Question
Push-based Supply Chain and Pull-based Supply Chain.
Answer :
Word Count : 1370
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Skip in 10
Push-based and pull-based supply chains are two important approaches to managing the flow of products, information, and resources from suppliers to retailers and ultimately to customers. In retail trade, the choice between these approaches directly affects inventory levels, product availability, operating costs, customer satisfaction, and the overall efficiency of supply chain management. The major difference between them lies in what triggers the movement of goods. A push-based supply chain is driven mainly by forecasts and anticipated demand, whereas a pull-based supply chain is driven by actual customer demand and sales. In a push-based supply chain, products are manufactured, transported, and stocked in advance on the basis of expected future demand. Retailers and manufacturers forecast how much customers are likely to purchase and arrange production and distribution accordingly. The movement of goods begins from the supplier or producer and moves toward the retailer and customer. Therefore, the system is called “push” because products are pushed through the supply chain before actual customer demand occurs. For example, a retail store may estimate that customers will purchase a large quantity of winter clothing during the coming season. On the basis of this forecast, the retailer places large orders with suppliers before winter begins. The supplier manufactures and ships the products, and the retailer stores them in warehouses and stores. The goods are therefore available before customers actually demand them. Forecasting is the central element of a push-based supply chain. Historical sales data, seasonal trends, market research, promotional plans, economic conditions, and expected changes in consumer behaviour are used to estimate future demand. Based on these forecasts, manufacturers plan production, wholesalers plan procurement, and retailers plan inventory. One important advantage of the push system is that it provides product availability. Retailers can maintain sufficient stocks so that customers can purchase products immediately when they need them. This is particularly useful for products with predictable seasonal demand. For example, retailers generally stock school supplies before the beginning of the academic session because demand can be reasonably anticipated. Another advantage is that large-scale production and transportation can generate economies of scale. Manufacturers can produce products in large batches, reducing the average production cost. Similarly, retailers may order products in large quantities and obtain quantity discounts from suppliers. The push system can also help retailers prepare for festivals, holidays, promotional events, and other periods of expected high demand. However, the push-based system has several limitations. The greatest problem is dependence on forecasts. Forecasts are not always accurate because customer preferences, economic conditions, competitors' actions, and market trends can change unexpectedly. If actual demand is lower than forecasted demand, the retailer may be left with excess inventory. This increases storage costs and ties up working capital. Excess inventory can be
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