EXPLAIN PUSH-PULL VIEW OF SUPPLY CHAIN PROCESS
Supply chain processes fall into one of two categories depending on the timing of their
execution relative to customer demand. All the industries fall under Pull or Push supply chain.
We have also seen hybrid new model called “Pull and Push” supply chain. Whatever is the
industry, as long as you make supply chain efficient using either pull techniques or push
techniques or both, that is what matters to the business.
What is Pull Supply Chain?
Under pull supply chain, products are manufactured or procured based on specific customer
requests. We also know it as “Built to Order” or “Configured to Order” model. We often see this
model operating in IT/High Tech Industries, where customization is the competitive advantage.
Briefly, we have seen this model in automotive industry and it is being used in high end luxury
market segment. The objective of this model is to minimize the Inventory carrying and optimize
supply. Pull model is as a response to growing uncertainty in demand and short product cycle.
Some of the characteristics of this model include:
1. Volatile demand situation;
2. High rate of Customization;
3. Minimal Inventory Carrying;
4. Highly dynamic and effective distribution network.
What is Push Supply Chain?
Under Push model, products are manufactured or procured based on anticipated customer
orders (speculative). This model is also known as Built to Inventory or Built to Sock. The name
itself reveals its functionality. Products are manufactured in anticipation of customer needs.
Even though direct to store or cross docks are implemented, overall retail supply chain is based
on push model. Some of the big names in the retail industry are trying to adopt the hybrid
model which is a combination of pull and push.
Some of the key challenges and characteristics could include:
1. High inventory costs,
2. Challenging working capital requirements due to low inventory turns;
3. Huge warehousing and distribution costs;
4. Inability to meet dynamic market conditions and
5. Seasonal demand and off the shelf product.
WHAT IS VALUE CHAIN AND WHY IS IT RELEVANT TO A FIRM TODAY?
The idea of a value chain was first suggested byMichael Porter (1985) to depict how
customervalue accumulates along a chain of activitiesthat lead to an end product or
service.Porter describes the value chain as the internalprocesses or activities a company
perform “todesign, produce, market, deliver and support itsproduct.” He further states
that “a firm’s valuechain and the way it performs individual activitiesare a reflection of
its history, its strategy, itsapproach to implementing its strategy, and theunderlying
economics of the activities themselves.”
Porter describes two major categories of business activities: primary activities and
Primary activities are directly involved in transforming inputs into outputs and in
deliveryand after-sales support. These are generally alsothe line activities of the
●inbound logistics—material handling and warehousing;
●operations—transforming inputs into the finalproduct;
●outbound logistics—order processing and distribution;
●marketing and sales—communication, pricingand channel management; and
●service—installation, repair and parts.
Support activities support primary activities andother support activities. They are
handled by theorganization’s staff functions and include:
●Procurement—purchasing of raw materials,supplies and other consumable items as
●Technology development—know-how, proceduresand technological inputs needed in
every valuechain activity;
●Human resource management—selection,promotion and placement; appraisal;
rewards;management development; and labor/employeerelations; and
●Firm infrastructure—general management,planning, finance, accounting, legal,
government affairs and quality management
How it is relevant to firm?
“The value chain disaggregates a firm into its strategically relevant activities in order to
understand the behavior of costs and the existing and potential sources of differentiation. A
firm gains competitive advantage by performing these strategically important activities more
cheaply or better than its competitors” (Porter, 1985). Further, Porter claims that the value
chain is embedded in the value system consisting of several value chains:
The supplier value chain is responsible to create and deliver the inputs that are used within the
firm value chain; hence suppliers may have an influence on the firm´s performance.
The channel value chains describes that a product passes through a channel on its way to the
customer that may affect the buyer´s behavior.
The buyer value chain defines the role of the company and the product that are determined by
a buyer´s needs.
Porter emphasis that in order to do the value chain, it is important not only to understand the
firms value chain but also how the firms value chain fits and is embedded into the whole value
system. This is how competitive advantage is gained and sustained.
Most corporations define their mission as one of creating products or services. For these
organizations,the products or services generated are more important than any single step
within their value chain. In contrast,other companies are acutely aware of the strategic
importance of individual activities within their value chain. They thrive by concentrating on the
particular activities that allow them to capture maximum value for their customers and
These firms use the value chain approach to better understand which segments,distribution
channels,price points,product differentiation, selling propositions and value chain
configurations will yield them the greatest competitive advantage.
The way that the value chain approach helps organizations assess competitive advantage is
through the following types of analysis:
Internal cost analysis—to determine the sources of profitability and the relative cost
positions of internal value-creating processes;
Internal differentiation analysis—to understand the sources of differentiation
(including the cost) within internal value-creating processes; and
Vertical linkage analysis—to understand the relationships and associated costs among
external suppliers and customers in order to maximize the value delivered to customers
and to minimize cost.
These types of analysis are not mutually exclusive. Rather,firms begin by focusing on their
internal operations and gradually widen their focus to consider their competitive position
within their industry.
WHAT IS ICD? WHAT ARE THE ADVANTAGE TO THE TRADE?
Inland Container Depots, otherwise known as ICDs, are dry ports equipped for handling and
temporary storage of containerized cargo as well as empties. This means that hinterland
customers can receive port services more conveniently closer to their premises
A common user facility with public authority status equipped with fixed installations and
offering services for handling and temporary storage of import/export laden and empty
containers carried under customs control and with Customs and other agencies competent to
clear goods for home use, warehousing, temporary admissions, re-export, temporary storage
for onward transit and outright export. Transshipment of cargo can also take place from such
FUNCTIONs OF ICDs/CFSs
The primary functions of ICD are as under:
a. Receipt and dispatch/delivery of cargo.
b. Stuffing and stripping of containers.
c. Transit operations by rail/road to and from serving ports.
d. Customs clearance.
e. Consolidation and desegregation of LCL cargo.
f. Temporary storage of cargo and containers.
g. Reworking of containers.
h. Maintenance and repair of container units.
The main benefits from ICDs:-
Concentration points for long distance cargoes and its unitization.
Service as a transit facility.
Customs clearance facility available near the centers of production and
Reduced level of demurrage and pilferage.
No Customs required at gateway ports.
Issuance of through bill of lading by shipping lines, hereby resuming full
liability of shipments.
Reduced overall level of empty container movement.
Competitive transport cost.
Reduced inventory cost.
Increased trade flows.
DISCUSS THE CURRENT FINANCIAL CRISIS OF AIR CARGO TRANSPORTATION
BRIEFLY DISCUSS THE DIFFERENT COST AN ORGANIZATION INCURS WHILE
Inventory is a physical resource that a firm holds in stock with the intent of selling it or
transforming it into a more valuable state
Maintenance, Repair and Operating (MRO)
Why company hold inventory?
Improve customer service
Economies of purchasing
Economies of production
Hedge against future
Unplanned shocks (labor strikes, natural disasters, surges in demand, etc.)
To maintain independence of supply chain
In order to control inventories appropriately, one has to consider all cost elements that are
associated with the inventories. There are four such cost elements, which do affect cost of
Unit cost: it is usually the purchase price of the item under consideration. If unit cost is
related with the purchase quantity, it is called as discount price.
Procurement costs: This includes the cost of order preparation, tender placement, cost
of postages, telephone costs, receiving costs, set up cost etc.
Carrying costs: This represents the cost of maintaining inventories in the plant. It
includes the cost of insurance, security, warehouse rent, taxes, interest on capital
engaged, spoilage, breakage etc.
Stockout costs: This represents the cost of loss of demand due to shortage in supplies.
This includes cost of loss of profit, loss of customer, loss of goodwill, penalty etc.