A pull system is exactly what it sounds like. The production of a product or system is varied depending strictly on the demand from the customer or the market, not from forecasts or previous performance. While most businesses strive to use a pull business model from end user to shop floor, it is rare for this to happen, as there are usually some aspects of the supply chain that are push systems.
A pull system is one in which the supply chain sends a product through the supply chain because there is a specific demand for that one product, as opposed to creating inventory and “pushing” the product out to distributors, wholesalers, vendors, or customers so they have to keep inventory, or worse, the production company has to keep inventory. A “push” supply chain is the exact opposite: they consist of many warehouses, retail stores, or other outlets in which large amounts of inventory are kept to satisfy customer demand on the spot.
As previously mentioned, it is very rare to see a system that is completely run on pull versus push methodologies. For example, one supply chain may be run on pull methodologies from the distributor to the customer. When the customer orders a product from the distributor, the distributor turns that order around immediately and orders that product from the manufacturer. The product is never sitting on the distributor’s shelves, and the supply chain from the distributor to the customer is strictly a pull system.
However, the manufacturer has been producing that product steadily for the last 6 months, whether there has been a demand or not. When a distributor orders the product, they pull it off their shelves and send it to the distributor (or possibly the customer). This is not based on demand from the customer, and is a great example of a push supply chain integrated with a pull supply chain.
When a business employs JIT and the pull model of business, they are taking on a few risks, but at the same time they are reducing costs dramatically. Because they do not have to stock inventory at that point in the supply chain, there is no risk of lost investment in that inventory, and they will not be scrambling when a demand signal changes based on seasonality, current events, publicity, or any of other reasons why customer demand and purchasing behaviors change.
On the downside, pull supply chains are much more complex and harder to manage. In order to meet the ever increasing demands of the customer with respect to customer service, and accurate, timely delivery of products, complex systems are necessary to track the status of orders and deliveries. While this has been made easier by modern technology, it is still a fight to maintain these systems in their ideal working order.
A perfect example of an almost ideal pull supply chain is the Dell business model. Michael Dell started manufacturing computers out of his dorm room while in college. The difference between him and his competitors is that he did not own a storefront or a manufacturing plant. He had to keep his inventory down to a minimum, if any at all, and did not have room for parts storage, no matter how small the components may have been.To counter these constraints, Dell created the ultimate business model: customers built their computer’s specifications on the internet, and using those specifications, the computer was built. Not a single spare part was left over, and Dell had no inventory, as each computer was shipped out the door as soon as it was manufactured.