information about the product by making awareness through many methods so that they go for it. and they expect pull strategy so that customer can come to you. for this company has to make their brand value and loyalty. in this type of strategy word of mouth plays a important role and this is one of the marketing method, if you are sure about your product loyalty and quality people will refer your product to buy . It happens in case of car buying, mobile buying. People used to take reference form their friends or relatives, they used to give feedback about the same and if you are good in your customer satisfaction, automatically new customer will come to you. 

 

For any organization it is preferable to combine both Push and Pull to be effective and to manage customer demand. for example any restaurant , they have all raw material with them as per forecasting so this is push system for them but they start to work after placing a order by any customer to give him fresh dish so this is pull system otherwise if they prepare dish in advance so no customer would like to buy that dish and it will a waste for that organization. Same example with retailers, stores they have inventory with them and replenish as soon as goods are consumed, so consumption of good is pull and having inventory is push to meet customer fluctuating demand, thats why companies have warehouse to supply them otherwise it will be stock out if they start to work after placing order by customer. s

another example of push and pull is of car manufacturing. they produce cars as per forecasting, this is push system but a new car demand coming form a showroom is pull because someone has purchased a car form their showroom . so to have minimum inventory they pulled out a car from company to meet customer requirement. 

Benchmark Six Sigma Expert View by Venugopal R

One of the key sayings that most of us would have heard while talking about Consumer Orientation is “Shed Product-Out philosophy” and “Adopt Market-In philosophy”.

 

We come across numerous explanations about the “Push” and “Pull” strategies. I am sure that most of the excellence ambassadors will do a good job of explaining these flow systems with examples. Let me try to express my views briefly based on my experiences.

 

An auto components company who have ‘Original Equipment’ manufacturers as their clients, has to align its production flow based on the clear orders from clients. This, of course is the case when your brand is already established and you are one of the ‘approved’ suppliers for the client. Evidently it is more of ‘pull’ strategy.

 

Imagine that you are a new entrant to the market or you are working to obtain orders from a new customer. The ‘Push’ is needed to sell your brand and credibility and also hasten to provide a pro-active pilot sample to attract the customer’s attention positively. You may want your product to be tried out and to obtain specific feedback based on the client’s expectations and accordingly customize the product.

 

For the same company, the products may be sold for ‘replacement’ in the open market. Imagine it is a fast-consuming product like tires, batteries or brake pads. Such products need to find their place in the shelves of the dealers for ready availability. The customers usually require such products immediately and they are not going to place an order for them and wait! The brand awareness creation, product promotion and product availability are critical here. Now this will appear to encourage a ‘push’ system in the flow. However, it could be a combination of ‘push’ and ‘pull’. The ‘pull’ for the organization could be based on data about market behavior, the consumption patterns, and the re-order levels from dealers.

 

Let’s look at a banking scenario. The dynamics could be bit different for issues like inventory, storage, WIP etc. If a bank wants to attract more customers, they should not only have their ‘products’ ready, but also invest in adequate campaigning and promotion programs to draw customers. If you do the ‘concept’ selling for a product, but fail to make the product available before your competition does, you are actually creating more customers for your competition!  You would have experienced every time you talk to the call center of your bank for any purpose, after attending to your query, they are quite likely to make you feel important and tell you that ‘you have been identified as one of our elite customers and we have a special offer for you’. And it will usually be an offer for providing you a loan or a credit card! Obviously, they have a target to ‘push’ a product! Even the bank is going to cut your card, only after you submit your application, which happens to be a ‘pull’ trigger here!

 

Which is better – Push or Pull? Looks like both have their merits depending upon the situation and other conditions, and maybe sometimes they appear to co-exist.

 

Some of the senior members in the forum may recall around 3 decades ago, how we had to place an order and wait for several months for buying a vehicle or to get a telephone connection. We see how all this is transformed in today’s world. How do we relate this to Push / Pull strategy and why? I leave it to be given some thought!

The best answer has been provided by Vastupal. He has explained the three systems along with reasons why one should be preferred over another.