Modern businesses need to achieve operational efficiency to reduce wastage of inventory and resources. Manufacturers consider demand-driven approaches to effectively meet customer demand in order to maximize profits for the businesses. Depending on the nature of business, companies use various models of manufacturing. Push and pull models of manufacturing are two major approaches implemented by companies and the choice depends on their business strategy. Push and pull-based models in manufacturing starts at the planning phase and continues through the execution stage.
Exploring Push-Based Manufacturing Model
In push model of manufacturing, companies manufacture products based on projected or anticipated demand. Companies produce units based on forecasted demand and then push these products into the market. Companies must be able to predict the customers’ demand in terms of quality and quantity. The success of push-based model depends on how closely the product demand correspond to actual demand; most often, the unpredictability in customer demand render the process largely ineffective. Mostly, manufacturers produce more products than the customers would actually need; thus the businesses need to push them onto the store shelves. A key attribute of the push-based model is that the products are always ready for customers at any given moment; lack of inventory in the supply chain rarely occurs. The company implementing this model is always full with production capacity, supported by management staff to execute the plan. Hence, relevant production information in the model flows from management to the market.
A major benefit which businesses and their retailers enjoy is the seemingly high predictability in their supply chain. Retailers can plan proactively to store the product and organize the merchandise accordingly. An example of a push-based model is Materials Requirement Planning (MRP). Push-based manufacturing approach is also known as “Make to Stock” (MTS) in which the company does not base its production on actual demand, but on estimated one. On the basis of financial, operations and logistics planning, an MRP software controls the entire scheduling and ordering operations. Using this model, raw goods and materials, along with inventory, are made available when needed.
Constraints in using Pull-based Manufacturing Approach
Since push-based approaches are front-loaded in planning and rigidly executed, companies looking for agility prefer not to implement this. The planning and execution in push-based model is rigidly pushed out from the top. As a result, manufacturers find it hard to meet inevitable changes in customer demand, without creating a considerable dent in the budget. The excess inventory, and space required to store it can be quite budget consuming. What is worse, additional inventory may not sell or might require significant revisions.
Pull Manufacturing Models
Modern businesses looking toward containing waste in production processes and improving efficiency look for lean manufacturing strategy. They prefer pull-based manufacturing approach, in which the production is based on actual demand. Unlike push model, a pull model leads to more streamlined supply chain by avoiding overproduction, excess inventory carrying cost and save storage space.
The pull manufacturing model is traditionally based on the Toyota Production System (TPS), developed by Toyota, and is also known as a ‘Kanban’ system where the execution process is triggered by consumption of inventory. A signal is placed where products or manufacturing items are stored, and represents when these need to be replenished. Items needed are always available and will only be replenished when a ‘cue’ is sent down the production process. As soon as a part of entire inventory is consumed, the activity of procurement, supply chain and manufacturing starts. As a result, the amount of waste in the entire manufacturing process is greatly reduced and the amount of inventory is kept to a minimum. The company using pull manufacturing approach reaps significant benefits such as high quality products, fewer rejects by customer, minimal planning, and less management overhead.
Which is right—Push- Or Pull-Based Approach?
The myriad benefits of implementing pull-based approach for manufacturing and service operations management may lead companies to believe that this is the right model. But, there are pitfalls to implementing only one strategy—pull- or push-based approach.
For instance, production in automobiles may largely be a failure with using the just-in-time or pull-based inventory control method. The production of automobiles is complex and takes considerable time to only produce the volume of output as per the actual customer demand. This requires a comprehensive supply chain planning and an effective customer relationship management, which may not be practically feasible. So manufacturers of automobiles may prefer a hybrid push-pull strategy. Prominent technology companies such as Dell has implemented the hybrid model. Using push-based model, raw materials and goods are pre-ordered and stored, and in line with pull-based strategy, the computers are assembled only when the customer order is made.
A business that implements only the push strategy piles a large amount of the product at a distribution center; however it has to wait for a pull signal in its retailing section to move the product to customer shelves. A company that is keen on implementing the pull strategy will still have to engage in planning activities. Market volatility may lead them to work in sync with customer demand so that the right raw materials are bought or acquired at the right time. Unavailability of the finished products at times may result in customer dissatisfaction – making a dent in the company’s reputation. The crux is: no model is devoid of drawbacks; the type of strategy the management picks is greatly dependent on product’s life cycle and nature of business.
Deskera MRP’s demand forecasting, inventory and stock management features provide information to help organizations plan their production better and to avoid scenarios of over or under stock of finished goods.