What is Pull-Through Production
Pull-through production is a just-in-time (JIT) manufacturing strategy that sends an order into the production process at the time a company receives an order for that item. A pull system, itself, is a method for controlling the flow of resources through a system. Resources are pulled into the production pipeline only as they are actually needed or requested.
A goal of pull-through production is to replace only what has been used, and at the optimal time; just as, for example, you would replace the oil in your car, or a filter in an appliance, when you get a signal that it is low. A pull strategy works well for products that you can manufacture or replenish quickly; ones whose demand is uncertain; or those products that do not benefit from economies of scale—meaning, making a lot of it does not reduce the cost of selling it.
Breaking Down Pull-Through Production
Pull-through production is an inventory management method in which products are manufactured based on actual demand, as in custom, or made-to-order (MTO), inventory. A pull-through strategy responds to customer demand in real time. The impetus for a product being made, or purchased, then, begins entirely with the customer’s order. In contrast, a push, or made-to-stock (MTS) strategy, refers to the more traditional model of trying to match production with consumer demand via forecasts, seasonal-demand planning, and historic trends. Often, the differences in these opposite strategies complement each other.
Plusses and Minuses of Pull-Through Production
One advantage of a pull strategy is the ability to sell without the associated cost of carrying inventory. If you can deliver as promised without that cost, then you lower your cost of goods sold (COGS) and increase your profit margin. In addition to decreased inventory costs, basing purchase orders and production schedules on actual, rather than anticipated, orders also can lead to lower expenditures in terms of storage, factory overhead, and raw materials or finished goods. Further, pull-through production might enable a company to cost-effectively tailor an item to a customer's specifications, potentially driving customer loyalty.
On the downside, with pull-through production, a company must conduct multiple, smaller production runs instead of just one or two runs, and this can be expensive if not managed properly. Another drawback is that job lots may be as small as a single unit, which could require more overhead in terms of setting up equipment within the production process, or needing to order smaller quantities of raw materials.
Pull-Through and eCommerce
Information technology (IT) makes it very easy for a vendor to shift to a pull-type business model from a push-type model. Hence, pull-through production has vast implications for online merchants and eCommerce in general. A major reason that supply chain management (SCM)—managing the product chain from development, through production, to distribution—has received so much attention in the 21st century is because of the IT now in place to link and manipulate the various aspects of a supply chain. The pull-through strategy in eCommerce also might make it attractive for smaller companies that have low inventory budgets yet want to provide more options to customers while developing an online global presence.
Pull Versus, or Plus, Push? A Symbiotic Relationship
Managing the dynamics of push and pull in conjunction is critical in SCM, whose major goal also is twofold: to create a solution (supply) for a goal (demand). In order for some eCommerce companies to strike a cost-effective balance in manufacturing, for example, they might use “push” for high-volume items that they know have sold well based on forecasting; and “pull” for special (perhaps trendy) items that they cannot afford to stock, but which they believe will appeal to customers. Hence, though inherently inverse, these two models are not mutually exclusive; and in fact, often are most effective when applied strategically together to address individual business scenarios.