What is a Push System vs a Pull System?
In a push-based supply chain, products are pushed through the channel from production up to the retailers. This means that production happens based on demand forecast.
In a pull-based supply chain, procurement, production, and distribution are demand-driven rather than based on predictions. Goods are produced in the amount and time needed.
Limitations to WIP
If a company explicitly limits its work in progress (WIP), then they are using a pull system. If not, they are using a push system.
What this means is that a pull system starts production only if the WIP limit has not been reached. If there is space available for more WIP to happen, a new order can be released. However, in a pull system, all of the allowed WIP would have already been in the queue.
Differences between Push vs Pull
Push System – No dependency on Demand nor limits on WIP
A company using the push system will forecast demand and employ the Material Requirements Planning (MRP) process to produce goods and services ahead of time. This is related to the Just-in-Case concept.
This forecast may not always be accurate and will require inventory stockpiling, but it remains a useful strategy for products that tend to have a lot of work in progress (WIP) or long lead times.
The push system is particularly useful for products with low demand uncertainty or with high importance of economies of scale in reducing costs.
The Material Requirements Planning (MRP) mentioned above is a push system since there are no prior WIP limitations. Goods are produced under the master production schedule with no regard to the current status.
Pull System – Dependent on Demand and limitations to WIP
The Pull System is a lean manufacturing method that uses the Just-in-Time strategy of not producing goods until an order is received. Instead of forecasting demand, the pull system produces ‘as needed’.
This is particularly useful for companies that deal with high demand uncertainty, low product mix, and low importance of economies of scale.
The classic Kanban is a pull system since there are a fixed number of cards available, and this limits the WIP.
Hybrid Push-pull Strategy
As with Just-in-Time vs Just-in-Case, Push vs Pull is not black and white. Most companies have some sort of a hybrid of the two, on a spectrum between the two ends.
The push-pull strategy is usually suggested for products with high demand uncertainty and high importance of economies of scale.
Dell pre-orders and stocks up on raw materials and components. However, from this point on, they do no produce their computers until an order is actually placed. They initially “push”, but then switch to “pull’’ in the production and assembly process.