In the previous blog we examined the outcome of three possible sales campaigns. Before progressing, it is important to clarify the sales campaign forecast numbers. In this series of blogs, the sales forecast has been finalized as part of the sales and operations planning (S&OP) process. At this point, the S&OP teams have authorized the demand and supply plans and decomposed the aggregate plans into individual finished goods forecasts. In turn, these values have been loaded into the forecast row of the master schedule.

This final blog on multi-echelon “push” and “pull” will summarize the uses and differences between the two techniques discussed throughout the series.

In the previous blog the different segments of the master schedule as they pertain to the demand plan were discussed. The driver of the schedule was noted as the sales forecast campaign. Once the forecast was developed, it could then be dropped into the master schedule

The previous blog ended with a description of how a sales campaign is decomposed into a possible period, weekly, and daily product-level forecast in the master schedule. Before the discussion can proceed much further, it is important to review the demand section of the MPS grid.

In my previous blog I introduced the perpetual problem plaguing most businesses in their efforts to integrate the sales forecast and production scheduling. The root of the problem was identified as residing in the discontinuity of many of the basic functions performed by demand and supply management.

The effective management of demand and supply has always resided at the core of the manufacturing and distribution enterprise. A veritable mountain of books and articles, accompanied by the availability of countless hours of classroom instruction and professional seminars, have mapped out every process, elaborated on each principle, and discussed the topic from every possible angle.

Despite the added control offered by DRP and centralized “push” channel planning, there are often occasions when distribution centers possess insufficient stock to fill the inventory needs of the distribution network. Such an event could occur because of the normal lag time in channel information and material flows or because of unplanned demand or supplier stock out.

In the previous blog we began a discussion on what happens to the distribution orders (DOs) generated by satellite warehouses. It was stated that the most important output of DRP was the generation of a schedule of DOs extending out into the planning horizon.

In the previous blog we examined the mechanics of the first part of the DRP pull system in action. The grid illustrated how the bill of distribution (BOD) was used by the DRP processor to guide the implosion process whereby projected inventory shortages at the lowest echelon in the channel structure are converted into distribution orders (DOs) and then placed as a schedule of gross requirements in the planning grids of supplying warehouses.

In the previous blog we examined in close detail the differences between material requirements planning (MRP) and distribution requirements planning (DRP). It was stated that at first glance, it appears that DRP is very much like MRP.

In the previous blog we introduced the DRP grid. It was stated that the advantage of DRP is that it not only generates planned DOs when demand exceeds supply, it also places these planned DOs in the requirements row of supplying facilities.

In the previous blog we introduced DRP by reviewing the definition from the APICS Dictionary. It was stated that because of the differences in replenishment lead times, DRP was the best choice when the supply source is a company plant.

If we summarize the discussion in the previous blogs, inventory replenishment in a multiechelon supply channel occurs in three possible ways: product is allocated down the supply chain using some form of dispersion algorithm; a form of reorder point pulls product from supplying to satellite facilities; and distribution requirements planning (DRP). For distribution channels supplied from a production plant or have long-lead time items purchased from outside suppliers, planners would most likely choose DRP.

In the previous blog we examined closely the mechanics of the reorder point (ROP) pull system. Although reorder points do provide an effective technique for multiechelon inventory replenishment, they have several important drawbacks.

In the previous blog a variety of pull system techniques were introduced: electronic techniques (EDI, CPFR, QR, and POS); a lean technique (kanban); and computer application-based (ROP and DRP). It was also stated that there are two essential criteria to consider when selecting a pull technique: 1) distribution lead time, and 2) the originating source of replenishment: either an outside supplier or an internal plant.

In the previous blog we revisited the concepts of push and pull as a prelude to a full discussion of pull system inventory replenishment techniques. To summarize, in a push system inventory flows down the bill of distribution echelon structure in anticipation of customer demand.

This blog continues the discussion on the basics of distribution replenishment “pull” systems. In the previous blog we reviewed the mechanics and purpose of the bill of distribution (BOD). We saw that the BOD enables planners to link together the facilities constituting the supply channel.

The first place to start in the development of a “pull” system is the design of the distribution channel structure. The linkage of channel facilities is critical in pull system design. Performing this essential task requires the definition of the relationship of each of the facilities constituting the channel system.

In this blog, we will be moving from a discussion of inventory “push” replenishment methods to an analysis of inventory “pull” methods. The APICS Dictionary defines the inventory pull method as -In distribution, a system for replenishing field warehouse inventories where replenishment decisions are made at the field warehouse itself, not at the central warehouse or plant.

In the previous blog, the mechanics of the channel replenishment “push” system were investigated in detail. This blog continues the discussion by look at the pros and cons of the push system and what types of company/products would deploy inventory push replenishment.

In the previous blog, it was stated that push channel replenishment is driven by two factors: First, channel replenishment was calculated by forecasting channel demand at the aggregate level. This task is usually performed weekly or monthly. Product is then pushed from the manufacturer or DC to downstream channel echelons using some form of replenishment algorithm based on the forecast.

In this edition of the on-going blog on “push” and “pull,” we will start a detailed examination of the push replenishment system. The previous blog defined the push system in distribution as “a system for replenishing field warehouse inventories where replenishment decision making is centralized, usually at the manufacturing site or central supply facility (APICS Dictionary).”

In this blog, the discussion moves from a concern with the nature of demand in the supply chain to a detailed review of push and pull inventory replenishment methods. Previously, it was stated that demand begins with the customer as independent demand, but from that point on is dependent as it passes upstream through the supply chain. How participants in the supply chain respond to demand will determine their selection of either a push or pull inventory replenishment method. A supply chain could be uniformly push or pull, an individual intermediary could be push or pull, or channel partners could be a combination of both. Actual channel replenishment design is driven by a variety of factors, such as the nature of the product, marketing strategies, seasonal campaigns, stage of product life cycles, and others.

My last blog described several key channel design decision factors shaping the use of inventory push and pull methods in the value delivery network. Perhaps the most critical point to make about channel management is that it is absolutely essential to separate the concept of channel “demand” from channel push and pull inventory “replenishment methods.” The first step in exploring this essential point is to visit the different types demand flows found in the typical supply channel. Once channel demand flows are defined, it is then possible to determine channel push and pull inventory replenishment methods.

My last blog described the value delivery network as that part of the supply chain responsible for the movement of goods and services from their entry into the supply channel to their eventual delivery to the end-use customer. An essential decision factor as to the application of push or pull methods to the delivery network begins with effective channel design. Design decisions are critical because they determine the overall performance goals of the channel configuration. All network decisions affect each other and either increase or decrease channel cost and responsiveness to the customer. A more detailed consideration of these design decisions are as follows.