By determine the boundaries between push and pull strategy the company is identifying the supply chain stages that should operate in a make -to stock chain and what part of the remaining supply chain stages should operate in a make-to-order strategy. This is done by pushing inventory to less costly location in the supply chain. This helps the company save money and efficient their supply chain. All supply chains must be a combination of push and pull processes, but it is different where in the supply chain they switch from the push to the pull strategy. To figure out this «paradigm» the need to analyze many factors like their products, market conditions, demand patterns, competitive and other external market pressures must be understood and analyzed to make such a decision. The decision affects the operational costs, response times to fulfill demand, agility as well as flexibility to change their products.
The Supply Chain timeline
This timeline helps us see how the time goes in a supply chain where the company starts up with the raw material and where it changes towards the time till the customer gets their product.
Component inventory is based on forecast, therefor a push strategy as to make-to-stock to serve the forecast of the demand. In the other side of the time line we find the pull strategy. This is where they build-to-order which implies that the component inventory is managed based on forecast, but they serve a specific customer request in the final assembly. This is where we find our push-pull boundary.
It is defined as where the assembly starts on the time-line. By defining this boundary the company has a great chance to tailor their supply chain as they see fits them both due to the fact that they can lower their costs, take more advantage of their resources and carry less inventory in a pull- strategy. At the same time the company can try to take advantage of economies of scale through a push strategy since this can be hard to reach with a pure pull strategy. By defining this boundary they can save a great amount of time, money and customer satisfaction.
“Designing and managing the Supply Chain: Concepts, strategies and Case Studies” By Simchi-Levi-Kaminsky-Simchi-Levi, Third edition http://www.supplychainmusings.com/2009/10/push-or-pull.html