Push–pull strategy explained

The business terms push and pull originated in logistics and supply chain management,[1] but are also widely used in marketing[2] [3] and in the hotel distribution business.

Walmart is an example of a company that uses the push vs. pull strategy.

Supply-chain management

See main article: Supply chain management.

Complete definition

There are several definitions on the distinction between push and pull strategies. Liberopoulos (2013) identifies three such definitions:

  1. A pull system initiates production as a reaction to present demand, while a push system initiates production in anticipation of future demand.
  2. In a pull system, production is triggered by actual demands for finished products, while in a push system, production is initiated independently of demands.
  3. A pull system is one that explicitly limits the amount of WIP (works in progress) that can be in the system, while a push system has no explicit limit on the amount of WIP that can be in the system.

Other definitions are:

Information flow

With a push-based supply chain, products are pushed through the channel, from the production side up to the retailer. The manufacturer sets production at a level in accord with historical ordering patterns from retailers. It takes longer for a push-based supply chain to respond to changes in demand, which can result in overstocking or bottlenecks and delays (the bullwhip effect), unacceptable service levels and product obsolescence.

In a pull-based supply chain, procurement, production and distribution are demand-driven rather than to forecast. However, a pull strategy does not always require make to order production. Toyota Motors Manufacturing is frequently used as an example of pull production, yet do not typically produce to order. They follow the "supermarket model" where limited inventory is kept on hand and is replenished as it is consumed. In Toyota's case, Kanban cards are used to signal the need to replenish inventory.

A supply chain is almost always a combination of both push and pull, where the interface between the push-based stages and the pull-based stages is sometimes known as the push–pull boundary.[5] However, because of the subtle difference between pull production and make-to-order production, a more accurate name for this may be the customer order decoupling point. An example of this is Dell's build to order supply chain. Inventory levels of individual components are determined by forecasting general demand, but final assembly is in response to a specific customer request. The decoupling point would then be at the beginning of the assembly line.

In a marketing pull system, the consumer requests the product and "pulls" it through the delivery channel. An example of this is the car manufacturing company Ford Australia. Ford Australia only produces cars when they have been ordered by customers.

Use of pull, push, and hybrid push-pull strategy

Harrison summarized when to use each one of the three supply chain strategies:

Examples in push and pull

Hopp and Spearman consider some of the most common systems found in industry and the literature and classify them as either push or pull

Liberopoulos (2013) also classifies common systems according to different definitions on the distinction between push and pull.

Marketing

An advertising push strategy refers to a situation when a vendor advertises its product to gain audience awareness, while the pull strategy implies the aims to reach audiences which have shown existing interest in the product or information about it.[8] The difference between "push" and "pull" marketing can also be identified by the manner in which the company approaches the lead. If, for example, the company were to send a sales brochure, that would be considered pushing the opportunity toward the lead. If, instead, the company provided a subject matter expert as a speaker for an industry event attended by targeted leads, that could be one tactic used as part of a strategy to pull in a lead by encouraging that lead to seek out the expert in a moment of need for that expertise.

Hotel distribution

The online world has brought this pull–push decision to the hotel distribution business.

See also

Notes and References

  1. Book: Dictionary of International Trade – Handbook of the Global Trade Community . Edward G. Hinkelman & Sibylla Putzi . World Trade Press . 2005 . 978-1-885073-72-3 .
  2. Book: Peter, J. Paul . A Preface to Marketing Management . James H. Donnelly . 2002 . McGraw-Hill Professional . 978-0-07-246658-4 . 132 .
  3. Book: Dowling, Grahame Robert . The Art and Science of Marketing . 2004 . Oxford University Press . 978-0-19-926961-7 . 266 . registration .
  4. J.. Ashayeri. R.P.. Kampstra. Demand Driven Distribution: The Logistical Challenges and Opportunities. 2005. Department of Econometrics and Operations Research Tilburg University.
  5. Book: The Practice of Supply Chain Management . Terry P. Harrison, Hau L. Lee and John J. Neale . Springer . 2003 . 978-0-387-24099-2 . registration .
  6. Liberopoulos. George. Dallery. Yves. 2002. Base stock versus WIP cap in single-stage make-to-stock production–inventory systems. IIE Transactions. 34. 7. 627–636. 10.1023/A:1014503725395. 59469286.
  7. Hopp. Wallace J.. Spearman. Mark L.. To pull or not to pull: what is the question?. Manufacturing & Service Operations Management. 6. 2. 133–148. 10.1287/msom.1030.0028. 2004. free.
  8. Hosbond. Jens Henrik. Skov. Mikael B.. 15 November 2007. Micro mobility marketing: Two cases on location-based supermarket shopping trolleys. Journal of Targeting, Measurement and Analysis for Marketing. 16. 68–77. 10.1057/palgrave.jt.5750058. Palgrave Macmillan Ltd. free.