1. The document discusses push-based, pull-based, and push-pull supply chain strategies. It explains that push strategies rely on forecasts while pull strategies rely on actual customer demand data. 2. A push-pull strategy takes advantages of both by using push (forecast-based) processes for early stages where there is lower uncertainty, and pull (demand-based) processes for later stages where uncertainty is higher. The optimal location of the push-pull boundary depends on factors like demand uncertainty and the importance of economies of scale. 3. Companies can implement push-pull strategies through techniques like postponement, where common components are produced based on forecasts but final assembly is done after customer orders are received.

1. 1
Supply Chain Management
Dr. RAVI SHANKAR
Associate Professor
SOM
SESSION 9: Supply Chain Integration

2. Dr. RAVI SHANKAR
Professor
Department of Management Studies
Indian Institute of Technology Delhi
Hauz Khas, New Delhi 110 016, India
Phone: +91-11-26596421 (O); 2659-1991(H); (0)-+91-9811033937 (m)
Fax: (+91)-(11) 26862620
Email: r.s.research@gmail.com
http://web.iitd.ac.in/~ravi1
SESSION#9: Supply Chain Integration (CFVG: 2012)
SUPPLY CHAIN INTEGRATION

3. 3
Supply Chain Strategies
Push-Based Supply Chain
Pull-Based Supply Chain
Push-Pull Supply Chain

4. 4
The Old Paradigm:
Push Strategies
Production decisions based on long-term
forecasts
Ordering decisions based on inventory &
forecasts
What are the problems with push strategies?
Inability to meet changing demand patterns
Obsolescence
The bullwhip effect:
Excessive inventory
Excessive production variability
Poor service levels

5. 5
Pull Systems
Production is based on data from the
final customer (POS data is critical)
Much more flexible system
Much more efficient system
JIT is a prime example of a pull system

6. 6
Benefits of Pull Systems
Decreased lead times
Lower inventory costs
Decrease in variability in production
Better service
Less space
More flexible system

7. 7
A Push/Pull View of Processes
Pull Process - Initiated in response to a customer
demand. Also known as make to order processes.
Push Process - Initiated in anticipation of a customer
demand. Also known as make to stock processes.
Obvious difference - in pull processes demand is
known; in push processes demand is forecasted

8. 8
A Push/Pull View of Processes
In all supply chains, some stages operate as push
processes and others as pull processes.
The push/pull boundary separates push processes
from pull processes.
This distinction important in supply chain design
issues. Goal is to increase number of pull processes.

9. 9
Comparison
LL Bean
Customer Order Cycle is
Pull
Replenishment,
Manufacturing and
Procurement are Push
based in forecasts and
subject to long lead times
Dell Computer
Customer Order and
Manufacturing are Pull
Processes
Procurement is a Push
Process based on forecasts
Distributors and
replenishment eliminated from
this supply chain
Dell’s suppliers operate in a
pull mode but their suppliers
(Tier 2) operate in a push
mode.

10. 10
Push and Pull Systems
What are the advantages of push
systems?
What are the advantages of pull
systems?
Is there a system that has the
advantages of both systems?

11. 11
A new Supply Chain Paradigm
A shift from a Push System...
Production decisions are based on
forecast
…to a Push-Pull System

12. 12
Push-Pull Supply Chains
Push-Pull Boundary
PUSH STRATEGY PULL STRATEGY
Low Uncertainty High Uncertainty
The Supply Chain Time Line
Customers
Suppliers

13. 13
A new Supply Chain Paradigm
A shift from a Push System...
Production decisions are based on forecast
…to a Push-Pull System
Initial portion of the supply chain is replenished
based on long-term forecasts
For example, parts inventory may be replenished
based on forecasts
Final supply chain stages based on actual
customer demand.
For example, assembly may based on actual orders.

