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Push vs. Pull Inventory Management Strategies

inventory-management-strategies-banner Most companies have a better chance to profit and satisfy customers when inventory managers develop an effective and efficient inventory management strategy. The right strategy ensures access to the right products, and it also helps control costs associated with buying and storing goods. Understanding the difference between push and pull inventory management models can help you develop the right system for your own unique business.

Push, Pull & Hybrid Models

The success of the push inventory model depends on excellent forecasting; products are either manufactured or ordered in advance to meet anticipated demand. Inventory managers must have accurate, historical sales records and hope prior sales will predict future demand.  As with any forecasting models, the most significant problem with this inventory method is the unpredictability of customer demand.  Even the best inventory systems with the most sophisticated forecasting calculations will, at times, get the expected demand wrong; leading to high carrying costs, forced write-downs and write-offs, or the inability to meet customer demands. iStock_000024170985The pull inventory model simply relies upon the ability to order or make products as they are requested by customers. This inventory method is also called just-in-time or JIT.  Advantages of a pull system include the fact that businesses aren’t spending money ordering or storing finished products until after customers have already purchased. However, this model is only effective when every link in the company’s supply chain operate according to this model rather than the more traditional pushing of stock in a top-down approach. Some businesses use a hybrid push-pull method to properly manage inventory. To be successful, companies require a sophisticated inventory control system to track products and supplies currently in stock with the ability to properly forecast future demand. This model is also known as a lean inventory strategy—companies rely heavily on forecasting and constantly adjust inventory levels based on actual sales.

Choosing the Right Inventory System

Selecting the best inventory management system for your business will most likely depend on what you are actually offering consumers.  Retail businesses will manage their inventory very differently than businesses who manufacture goods.  However, whether your company chooses a push, pull, or hybrid inventory management model doesn’t eliminate the need for effective and accurate inventory tracking. Read examples of how our customers here at Wasp have used Inventory Control to successfully manage their stock.