What strategy does Rolls-Royce using?! Pull and Push strategies

 In the Supply chain, which means in any business the demand is the axle of the entire operations from sourcing to coping with reverse logistics hardships. The Pull strategy and Push strategy are the operating strategies of the business based on customer demand for the product or service in the business.

Basically, the pull and push strategies are more likely the clones of Lean and Agile strategies of the supply chain.

To start explaining the pull and push strategies, we go with the pull strategy first,

Pull Strategy

The pull strategy predominantly works with customer choice, which means the business that uses the pull strategy will rely on the customer orders. Factually in the pull strategy, the vendor or manufacturer always starts their work after the customer order. So, the entire supply chain of this kind of business is driven or pulled by the customers.

The main benefit of using this pull strategy is giving a higher service level, it is more flexible than the push strategy in terms of the fluctuation in the demand. The business can secure more money by maintaining limited inventory, especially, procurement inventory and work-in-progress inventory.

Critically, the worst side of the pull strategy is implementing this pull strategy is even hard. Small mistakes in the order calculation may lead to unhappy customers.

Example

The real-time example of the pull strategy is DELL again, but, another greatest real-time example is Rolls-Royce car manufacturer.

Rolls-Royce is using Cutting-edge technology to manufacture its cars. The cutting-edge technology is nothing but the child of the pull strategy. They always make their premium cars once they got an order from the customer and then they make and deliver the car safely and neatly. By doing this, they are saving more inventory costs than others.

Push Strategy

The push strategy in the supply chain is not to make their product at a later stage. Because the push strategy will always work with the demand forecasting technique. By accessing the historical data and forecasting the demand of the market they produce the product and store it.

Businesses with better predictability in their supply chain are more likely to use this push strategy. The biggest drawback of the pull strategy is unhappy customers but in the push strategy, there is less chance to miss customer orders.

The main advantages of this strategy include long-term planning, readily available stocks, the economics of scale, and mostly no unhappy customers. But the weakness of a push strategy is high inventory cost for both manufacturer and retailer. Push strategy users will take a long time to react to changes in the marketplace.

Example

The real-time examples are all Christmas toys and utility makers. Because the Christmas toys and utilities are always slow business except for December month. The Christmas gift manufacturer mostly relies on Christmas, So, they always try to push their product to the consumer before Christmas. For this, the manufacturer could not wait for customers' orders, because, Christmas is a famous festival and celebrated by billions of people every year. In this case, the demand for Christmas gifts and other stuff is very high. So this manufacturer should forecast demand and act effectively or they get insufficient time to make a product for customers this lead to losing the customer.

 

 Note With all this, some companies have the capability to adapt with both pull and push strategies, using both strategies like Tata motors (a huge car manufacturer in India), Nike, sometimes Amazon online shopping, and so on.

Hint Make-to-order products are always a Pull strategy and Make-to-Stock products are always a Push strategy.

Posted by

Lokesh Venkatachalam