to manage that risk. Company B because of concerns with respect to shipping lead times is likely to supply to
forecast and becomes in respect to its Australian customer, a push supplier although, for its own domestic
customers, it may too be able to operate a pull model. Company C, because of even longer lead times will likely
operate as a push model either because of long lead times to the ultimate end customer or because of a prime
business imperative to capture economies of scale in its processing infrastructure.
There are in addition, a range of industries that typically require a hybrid push and pull model, notably resource
and processed product supply chains, including forestry, pulp and paper, meat, dairying, mining and oil products.
Resource and processed product supply chains usually involve producing a large variety of high value and lower
value endproduct
stock keeping units (SKU’s) from an original raw material of variable quality. Whereas it is
often possible to create demand pull supply chains for the higher value end products, the lower value end products
or byproducts
are often variable in output and typically have to be pushed to end customers, particularly by using
pricing to stimulate offtake.
The original raw material may be pushed continuously into the supply chain by a
blast furnace or petrochemical plant or something far less sophisticated such as a cow being milked twice a day.
The usual prime determinants of whether a business operates in push or pull modes are economies of scale and
the uncertainty of demand as shown below. For example, an architectdesigned
custom built home is made to
order in response to specific known customer demand. Clearly inventory is very low. However, a housing
developer builds a large number of homes to capture scale advantages but at the risk of uncertain timing of
purchase and potentially will need to discount some for sale. A “dialup”
pizza shop produces also to specific
demand pull to supply specific customised pizzas. However, there is an element of push in this instance. To
enable responsiveness, the pizza bases and ingredients are built as inventory in advance of the customer order.
The final assembly is delayed until there is a specific order. This is an example of postponement and is an
excellent example of push and pull operating in the same business.
Determinants of Push and Pull Business Model
Thus, “best” is creating, where possible, demand pull but “best” also means operating the most effective push or
hybrid model if that is what is most applicable to a particular business or industry. The following table lists a
variety of differentiators that can be used to develop a best practice business model. Primarily, the demand pull
business should be developing business processes and infrastructure that allows it to produce products or services
in direct response to customer demand in the most minimal time. The demand pull business emphasises
technologies and processes and relationships that reduce time to respond to customer demand. The demand push
business focuses on having tight business processes and a capability to respond to uncertain customer demand.