14. 14
Consider Two PC Manufacturers:
Build to Stock
Forecast demand
Buys components
Assembles
computers
Observes demand
and meets demand if
possible.
A traditional push
system
Build to order
Forecast demand
Buys components
Observes demand
Assembles
computers
Meets demand
A push-pull system

15. 15
Push-Pull Strategies
The push-pull system takes advantage of the
rules of forecasting:
Forecasts are always wrong
The longer the forecast horizon the worst is the
forecast
Aggregate forecasts are more accurate
The Risk Pooling Concept
Delayed differentiation is another example
Consider Benetton sweater production

16. 16
What is the Best Strategy?
Pull Push
Pull
Push
I: Computer
II: Furniture
IV: Books/CDs III: Grocery
Demand
uncertainty
(C.V.)
Delivery cost
Unit price
L H
H
L
Economies of
Scale

17. 17
Selecting the Best SC Strategy
Higher demand uncertainty suggests pull
Higher importance of economies of scale
suggests push
High uncertainty important such as the computer
industry implies pull
Low uncertainty important such as groceries
implies push
Demand is stable
Transportation cost reduction is critical
Pull would not be appropriate here.

18. 18
Selecting the Best SC Strategy
Low uncertainty but low value of economies of
scale (high volume books and cd’s)
Either push strategies or push/pull strategies
might be most appropriate
High uncertainty and high value of economies
of scale
For example, the furniture industry
How can production be pull but delivery push?
Is this a “pull-push” system?

19. 19
Characteristics and Skills
Raw
Material Customers
PullPush
Low Uncertainty
Long Lead Times
Cost Minimization
Resource Allocation
High Uncertainty
Short Cycle Times
Service Level
Responsiveness

20. 20
Locating the Push-Pull Boundary
The push section:
Uncertainty is relatively low
Economies of scale important
Long lead times
Complex supply chain structures:
Thus
Management based on forecasts is appropriate
Focus is on cost minimization
Achieved by effective resource utilization – supply chain optimization
The pull section:
High uncertainty
Simple supply chain structure
Short lead times
Thus
Reacting to realized demand is important
Focus on service level
Flexible and responsive approaches

21. 21
Locating the Push-Pull Boundary
The push section requires:
Supply chain planning
Long term strategies
The pull section requires:
Order fulfillment processes
Customer relationship management
Buffer inventory at the boundaries:
The output of the tactical planning process
The input to the order fulfillment process.

22. 22
Benetton Manufacturing Process PostponementBenetton Manufacturing Process Postponement
Purchase Yarn
Dye Yarn
Finish Yarn
Knit Garment Parts
Join Parts
Old Sequence
Purchase Yarn
Knit Garment Parts
Join Parts
Dye Garment
Finish Garment
New Sequence
This process
is postponed

23. RM – 600 SKUs, 350 Suppliers
75% Domestic, 25% Imported
PM-300 SKUs, 140 Suppliers
5 Plants, 18 PC
Dealer(15000)
3000 SKUs
Depots (70 No)
70% volume
6 Regional
Distribution Centers
Export & Industrial
Consumers (2000)
Made to stock Made to order
Supply Chain at Asian Paints

24. 24
Postponement in Practice
Dealer Tinting System
In factory they make “Base/white" only
Raw base sent to the dealers
Customers choose their desired shades via
computer systems at the dealer end
Dealer mixes the desired base and the
colorants with help of the DTS
>2500 dealers have DTS

25. 25
Lean Agile
• Forecast at generic
level
• Economic batch
quantities
• Maximise
efficiencies
• Demand driven
• Localised
Configuration
• Maximise
effectivenessStrategic
Inventory
The de-coupling point

26. 26
Two key de-coupling points
Forecast Driven Order Driven
Less uncertainty due to
enrichment of undistorted data
Push Pull
Factory Assembler Finished goods
Stock
Retailer
Market sales
Information
de-coupling
point
Direct market sales information
Material
de-coupling
point
Source: Mason-Jones & Towill

27. 27
Driven
By
Demand
Driven
By
Forecast
Plants Distribution
Centres
Warehouses Depots

28. 28
Locating the Push-Pull
Boundary