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Resources  /  Blog  /  Push vs. Pull Supply Chain: What It Means for Strategic Sourcing During COVID-19
Sourcing Education

Push vs. Pull Supply Chain: What It Means for Strategic Sourcing During COVID-19

June 24, 2020
Supply chains have long relied on endless mounds of historical data to predict tomorrow’s seasonal trends. With disruption of global supply chains due to externalities like COVID-19, we have seen that our supply chains are fragile and easily disturbed. Consumers in all markets have felt the impact of these sudden, rapid shifts. As strategic sourcing professionals, knowing which supply chain strategy your organization adheres to is critical to defining your procurement department’s best practices.

 

What is a Push-Model Supply Chain Strategy?

A Push-model Supply Chain is one where projected demand determines what enters the process. For example, beach umbrellas or beach chairs are pushed to retailers a month before the summer season starts in anticipation of a spike in demand, relative to the winter and spring season.

Components of a Push-Model Supply Chain

      • Companies have predictability in their supply chains

      • Planning production is feasible to meet their anticipated needs

      • It gives retailers time to prepare a place to store inbound inventory

      • This strategy has clearly forecastable demand

      • Requires large inventory on hand or committed storage space

      • Lacks flexibility to meet changing demand

What is a Pull-Model Supply Chain Strategy?

A Pull-model Supply Chain strategy involves inventory management that minimizes stock on hand, focusing on relatively rapid responses to demand fluctuations.  One example of an industry that operates under this strategy is a direct custom computer retailer that waits until and order is received to build the custom computer to spec for the consumer.

Components of a Pull-Model Supply Chain

      • Products enter the Supply Chain when customer demand is validated

      • Companies avoid the cost of carrying inventory that may not sell

      • Risk is created if supply cannot meet demand

      • Demand drives production and distribution

      • Rapid response exists to a specific order/demand

      • No ‘back up’ inventory carried on hand by the buying organization

Real World Push/Pull Supply Chain Dilemmas

Let’s think of push and pull supply chain in terms of a modern-day shopper during the quarantine. As a busy working mom in quarantine juggling homeschooling, work, and sanity, I had two options: to stockpile or to keep just enough on hand to fill my family’s needs. The former meant filling my refrigerator and pantry shelves with items I may need; the latter meant exposing myself to potential risks by frequently leaving home in response to keeping smaller quantities stocked. As neither of these options were appealing (I’m a neat freak and maybe a little bit of a germaphobe), I looked for ways to optimize my personal supply chain by breaking my regular routine of small-batch Trader Joe’s runs with a variety of meat and produce delivery services, virtual shoppers, and food shopping on my own.

The result was a semblance of normalcy, adequate supply, and limited food waste. I essentially had strategically optimized the push/pull supply chain balance of my pantry without even knowing it. We see this trend emerging beyond the home and into the workplace. We predict a mixed push and pull model in a post-COVID environment to guarantee you can meet the market demand rapidly while mitigating the risks associated with significant inventory storage.

Here are some tools I used:

No Waste – Easily track, organize, and manage the food in your home.

Imperfect Foods – Grocery items that help reduce food waste – delivered for up to 30% less than national supermarket chains.

InstaCart – Groceries delivered to your door or ready for pick-up.

How Strategic Sourcing Plans for Uncertainty

Seasonality peaks, lifecycle management, and short productions, when paired with high-demand volatility, global supply disruptions, will make people globally rethink their supply and demand needs. New technologies like sourcing enablement, which use artificial intelligence to power data-driven decisions, allows supply chain managers and strategic sourcing teams to adapt to an environment where the ability to adequately balance supply and demand becomes increasingly ambiguous.

“It starts with smart sourcing.”

Tools that synchronize data and assess replenishment needs, demand sensors, and inventory management systems that manage the processing of orders will all need to connect to form a network that fortifies operations that maintain a high level of customer service. Moreover, highly developed and systematic supply chains will ultimately allow the organization to respond quickly to build smarter models with higher degrees of customer success. Where does this all begin? It starts with intelligent sourcing.

Enabling buyers and suppliers to collaborate in real-time in a centralized location streamlines the strategic sourcing process. Significant downstream improvements and time-saving measures that allow for procurement managers and buying organizations to deploy nimble adaptations to meet uncertain market conditions are just the tip of the iceberg for organizations that adopt best practices with sourcing enablement. When volatility rises in the supply chain, strategic sourcing professionals need to lean on the relationships they’ve built with their strategic supplier partners to whether the uncertainty.

Sourcing enablement tools remove the needless friction from the sourcing process on both the buyer and seller side, resulting in partnerships that make an impact beyond bottom-line savings.

To see if sourcing enablement is right for your push or pull supply chain strategies, get started now.

 

FAQs

Push vs Pull

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    What is the difference between a Push-Model and a Pull-Model Supply Chain?

    A Push-Model Supply Chain relies on projected demand to determine what enters the process, while a Pull-Model Supply Chain responds to validated customer demand, minimizing stock on hand.

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    What are the key components of a Push-Model Supply Chain?

    Companies enjoy predictability in their supply chains, plan production based on anticipated needs, and require large inventory or committed storage space.

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    What are the key components of a Pull-Model Supply Chain?

    Products enter the supply chain when customer demand is confirmed, minimizing the cost of carrying inventory. However, risk is created if supply cannot meet demand.

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    How do Push and Pull Supply Chain strategies relate to real-world scenarios?

    Consider a modern-day shopper during quarantine: the decision to stockpile (Push) versus keeping minimal supplies (Pull) reflects the balance between convenience and risk.

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    What tools can optimize the balance between Push and Pull strategies in personal supply chains?

    Tools like “No Waste,” “Imperfect Foods,” and “InstaCart” help optimize inventory management and reduce waste.

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    How does Strategic Sourcing plan for uncertainty in supply chains, particularly during events like COVID-19?

    Strategic sourcing professionals leverage technologies like sourcing enablement, powered by AI, to make data-driven decisions and adapt to volatile market conditions.

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    How do sourcing enablement tools benefit supply chain operations?

    Sourcing enablement tools facilitate real-time collaboration between buyers and suppliers, streamlining the sourcing process and enabling nimble adaptations to uncertain market conditions.

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    What are the downstream benefits of adopting sourcing enablement best practices?

    Beyond cost savings, sourcing enablement fosters partnerships between buyers and suppliers that contribute to higher customer success rates and operational efficiency.

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    How can organizations determine if sourcing enablement is suitable for their supply chain strategies?

    Organizations can evaluate the suitability of sourcing enablement by assessing their readiness to streamline sourcing processes and enhance collaboration with suppliers.