Charlotte NC Specialty Logistics

Business Logistics: From Push to Pull Logistics[1]

Executive Summary

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.

Findings

Composition of Interviews
In the course of the interviews conducted with numerous transportation professionals[iii], it was determined that the application of true pull logistics models is very limited. Furthermore, the appearance of these programs is generally not in primary industrial and retail industries, but among specialty producers and retailers for whom stock-outs are infrequent because of low transaction volumes. Much of the current logistics environment appears to be a "blended model": one that incorporates elements of both push and pull systems.

Credits

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