Demand-Driven Inventory Optimization and Replenishment: Creating a More Efficient Supply Chain

CHAPTER 2

Achieving Timely and Accurate Responses to Customer Demand

Push supply chain methodology: In 1640, Mary sits in front of the fire on a cold evening. She makes three candles and puts them in the corner of her dining room. The next day Linda, Martha, and Sally stop by Mary's house to share coffee and scones. They see the candles and decide to buy all three candles.

Pull supply chain methodology: While having coffee and scones in 1640, Linda, Martha, and Sally tell Mary they need candles. That night Mary sits in front of the fire and makes three candles and puts them in the corner of the dining room. Linda, Martha and Sally stop by the next day and buy the candles.

Not too tough to figure out, eh? In one example Mary knew her friends needed candles, and in the other she had a good idea they needed candles. However, today's supply chains are in an identity crisis because of the demand-based definition of what “Mary knew her friends needed candles” really means.

PUSH AND PULL SUPPLY CHAINS

The original definitions of push and pull supply chains are pretty self-explanatory. The pull supply chain was predicated on known demand from specific customer needs. This was considered to be a build-to-order model. The classic view of a build-to-order supply chain was Mary's example of her friends asking her to make candles for them. A product was simply not built until it was ordered.

What was required for the pull model to work effectively?

• Customization of the product was paramount. ...