How to implement a push and pull strategy in a supply chain

One of the most important strategies that business managers need to master is the push and pull strategy in the supply chain . This article 1C Vietnam will help businesses better understand how to implement these two strategies, thereby optimizing business operations, minimizing costs and improving customer satisfaction. Let's explore the benefits and challenges of applying push and pull strategies in your business's supply chain .

1. Overview of push and pull strategies in the supply chain

Understanding and flexibly applying push and pull strategies in the supply chain not only helps businesses optimize warehouses and minimize costs, but also enhances the ability to respond to market demand quickly. Exactly. The information below will explain an overview of push and pull strategies, as well as the important roles they play in the modern supply chain.

1.1 What is the push strategy in the supply chain?

Push strategy is a method of producing goods based on customer demand forecasts and long-term production plans. However, these forecasts are often not completely accurate and have a high level of risk. In a push supply chain, inventory is often high because products must be available to quickly respond to any changes in consumer behavior. This leads to high production and transportation costs.

The push strategy has some advantages and disadvantages as follows:

Specific examples of push strategies in the supply chain are often found in companies manufacturing household appliances based on long-term market demand forecasts. These companies will mass-produce products such as electric stoves, washing machines and refrigerators according to a pre-determined production schedule. These products are then widely distributed to retail stores and supermarkets nationwide without waiting for specific orders from customers before production.

1.2 What is the pull strategy in the supply chain?

Pull strategy is a method of producing goods based on specific orders from customers instead of predicting demand in advance. This ensures that customer demand is clearly defined, with little variation, resulting in low or even no inventory levels.

Pull strategies also help mitigate the bullwhip effect, a phenomenon in the supply chain where inaccurate demand forecasts cause large and unnecessary fluctuations in inventory and production processes.

Below are some advantages and disadvantages of the pull strategy in the supply chain

An example of a pull strategy in a supply chain is the production of automobiles to specific customer orders. Instead of mass production and storage, automakers only begin the production process when an order is received from a customer, ensuring that each vehicle is customized to individual requirements.

1.3 Push and pull strategies in the supply chain

In the supply chain, actual demand drives the entire production process of the pull strategy, while the push strategy is based on the business's forecast of market demand. To achieve optimal efficiency, businesses often combine both of these strategies, using the advantages of each method to coordinate production and distribution activities.

• The Push/Pull system works as follows: When the manufacturer receives an order, the order will be immediately transferred to the factory or warehouse for preparation. The inventory is then delivered to the distributor periodically.
• The Pull/Push system allows products to be transferred to the warehouse before the business receives the order. This system has many levels. Depending on each level, products can appear in many business stages. This often happens when goods are imported at the same time.

For example, businesses may choose to store products at distribution centers and only deliver products to stores when orders are received from customers. This helps ensure that products are available to meet customer needs quickly and efficiently.

2. The importance of pull and push strategies in the supply chain

Push and pull strategies play a key role in supply chain management, helping businesses use resources effectively, promote lean production and ensure products are delivered on time. Thanks to that, businesses can minimize waiting time and waste, while quickly and accurately responding to customer needs.

3. Difference between pull and push strategies

Each push and pull strategy in the supply chain has a different approach and application in managing production, inventory and product distribution. To choose the most suitable method, businesses need to understand the basic difference between these two strategies.

Conclusion: Pull strategies provide greater flexibility and responsiveness to customer needs, while push strategies can optimize production processes and minimize inventory. The choice between these two strategies often depends on the industry, the specific product type, and the unique requirements of the supply chain.

4. How to implement an effective push and pull strategy

After understanding Push and Pull strategies in supply chains, it is important to study how to implement these strategies in practice. Below is the suggested procedure:

• The first is to determine the availability of raw materials, an important factor that businesses need to focus on to plan their supply and cost-effective procurement methods before manufacturing the product.
• This is followed by the processing of raw materials in the manufacturing plant, to create the final product. This process may vary depending on the product type.
• Finally, the finished product is brought to retail stores or shipped directly to customers upon request.

These are the basic steps in the supply chain that most businesses around the world apply. Managers can use push and pull strategies to optimize production processes and meet market demand. Currently.

5. Some notes when applying push-pull strategy in the supply chain

Push and pull strategies in the supply chain play an important role in optimizing the process of managing an enterprise's production and business activities. To apply these strategies effectively, businesses need to be flexible in their use to maximize efficiency and make good use of available resources. Below are some important notes.

1 - Use the Push strategy

• Applicable when businesses have the ability to accurately predict customer needs and want to react quickly.
• Suitable for products with long life cycles, low fluctuations and predictable demand.
• Ideal when businesses want to take advantage of production scale to reduce product unit costs.

2 - Use the Pull strategy

• Applicable when customer needs frequently change and are difficult to predict.
• Suitable for products with short life cycles, many fluctuations and unpredictable demand.
• Best when businesses want to focus on meeting the specific needs of each customer, creating flexibility in production and transportation of goods.

3 - Use a Combination of Pull and Push strategies

• When a business wants to combine the advantages of both Push and Pull strategies to balance business efficiency and the ability to meet customer needs.
• As businesses seek to enhance competitiveness, minimize risk and optimize supply chain management.
• When businesses need to flexibly adjust production and transportation based on actual data and customer demand forecasts.

6. Apply technology in implementing push-pull strategy

Technology plays an important role in supporting and optimizing the supply chain management process. Below are some typical technologies that help support the push-pull strategy:

• Warehouse Management System (WMS - Warehouse Management System): WMS helps businesses track and manage inventory effectively, including activities such as warehousing, warehousing, inventory and logistics coordination. transfer.
• Supply Chain Management System (SCM - Supply Chain Management): SCM supports businesses in managing the entire supply chain process, from demand forecasting, production planning, to goods transportation and distribute products to customers.
• Artificial intelligence (AI) and machine learning: AI and machine learning help businesses analyze big data from many different sources, provide accurate forecasts of market demand and optimize processes Supply chain management with appropriate suggestions and recommendations.

If businesses are looking for a comprehensive supply chain management solution, they can refer to 1C Vietnam's 1C:ERP solution, which allows the integration of many supporting technologies at the same time and customization accordingly. with actual usage needs.

• 1C:ERP allows businesses to track inventory in real time. This helps the sales team track the quantity, value and status of inventory, thereby knowing the remaining quantity, total inventory value and products that are nearly out of stock.
• 1C:ERP allows businesses to track the warehouse import and export history of each product. Detailed information such as import date, export date, quantity, storage location and other related details are all stored on a unified platform, making it easy to access and report.

The above article has provided useful information about push and pull strategies in supply chains in supply chain management, exploring the advantages and disadvantages of each strategy as well as how to implement it and important notes. In today's technological era, businesses should apply effective solutions to help optimize pull strategies in the production process such as 1C:ERP to meet specific customer needs and minimize residual risks. warehouse. If you have any questions about this solution, please contact 1C Vietnam for support.