The Changing Dynamics of Pull and Push Theory in Supply Systems

Using Manufacturing and Retail Industries as Case Analysis

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Times are changing with lots of redundancy within the corporate culture of supply chain systems, making it very difficult to capture added value of optimization in a best in class manner, in my over 15 years experience as a supply consultant by rising through the ranks understand the flexibility manufacturing and distribution firms plays to mitigate the overall risk. Manufacturing firms should have a robust material requirement platform that should drive clean information to all supplier bases, and identify good aggregate data about the final deliverable.

I do notice over the years that some firms in the Asian region do have a good predictive system to manage and monitor processes like this to minimize risk. Systems of push and pull is more mature in some industries than others; the maturity level of supply chain systems is dependent on the performance of the operation of the organization. The push strategy if not properly implemented by the manufacturer will translate to a cost center, because the deliveries of the product to distributors or wholesale locations does not transform to cash since some of the contract terms with the distributors are  not based  on pre-paid but final sale translation reconciliation.

Organizations should recognize the need to improve their systems by adopting great internal stakeholders first hand information that can validate the integrity of the data. The driver of the information should be based on consumer behavior if we are concentrating on food manufacturing organization, as it takes a very short duration for food to start decomposing, thereby creating loss for the business owner. Critical visible information is very much required in driving the excellent and resilient supply chain systems. It is best to understand that a good supply enabler should have the requisite element to drive all parts of the value chain from the front end to the back end. A responsive supply chain system should have a better structure to analyze data and manage all the critical element of the value chain in real time.

The organizations operating in Asia-Pacific countries are fast embracing the agile form of supply chain systems that are scalable and very responsive to not just trigger effective front end planning but also develop back end capacity planning, and have a strategic approach of managing the entire supply chain system. It is very clear that firms that have a good pull system will definitely have great supply algorithm through a best in class incremental process improvement execution.

An excellent supply chain system that should have a good pull and push strategy should justify the cost of spending a good part of the information technology budget to establish such infrastructure. The chief technology officer or chief operating officer of the corporation should normally become the project sponsor of such capital projects that will enable transformation in the supply chain organization.

The leadership of most North American organizations are becoming customer centric, which will involve an organization understanding how to create value that is tangible, making supply chain an excellent hub of value creation. In the model currently used by most North American Fortune 500 firms like Wal-Mart, the relationship between the firm and their suppliers does not support an effective customer intelligence analysis that involves aligning the back end with customer demand, which will require good consumer behaviour analytics to help the organization have a good predictive platform.

The industry perspective is generally case by case, as the cycle time re-ordering for the retail industry, which is different when compared to other industries. Some vital criteria are very important to drive a world-class pull system, a good metric will be to build a mechanism of a good material requirement planning that will trigger the information systems that is guided by great information flow integrity.

In recent years, lots of organizations are beginning to see the importance of a world class information system to drive predictable supply chain platforms to support the organization enterprise wide. Although the investment in technology is still yet to achieve maturity, which is due to a shortfall of budget allocation by organizational leaders in these organizations. A perfect example is how most retail firms are currently playing catch-up with utilizing Web2.0 technology to drive the extended supply chain across the organization.

The advanced nature of supply chain systems should be able to capture the strategy for the organization in real time to create the best value for all stakeholders. The internal stakeholders who are all participants within the organization are responsible to professionally execute their scope of work in order to produce best in class deliverables.

The internal stakeholders are functional departments like marketing, sales, operations, production, engineering, and supply chain. The extension of building the requirement is very critical to how successfully the organization will perform. An agile system should be flexible to react to customer changes and quickly adapt to meet customer needs at all times. The performance of supply chain systems comes with the speed of reacting with customer demand in real time situations.

There are various up time online technologies that can support and drive supply chain performance, and these technologies are cheap to acquire  and manage, although require great skills to deploy and make it work with other compatible technologies to create the best value. The push strategy should have a good template of capturing the demand of the wholesale or customer, and should be grouped based on maximum /minimum value, as such grouping within a range period of durations helps organizations to develop a material requirement planning tool that will have a perfect alignment with raw customer data in real time. Such structure will drive scalable information about customer expectation during peak and off peak time.

Conclusively, times are changing, and most organizations are not catching up with the trending changes as it relates to how organizations should face the challenges head on. Investment in a scalable technology is the way to go, to master the art of becoming a leader in deriving the best value for money in supply chain investment in your organization.

Establishing an excellent baseline is the key to structure the supply chain organization enterprise-wide, also identifying the critical performance metric and keep improving on the process to gain competitive advantage within the industry.

 

Vincent Amanyi is the Principal Partner with Encore Power Solution Consulting and leads the firm’s project and supply chain practice unit. He has more than 15 years of combined project management and Supply chain consulting experience in the energy industry.

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