Push System

Definition

A push system is a production strategy where goods are produced in advance based on forecasted demand and then pushed through the supply chain to be stocked at various locations. This approach contrasts with a pull system, which produces items in response to actual demand. In a push system, production schedules are determined by anticipated sales, leading to potential overproduction or underutilization of resources if forecasts are inaccurate.

5 Must Know Facts For Your Next Test

1. Push systems can lead to higher levels of inventory because production is based on forecasts rather than actual sales.
2. They often require significant investment in forecasting tools and methods to minimize the risk of overproduction.
3. In industries with stable demand patterns, push systems can be efficient due to predictable production schedules.
4. Push systems can result in longer lead times as products may not align perfectly with customer needs at the time of delivery.
5. Companies using push systems must closely monitor market trends to adjust their forecasts and avoid excess inventory.

Review Questions

• How does a push system impact inventory levels compared to a pull system?
  • In a push system, inventory levels tend to be higher because products are produced based on forecasts rather than actual demand. This proactive approach can lead to overstock situations if the forecasts do not accurately predict customer needs. In contrast, a pull system minimizes inventory by producing goods only in response to actual customer orders, resulting in leaner operations and reduced holding costs.
• What are some advantages and disadvantages of implementing a push system in production?
  • Advantages of a push system include the ability to maintain high inventory levels for quick response to demand and the potential for optimized production schedules in stable markets. However, disadvantages include the risk of overproduction, increased carrying costs for unsold goods, and potential waste if products become obsolete before they are sold. Companies need to carefully weigh these factors when deciding on their production strategy.
• Evaluate how effective forecasting is crucial for the success of a push system and its implications for supply chain management.
  • Effective forecasting is vital for a push system as it directly influences production decisions and inventory levels. Accurate predictions enable companies to align their production schedules with anticipated demand, minimizing excess stock and reducing waste. In terms of supply chain management, poor forecasting can lead to inefficiencies such as stockouts or excess inventory, creating challenges that ripple through the supply chain, ultimately impacting customer satisfaction and overall operational performance.

Related terms

Forecasting: The process of predicting future demand for products or services based on historical data and market analysis.

Inventory Management:

The supervision of non-capitalized assets, or inventory, and stock items to ensure the right amount of products are available when needed.

Supply Chain Management:

The management of the flow of goods and services, including all processes that transform raw materials into final products.