Pull-Through Production

DEFINITION of 'Pull-Through Production'

A method used in just-in-time manufacturing processes to order production inputs and schedule manufacturing at the time a customer places an order. By basing purchase orders and manufacturing schedules on actual, rather than anticipated, orders, pull-through production helps control inventory costs.


Pull-through production also facilitates product customization. Since products are made as they are ordered, it may be possible to cost-effectively tailor an order to a customer's specific needs, instead of only offering a generic product.

BREAKING DOWN 'Pull-Through Production'

Using pull-through production means that companies are less likely to purchase excess inventory, are able to reduce their inventory storage costs, and are able to reduce the opportunity costs of tying up in inventory money that could be used elsewhere. The downside is that the company must conduct multiple, smaller production runs instead of one or two large production runs, which can be more expensive if not managed properly.

RELATED TERMS
  1. Inventory Management

    Inventory management is the overseeing and controlling of the ...
  2. Just In Time - JIT

    An inventory strategy companies employ to increase efficiency ...
  3. Purchase Order Lead Time

    The number of days from when a company buys the production inputs ...
  4. Business Inventories

    An economic figure that tracks the dollar amount of inventories ...
  5. Inventory Financing

    A line of credit or short-term loan made to a company so it can ...
  6. Carrying Cost Of Inventory

    This is the cost a business incurs over a certain period of time, ...
Related Articles
  1. Investing

    What is Involved in Inventory Management?

    Inventory management refers to the theories, functions and management skills involved in controlling an inventory.
  2. Investing

    How to Analyze a Company's Inventory

    Discover how to analyze a company's inventory by understanding different types of inventory and doing a quantitative and qualitative assessment of inventory.
  3. Investing

    Explaining Carrying Cost of Inventory

    The carrying cost of inventory is the cost a business pays for holding goods in stock.
  4. Investing

    Days Sales of Inventory

    Days Sales of Inventory, also called Days Inventory Outstanding, is a key financial measurement of a company's performance pertaining to inventory management. In simple terms, it tells how many ...
  5. Markets

    Understanding Marginal Cost of Production

    Marginal cost of production is an economics term that refers to the change in production costs resulting from producing one more unit.
  6. Investing

    How to Calculate Average Inventory

    Average inventory is the median value of an inventory at a specific time period.
  7. Investing

    Understanding Economic Order Quantity

    Economic order quantity is an inventory-related equation that determines the optimum order quantity that a company should hold in its inventory.
  8. Markets

    Explaining Market Orders

    A market order is the most common order used to purchase a financial security.
  9. Investing

    Inventory Valuation For Investors: FIFO And LIFO

    We go over these methods of calculating this component of the balance sheet, and how the choice affects the bottom line.
  10. Investing

    How Does a Perpetual Inventory System Work?

    Perpetual inventory is a system that continually tracks inventory items for quantity and availability.
RELATED FAQS
  1. How is the economic order quantity model used in inventory management?

    Understand what types of costs make up total inventory costs, and learn how the economic order quantity model is used to ... Read Answer >>
  2. What is the difference between JIT (just in time) and CMI (customer managed inventory)?

    Understand the principles behind just-in-time inventory management and customer-managed inventory. Learn the difference between ... Read Answer >>
  3. How does economic order quantity assist a company with maximizing profits?

    Understand how economic order quantity minimizes overall inventory costs to maximize profits. Learn what specific types of ... Read Answer >>
  4. Does working capital include inventory?

    Learn about inventory that is part of current assets and working capital, which is the difference between current assets ... Read Answer >>
  5. What are the differences between period costs and product costs?

    Find out why GAAP separates all company expenses into either period or production costs and how this impacts the way expenses ... Read Answer >>
  6. How can a company control its holding costs?

    Learn about the specific costs that go into a company's overall inventory holding costs, and understand how a company can ... Read Answer >>
Hot Definitions
  1. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  2. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  3. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  4. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  5. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  6. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
Trading Center