Push system and pull system in supply chains

Supply chain management refers to the value creation process from the supplier to the end consumer. Depending on how the supply chain is managed, there are two systems. The push system and the pull system. A company can trigger the production or delivery of products by orienting itself to past values and thus producing with foresight or by waiting for a specific customer order.

Diagram describing the internal supply chain. In the largest block in the middle of the supply chain, the procurement, production and sales circles overlap. An arrow with two arrowheads is placed over all the circles. On the outside, the suppliers and customers blocks are on opposite sides of the supply chain block. The outer elements suppliers and customers are connected to the inner element internal supply chain by arrows with two arrowheads.Process in the push system

Producer → Distribution center (retail) → Sales outlet

Producer: Based on estimates, decisions are made about whether and how much to produce. Market and sales data is used for this purpose and forecasts are created on this basis.

Distribution center: In retail, a reorder point process takes place based on existing stock levels. Orders are placed on the basis of forecasts and a safety stock is maintained at the same time.

Sales outlet: In the retail store, a reorder point procedure is carried out based on existing shelf stock. As in the distribution center, orders are placed based on forecasts and a safety stock is maintained.

The push principle is also used when a new product is launched or the availability of spare parts needs to be guaranteed. The danger with push systems is miscalculation. This can either lead to over-calculation or to customer requests not being met due to shortages.

With pull systems, decisions about the specific delivery quantity and delivery time are not made at the production site, but at the distribution center. The desired quantity is then pulled from the production site, according to the term “to pull”. In the pull system, control is decentralized.

Process with the pull system

Sales outlet → Distribution center (retail) → Producer

Sales outlet: Ongoing stock checks take place in the sales outlet. Automatic reorders are placed in line with actual demand via electronic data exchange. Sales are identified via barcode and EAN code.

Distribution center: In the distribution center, the reorder is passed on to production. The products are handled according to cross-docking. The specific quantity and the specific time of delivery are determined in the distribution center.

Producer: The products are produced at short notice and provided with a barcode and EAN code. Additional forecasts are created based on demand data, such as sales and product movements.

The pull principle requires efficient information flows. Fast transmission of information is necessary for the receipt of demand and short throughput times are then required for production.

You can find more information at Individual planning for individual products.

 

Image license: CC BY-SA 3.0, Author: Stern