Tuesday, 17 November 2015

The Push and Pull System in Supply Chain Operations

A common system that is used in the supply chain is the push and pull system. The push system needs the company to keep a certain stock level. The needs of the customer can be fulfilled immediately by the company having the right level of stock. This system has lots of advantages:
  • Inventories are controlled easier
  • Obtaining economies of scales
  • Reduces the risk of the customer choosing a different product due to lack of stock
The disadvantages include:
  • The company may overstock or under stock as the demand levels may change
  • The firm might have high inventory costs

The pull system is a production method. The order is placed and production begins. The advantage of the pull system is:
  • The inventory levels are minimal so the cost of inventory is reduced
The disadvantage is:
  • There is a high risk of being out of stock
Many companies use both the push and pull systems for production. Some components will be kept in the inventory, using the push system, and when the customers place a customised order the firm then uses the pull system. The combination of both systems is commonly seen in Dell and Rolls Royce.

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