Business Logistics

Business Logistics: From Push to Pull Logistics[1]

The migration from manufacturing-based "push" logistics systems to "direct-placement" or "pull" networks has appeared as an emerging trend in physical supply and demand coordination. The implications of any large-scale migration to "pull" logistics could be significant for a national freight productivity program.
To determine whether or not manufacturers are indeed shifting from a "manufacture-to-supply" or "inventory-based" logistics model to a "manufacture-to-order" or "replenishment-based" logistics model, we conducted a series of interviews with major shippers and transportation providers.
Our interviews suggested that of the two dominant logistics models in use, inventory-based logistics prototypes still dominate among most large-scale manufacturing and distribution firms. Inventory-based logistics also represents the primary model for "E-tailing" (Internet-based retailing): national or regional warehouses supplying home and business delivery with airfreight and package delivery services.
The manufacturers and retailers we interviewed believed that replenishment-based logistics systems offered efficiency versus traditional inventor-based models, but were reluctant to risk the increased stockouts perceived to accompany replenishment models. We found little evidence of pure pull systems in high-volume logistics applications. The companies interviewed did not anticipate a major shift over the next decade, but rather a gradual expansion of pull systems in response to increasing pressure to improve customer service and still reduce inventories. Most interviewees believed that a "blended model" would emerge as the dominant system: one that incorporates elements of both push and pull systems. For example, General Motors (GM) logistics strategy still incorporates built-up inventories for finished goods (automobiles), but is seeking to adopt more "pull" logistics on the supply-side (auto parts). Conversely, DuPont has implemented pull-logistics systems for the distribution of industrial and consumer products, but has maintained an inventory-based model for supply logistics due to the high cost (in production inefficiency) of stockouts, and the inconsistency of current rail services.

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