Today, we are discussing inventory planning. What are push and pull inventory planning techniques?
Push: Push inventory planning takes historical data and uses forecasting methods to determine where and when inventory needs to be available. This is typically performed in a classic stocking environment and can be more successful for products that have a longer shelf life and will not go out of style quickly. An example of push inventory planning is in the fashion industry, where teams analyze the market for trends and begin producing the next season’s clothing line months in advance. Should they be wrong, clothes are sold at a steep discount for companies to recover as much, financially, as they can.
Pull: A pull inventory planning approach involves having the customers use their point-of-sale data and determining their inventory plan. The customers would then provide their replenishment timing and estimated quantities to their upstream suppliers in order to allow them to plan their own production or replenishment. Two of the main ways to implement a pull system are through a reorder point (ROP) or through distribution requirements planning (DRP). ROP is usually favored for purchased finished goods (from outside suppliers) while DRP is often used for internal products or longer lead time products.
It should be noted that there are few pure examples of push and pull inventory management practices out there. Most businesses are typically using some sort of hybrid depending on their portfolio mix. Others may segment their products in order to put those products that are capable of using ROP well on that system and continuing to forecast the others.