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8/10/2019 06 Push Pull Strategies
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Fundamentals of Industrial Plants
Supply chain strategy
Instructor:
Carlo Rafele
Dept.
of
Production
and
Management
Engineering
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2
1.MainrelationshipswithinSCM
2. Operational
links
between
actors
3. Contractsandbenefitsforactors
Contents
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3
Comprising different ways of collaboration in
the SCM
Knowing right application of relationships
Understanding the main logistic contracts
and applications
Lecture
Goals
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A New Supply Chain Paradigm A shift from a Push System
Production decisions are based on forecast
to a Push-Pull System
Initial portion of supply chain is replenished
based on long-term forecasts For example, parts inventory may be replenished
based on long term forecasts
Final supply chain stages based on actualcustomer demand
For example, assembly may be based on actualorders
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Push-Pull Supply Chains
Supply Chain Time Line
PUSH STRATEGY PULL STRATEGY
Low uncertainty High uncertainty
Suppliers Customers
Push-Pull Boundary
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Consider Two PC Manufacturers
Build to stock
Forecast demand Buys components
Assembles computers
Observes demand andmeets demand if
possible
A traditional PushSystem
Build to order
Forecast demand Buys components
Observes demand
Meets demand Assembles computers
A Push-Pull System
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Characteristics and Skills
Raw
materialCustomers
Low uncertainty
Long lead times
Cost minimization
Resource allocation
High uncertainty
Short cycle times
Service level
Responsiveness
Push-Pull Boundary
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Locating the Push-Pull Boundary
The Push section requires: Supply chain planning
Long term strategies
The Pull section requires: Order fulfillment processes
Customer relationship management
Buffer inventory at the boundary: The output of the tactical planning process
The input to the order fulfillment process
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Selecting the Best SC Strategy Higher demand uncertainty suggests Pull
Higher importance of economies of scale (EOS)suggests Push
High uncertainty and EOS not important: such
as the computer industry, implies Pull Low uncertainty and EOS important: such as
groceries, implies Push
Demand is stable Transportation cost reduction is critical
Pull would not be appropriate here.
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Selecting the Best SC Strategy Low certainty but low value of EOS (high volume
books and CDs) Either Push strategies or Push-Pull strategies might
be most appropriate
High uncertainty and high value of EOS For example, the furniture industry
How can production be Pull but delivery Push?
Is this a Pull-Push system?
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What Is the Best Strategy?
Pull
Pull
Push
Push
Demand
Uncertainty
Delivery Cost
Unit Price
Economies of Scale
H
H
L
L
I II
III IV1
2
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Choosing Between Push/Pull Strategies
Pull Push
Pull
Push
Economies of ScaleLow High
Low
High
DemandU
ncertainty
Industries where:
Customization is High Demand is uncertain Scale economies are Low
Computerequipment
Industries where:
Standard processes are thenorm
Demand is stable Scale economies are High
Grocery,Beverages
Industries where:
Uncertainty is low Low economies of scale Push-pull supply chain
Books, CDs
Industries where:
Demand is uncertain Scale economies are High intransportation Low economies of scale inproduction
Furniture
Where do the followingindustries fit in thismodel:
Automobile?
Aircraft?
Fashion?
Petroleum refining?
Pharmaceuticals?
Biotechnology?
Medical Devices?
Source: Simchi-Levi
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Different Location of the Push-Pull
Boundary
Raw
material Customers
Furniture Dell GMAmazonTraditional
retailers
Production Assembly ManufacturerDC
DistributorDC
Store
IKEA
PUSH PULL
Source: Tatjana Bolic Supply Chain Management
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Different Positions for the
Decoupling Point
Source: F.Dallari, Manuale di logistica MPH
PHASES OF THE MANUFACTURING LOGISTICS SYSTEM
SYSTEMEngineering Purchasing Manufacturing Assembling Delivery
Product
Building
Aircraft
Furniture
Car
Fridge
Light bulb
Forecasting not required
Forecasting not required
Forecasting about purchased materials
Customized on
demand
Componentscustomized on
demand
Catalogs
Customizationon standard
modules
Mass
production
Consumergoods
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