As supply chain and operations professionals, we understand the concept of the Push-Pull boundary. In my opinion, it has become more important and relevant than ever, given the difficult and challenging times that we are currently in, owing to the pandemic.
It is quite evident that the boundary has been moving closer to the customer/consumer particularly in the industries/sectors that fall under the “Essentials” category. The key industries include – FMCG, CPG, Food, Pharmaceuticals, Health Care, and Hygiene.
Companies in this space have been working round the clock to ensure the availability of supplies to cater to growing demand. What began as a supply disruption in the early stages of the pandemic in March has now moved into a phase of demand disruption as well.
Therefore, product availability coupled with speed and service has assumed greater significance. If we were to bring the increasing role and importance of e-commerce into this equation, it becomes clear that there has been a notable shift in demand for online channels due to the closure of various physical distribution channels/formats.
Key factors affecting Push-Pull Boundary
Let’s take a look at some of the key factors affecting this boundary:
- Product Variety and Life-cycle
- Product Range
- Number of SKUs
- Frequency of New Launches
Type of Distribution & Fulfillment Model
- Make to Stock/Make to Order/Engineer to Order/Assemble to Order
- Market Dynamics (Demand Profile and Characteristics)
- Degree of Standardization
- Market Tolerance
- Internal as well as External Process Lead Times
Operations Excellence Philosophies & Tools
In order to effectively design and implement a push-pull-based supply, manufacturing, storage, and distribution system, it is recommended to deploy the time-tested tools shown in the graphic below (Source: Sunil Bharadwaj – Journal of Business Forecasting | Summer 2020 Article).
These tools have been used in various combinations across the end-to-end supply chain to fulfill the key objectives of Superior Customer Service, Increased Throughput, Waste Reduction, Constraint Management, and Shorter Lead Times. In my opinion, a purely Push or a purely Pull model does not exist. It is a mix of both.
The Role of Forecasting
A topic of increasing debate these days is the role of forecasting in the present business scenario. Forecasting is essential for long-range capacity and resource planning. It is necessary at an aggregate level.
However, at more granular levels, consumption trends and point of sale inputs could be better drivers for distribution planning.
Also, traditional time series forecasts may not be effective given the impact of Covid-19 on demand patterns. There are experts who propagate the benefits of Probabilistic Forecasting over Statistical Forecasting.
A new concept that I recently came across is Agile Forecasting. It has been eloquently explained by Dr. Rakesh Sinha in his recent article (https://www.linkedin.com/pulse/agile-forecasting-dr-rakesh-sinha/)
The Demand was Driven Institute focuses on the methodology and approach related to DDMRP (Demand Driven Material Requirements Planning). However, the efficacy of any methodology would be proven only if it is piloted or tested in a real business environment to enable us to understand the outcomes and then learn from them.
But one trend that has clearly emerged is the need for scenario-based planning coupled with various forecasting approaches and the re-calibration and fine-tuning of forecasting and planning parameters to achieve higher fill rates and product availability.
If Buffers are used, then they need to be placed at the right points across the supply chain and in the right quantities (sizing). This would enable suitable de-coupling and control/reduce demand shocks.
Push-Pull and SCOR Model
The push-pull tools could be overlapped with the steps of the SCOR model (Supply Chain Operations Reference Model) namely: Plan, Source, Make Deliver, and Return. The “Enable” step could also be included.
However, the implementation would vary depending on the type of industry, product, service, demand characteristics, and customer tolerance.
In light of changing demand patterns, supply and demand disruptions, and omnichannel distribution models, it becomes imperative to revisit the Push-Pull strategies and use the relevant operations excellence tools.
These initiatives take time and entail a high level of partner collaboration (both within and outside the organization) knowledge transfer, training, change management, and periodic audits to ensure sustenance. However, this is easier said than done. But it is worthwhile given the fact that organizations learn and grow through these experiences. Last but not the least, risk management systems and metrics need to be integrated with existing performance management systems so that the systemic and supply chain shocks could be controlled or minimized to a certain extent.
A periodic mapping of existing supply chain organizations and structures with reference to the “Push-Pull Systems” is necessary to stay in tune with the ever-changing, dynamic, and demanding customer/consumer needs and expectations.