WHAT IS PUSH AND PULL STRATEGY IN SUPPLY CHAIN

MANAGEMENT?
Every successful business relies heavily on efficient supply chain management to run its
everyday operations. Some of the most successful companies in the world like Amazon and
Walmart rely heavily on new and sophisticated techniques in supply chain logistics to run
their operations. Hence, this is a very active space which sees a lot of innovation in all the
aspects of the chain. Let’s take a look at the Push and Pull strategies in supply chain
management and see which approach works for which business.

Pull Supply Chain – Under pull supply chain, the process of manufacturing and supplying is
driven by actual customer demand. In this type of supply chain logistics, inventory is
acquired on a need-basis. The benefits of this type of planning include less wastage in the
case of lower demand. The problem, however, is that the company might not have enough
inventory to meet rising demands due to unforeseen factors. For example, an auto repair shop
that only orders parts that it needs. In this case, the business waits until it gets an order to
procure the parts required for the repair.

Push Supply Chain – Under push supply chain, the logistics are driven by long-term
projections of customer demand. For example, at the end of the summer season, clothing
brands start to manufacture more warm clothes. This type of planning becomes valuable to
companies as it helps plan them for events in the future and be prepared when winter comes.
This gives the companies meet their needs in time and also gives them time to figure out
other logistics like where to store the inventory.
Push and Pull Strategies in Practise
In real life, no businesses rely entirely on either push or pull logistics, but instead employ a
mixture of the two to make the best use of them. Modern-day supply chain operations are
very complex and consist of some steps from getting the raw materials to the delivery of the
final product to the end consumer. The process roughly consists of the following steps:
 Determining the availability of raw materials. Even before the product can begin to be
made it is important to plan where and how the raw materials can be acquired from cheaply.
 Processing the raw materials in a factory to yield the final products. This step varies
from company to company like food-based products, cloth-based product, etc.
 Then the finished product is taken to a storage facility or a distribution facility.
The packaged product is taken to a retail store or shipped directly to the customer as needed.

What Is Demand Forecasting?

Demand forecasting is the result of a predictive analysis to determine what demand will be at
a given point in the future. Forecasts are determined with complex algorithms that analyze
past trends, historic sales data, and potential events or changes that could be factors in the
future.
 How Does Demand Forecasting Apply to Supply Chains?
Multiple parts of any supply chain can benefit from demand forecasting. One example is
inventory, and specifically lean inventory. Warehouse costs can run high when goods and
materials are sitting on the warehouse floor. Lean inventory keeps the minimum amount of
that good or material in stock, without running the risk of having too little of it available.
With demand forecasting, third-party logistics providers (3PLs) can analyze past trends to
design an effective lean inventory model for the future. Multiple factors are taken into
account at any given moment, and the SCMS can adjust the minimum required inventory as
necessary.
Other parts of the supply chain that can benefit from demand forecasting include:

 Scheduling
 Staffing
 Distribution planning

Ways to Forecast Your Supply Chain

1.Seasonal Planning
Last year from November 1 to December 31, retail sales exceeded $850 billion. The huge
numbers retailers put up during the winter are no secret, so it should come as no surprise that
supply chain managers need to plan for this spike in buyer interest.
Seasonal demand is a trend that tends to stay similar from year to year. People are more
interested in buying swimsuits in the summer, and Christmas ornaments are in higher demand
in the winter. These trends, while obvious, can be difficult to nail down. Competitors know
when to plan for seasonal demand shifts, so your supply chain needs to have as specific of a
forecast as possible.

Because winter is predictably busy, demand forecasting can also be used to determine how
much extra staffing is needed and how to effectively distribute goods on time.

2.Buyer Trend Analysis

Everything goes in and out of style, and often without any warning. Buyer trends are difficult
to track, but doing so can make you tons of money. To meet the wavering demands of buyers,
your supply chain needs to be flexible enough to add huge amounts of an item in a short
period of time.

At the same time, being aware of buyer trends can save you from having static inventory and
keep the operating costs of your supply chain lower. Fortunately, reaching the appropriate
level of inventory is possible with logistics.
3.Intuitive Planning
Sometimes, when you feel like something might affect your supply chain, the best option is
to trust your gut. As it turns out, trusting your gut often draws from your experiences, so
seasoned supply chain professionals can find potential shifts in consumer demand just by
feeling them out. This is called intuitive planning.
Intuitive planning takes into account everything your SCMS can’t. For example, an e-
commerce company could have plans to purchase a competitor in the coming months. Of
course, your software isn’t aware of this plan until you let it know. But conventional wisdom
tells us that this will bring more customers, meaning more buyer demand.

Intuitive planning isn’t nearly as technical as the other demand forecasting models, but it can
be just as important.

Advantages of Demand Forecasting

Reduced Inventory Costs

Static inventory, or inventory that isn’t moving out of your warehouse, eats up space and can
drive up costs. In fact, holding onto inventory for 12 months could increase the cost of that
item by as much as 60% thanks to taxes, insurance costs, and warehousing costs.
The less time an item spends in a warehouse, the better.

Better Supplier Relationships

3PLs work closely with your suppliers to ensure that goods and materials are being sent in a
timely manner. Purchasing managers can use demand forecasting information to show
suppliers how much more (or less) of that good or material will be needed for a period of
time. This level of transparency is great for business and keeps suppliers happy.

Improved Resource Planning and Scalability

Every company wants to think of itself as scalable, but without demand forecasting,
scalability can be tough. When your supply chain takes demand forecasting into account,
scalability is a natural outcome. These supply chains are designed to be flexible and scale up
or down on a moment’s notice.
Increased Customer Satisfaction
When talking about demand forecasting, it can be easy to forget about the only factor that
really affects demand: customers. Customers know what they want, and the sooner they can
get it, the better.

Demand forecasting keeps your warehouses ready for changes in demand, so when a sudden
spike in interest comes, you’ll be there to provide a quick, reliable solution for customers.
This makes customers very happy, and it can lead to higher customer retention, referrals, and
valuable online reviews.

Better Performance
Efficiency is at the heart of every supply chain, and demand forecasting increases efficiency.
Every step of the supply chain — from staffing the right number of warehouse workers to
making sure too many items aren’t clogging a warehouse — benefits from demand
forecasting.