Inventory Policy

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NEEDS

Figure 2: Technology Push

Pull System

This inventory regulatory system is initiated by customer's demand. Here, companies make only enough products to satisfy customer's orders (Muller, 2011). One advantage of this system is that there no excess of inventory is generated that requires storage, therefore reducing the cost of transporting and storing goods as well as the inventory levels (Saxena, 2009). However, one major drawback of the pull method is that it is highly possible to run into ordering problems, such as whereby the supplier is not able to get a consignment out on time. The company is therefore left incapable of fulfilling the order and thus leading to customer dissatisfaction. An example of the pull inventory control method is the “just-in-time” or JIT system (Muller, 2011). Its objective is to retain inventory levels to a least possible by having only sufficient inventories, not an item more or less, to satisfy customer needs. This JIT system eradicates waste by reducing the quantity of storage space needed for inventory and the expenses of storing goods (Saxena, 2009).

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Figure 3: Market/demand pull

Push-Pull System

Some businesses have created a strategy referred to as the push-pull inventory control system, which brings together the finest of both strategies. Push-pull also goes by the name lean inventory strategy. It calls for a more accurate prediction of sales and modifies inventory levels based on actual sales of the goods (Muller, 2011). The aim of this method is to stabilize the supply chain and the subsequent decrease in product shortages, which may prompt customers to go somewhere else to with their orders. With this system of inventory control, planners use refined structures to improve guidelines for solving long - and short -term production demands.

Picking the Right System

It is quite hard for inventory managers to know always as to how much inventory they ought to order and the right time to do so. The inventory control type will therefore depend largely on what the type of product being produced. For certain items, like automobiles, it may not be able to be produced with the pull or just-in-time or inventory control methods (Saxena,2009). The production of hefty items, like automobiles, is too intricate and takes a long time to only produce the needed amount to fulfill precise customer requirements. Computer companies, like Dell, are integrating the push-pull system, whereby the goods and raw materials are pre-ordered and stored. Conversely, the computer itself is not put together until a customer orders for one (Nahmias 2011).

Conclusion

While the push method uses forecasting of demand to base its production, pull inventory method is based entirely on statistics of the actual demand in the market. At some point, there is an interphase between the two called the push-pull decoupling point or boundary (Muller, 2011). Communication method used by manufacturer to buyers may also be used to classify the two. When for instance a company uses non-interactive media like television to advertise its products, then it is merely pushing it to the people unlike when interactive media like the internet is applied. Here, the customer has a chance to express their demands or preferences making it more of a ‘pull’ strategy. Invention of a push-pull inventory method came in handy in a rather competitive market. With time, companies have learnt to be more flexible to enable them attain more market share. The greatest beneficiary remains the customer (Nahmias, 2011).

Works cited.

Müller, M. (2011). Essentials of inventory management. New York: AMACOM.

Saxena, R. S. (2009). Inventory management: Controlling in a fluctuating demand environment.

New Delhi: Global India Publications.

Nahmias, S. (2011). Perishable inventory systems. New York: Springer.