What Is Pull-Through Production?
Pull-through production is a just-in-time (JIT) manufacturing strategy that sends an item into the production process at the point when a company receives an order for it. Pull-through production utilizes a pull system, a method for controlling the flow of resources through a system. Resources are pulled into the production pipeline only as they are actually needed or requested.
Key Takeaways
- Pull-through production is a just-in-time (JIT) manufacturing strategy.
- In pull-through production, a customer’s order triggers the purchase of materials and the scheduling of production for the requested items.
- A pull strategy works well for products that can be manufactured or replenished quickly, experience uncertain demand, or do not benefit from economies of scale.
- Adopting a pull-through method of production can reduce the various cost associated with carrying inventory, although the process can be counterproductive and expensive if not managed properly.
How Pull-Through Production Works
Pull-through production is an inventory management method in which products are manufactured based on actual demand, as in custom or made-to-order (MTO) inventory. A pull-through strategy responds to customer demand in real-time. That means that the impetus for a product being made, or purchased, begins entirely with the customer’s order.
The goal of pull-through production is to replace only what has been used and at the optimal time. A pull strategy works well for products that can be manufactured or replenished quickly; for products whose demand is uncertain; and for products that do not benefit from economies of scale—in other words, making a lot of it does not reduce the cost of selling it.
Advantages and Disadvantages of Pull-Through Production
One advantage of a pull strategy is the ability to sell without the associated expenses of carrying an inventory. If a company can deliver as promised without absorbing these extra costs, pull-through production should result in a lower cost of goods sold (COGS) and wider profit margins.
Basing purchase orders and production schedules on actual, rather than anticipated, orders can lead to lower outlays on storage, factory overhead, insurance, raw materialsand finished goods. Pull-through production might also enable a company to cost-effectively tailor an item to a customer’s specifications, potentially driving customer loyalty.
However, there are some notable downsides to this manufacturing strategy. With pull-through production, a company must conduct multiple, smaller production runs instead of just one or two runs. This process can be expensive if not managed properly.
Another drawback is that job lots may be as small as a single unit, which could require more overhead in terms of setting up equipment within the production process, or needing to order smaller quantities of raw materials.
Pull-Through Production vs. Make To Stock (MTS)
A push, or made-to-stock (MTS) strategy, refers to the more traditional model of trying to match production with consumer appetite via forecasts, seasonal-demand planning, and historic trends.
Often, the differences in these opposite strategies complement each other. Managing the dynamics of both a push strategy and a pull strategy is critical to successful supply chain management (SCM).
For example, in order for some ecommerce companies to strike a cost-effective balance in manufacturing, they might use a push strategy for high-volume items that they know have sold well based on forecasting. Alternatively, they might use a pull strategy for special items that they cannot afford to stock, but which they believe will appeal to customers.
Although these methods appear to be in opposition to each other, they are not mutually exclusive. In fact, they are often the most effective when applied strategically together to address individual business scenarios.
Special Considerations
Information technology (IT) makes it very easy for a vendor to shift from a push-type model to a pull-type business model. Hence, pull-through production has vast implications for online merchants and the e-commerce industry.
Supply chain management involves managing the product chain from development through production, and to distribution. Supply chain production has received new attention in the 21st century because of the advanced IT technology that’s now available and that can link and manipulate various aspects of a supply chain.
Implementing a pull-through strategy into the e-commerce aspect of a business could be attractive for smaller companies that want to have an online presence and provide more options to customers but that have low inventory budgets.