Inventory Management
1. What is push-pull system of inventory?
"Push type" means “Make to Stock” in which the production is not based on actual demand. "Pull type" means “Make To Order” in which the production is based on actual demand.
The Push-type method is based on demand forecast. Pull-type supply chain management is based on the demand side such as Just-in-Time (JIT) and CRP (Continuous Replenishment Program) or actual demand assigned to later processes.
Push System
The push system of inventory control involves forecasting inventory needs to meet customer demand. Companies must predict which products customers will purchase along with determining what quantity of goods will be purchased. The company will in turn produce enough products to meet the forecast demand and sell, or push, the goods to the consumer.
Advantages : The company is fairly assured it will have enough product on hand to complete customer orders. This prevents the inability to meet customer demand for the product.
Disadvantages : If too much product is left in inventory, it increases the company's costs for storing these goods.
An example of a push system is Materials Requirements Planning, or MRP. MRP combines the calculations for financial, operations and logistics planning. It is a computer-based information system which controls scheduling and ordering. Its purpose is to make sure raw goods and materials needed for production are available when they are needed.
Pull System
The pull inventory control system begins with a customer's order. With this strategy, companies only make enough products to fulfil customer's orders.
Advantages : There will be no excess of inventory that needs to be stored, thus reducing inventory levels and the cost of carrying and storing goods.
Disadvantages : It is highly possible to run into ordering dilemmas, such as a supplier not being able to get a shipment out on time. This leaves the company unable to fulfil the order and contributes to customer
"Push type" means “Make to Stock” in which the production is not based on actual demand. "Pull type" means “Make To Order” in which the production is based on actual demand.
The Push-type method is based on demand forecast. Pull-type supply chain management is based on the demand side such as Just-in-Time (JIT) and CRP (Continuous Replenishment Program) or actual demand assigned to later processes.
Push System
The push system of inventory control involves forecasting inventory needs to meet customer demand. Companies must predict which products customers will purchase along with determining what quantity of goods will be purchased. The company will in turn produce enough products to meet the forecast demand and sell, or push, the goods to the consumer.
Advantages : The company is fairly assured it will have enough product on hand to complete customer orders. This prevents the inability to meet customer demand for the product.
Disadvantages : If too much product is left in inventory, it increases the company's costs for storing these goods.
An example of a push system is Materials Requirements Planning, or MRP. MRP combines the calculations for financial, operations and logistics planning. It is a computer-based information system which controls scheduling and ordering. Its purpose is to make sure raw goods and materials needed for production are available when they are needed.
Pull System
The pull inventory control system begins with a customer's order. With this strategy, companies only make enough products to fulfil customer's orders.
Advantages : There will be no excess of inventory that needs to be stored, thus reducing inventory levels and the cost of carrying and storing goods.
Disadvantages : It is highly possible to run into ordering dilemmas, such as a supplier not being able to get a shipment out on time. This leaves the company unable to fulfil the order and contributes to customer