Inventory management is a key concern for any manufacturer or good reseller. In general, you want to have enough materials or products on hand to meet near-term demand, but not so much that it becomes expensive. Push and pull are contrasting approaches to inventory control, and each has pros and cons.
In a push inventory system, a manufacturer or reseller takes a proactive approach to projecting demand. A manufacturer might sense that economic, cyclical or societal factors will lead to more customer demand in the next year. The manufacturing company would make enough goods to cover demand projections. A resale business would order enough inventory to meet your expected demand from your customers.
A push system reduces your risks of not meeting demand. Essentially, you prepare or buy goods and then worry about how to ensure adequate demand. Push is used commonly in businesses where demand is more predictable. A common drawback of such a system is that poor projections can lead to undersupply or oversupply. If you underproject demand and can't react quickly, you may miss business and alienate customers. Push often leads to excess supply, which causes you to mark down extra inventory or throw it out.
Pull inventory is more reactive. Your business monitors ongoing customer demand in real time and makes or buys goods to match. The prevalence of pull demand has increased as data analysis software technology has evolved. Planners and forecasters can more easily see how demand compares to current inventory levels at any given point in time. In a pull system, you send more frequent orders in smaller batches based on point-of-sale data at each store or business unit.
The major benefit of pull inventory control is that you can adjust inventory levels as time goes on. A pull system used to optimize inventory levels is called just-in-time inventory management. Your goal is to have enough inventory to meet demand with little extra on hand. A drawback of pull inventory is that dramatic ebbs and flows in cyclical businesses are difficult to respond to in a timely fashion. A weekend rush may leave a store out of stock, which can upset customers. Your potential for excess isn't quite is great with smaller, frequent orders. More regular orders also leads to higher shipping costs.
