Push / Pull Model

Supply chain processes fall into one of two categories depending on the timing of their execution relative to customer demand, which are as below:

• Pull Model
In pull model, execution is initiated in response to a customer order. Production and distribution are coordinated based actual customer demand rather than forecasted demand. The firm does not hold any inventory and only responds to specific orders. Being reactive in nature, pull model results into slower response. The pull model is often difficult to implement where lead times are long and become impractical to react based on actual demand. Additionally, economy of scale are difficult to achieve for such cases. It applied to that portion of the supply chain where demand uncertainty are high. 

• Push Model
In push model, execution is initiated in anticipation of customer orders. Production and distribution decisions are coordinated based on long-term forecasts. Manufacturer demand forecasts based on orders received from the retailer’s warehouses. It is speculative as the execution is driven based on forecasted demand which can inherently be different from the actual demand. In push model, the inventory are built and result into faster response to the customer. However, push model can results into longer reaction time to changing demand patterns in the market. This can cause obsolescence of supply chain inventory as demand for certain products disappears. Furthermore, the variability of orders received much larger than the variability in customer demand (i.e. bullwhip effect). The push model is applied to that portion of the supply chain where demand uncertainty is relatively small.

The combination of push and pull model are used in a Supply Chain to achieve high performance. It is useful in considering strategic decisions relating to supply chain design and processes. The push-pull boundary separates push processes from pull processes. But the important question is, where to draw the Push and Pull boundary? Or, shifting the boundary?

Let us take an example of Subway. Components (i.e. breads, salads etc.) are made and kept as inventory i.e. push model, whereas final products (i.e. sandwich or subs)are delivered based on pull model.

As push-pull boundary shifts from customer-end to the supplier-end, the response time decreases but higher customization is possible. In reality, middle ground need to be found.