Push vs. Pull System Inventory Management
Running a business can feel like a balancing act between making a profit and satisfying customers. An effective inventory management system can help you do both. First, you’ll need to figure out what an effective system looks like for your business.
Most inventory management systems can be described in one of two ways: a push system or a pull system. Choosing the right method can help you control how much inventory you have at any given time so your business can meet demand effectively. What’s the difference between the two systems, and how do you choose one for your business?
What Is Push System Inventory Control?
To make the most of push system inventory management, companies need to forecast inventory needs in order to meet consumer demand. The goal is to sell (push) goods from the inventory to customers as orders come in. To do this, the business needs to have a great deal of inventory in stock ahead of the demand.
When a company uses the pull system effectively, the advantages are clear. The business is able to meet consumer demand and ship products out without delay. Products are likely to be in stock all the time, and the business typically pays lower manufacturing costs per item by ordering in bulk.
Due to the unpredictable nature of consumer demand, the push system comes with a high likelihood of over-stocking. In turn, excessive stock can lead to higher storage costs.
What Is Pull System Inventory Management?
Rather than looking ahead at anticipated demand, pull system inventory management involves a more short-term approach. The business relies on the ability to place orders for products as customers request them. For this reason, the pull system is often referred to as “just-in-time” ordering.
The pull system is beneficial in that a business does not need to order or store products until it knows there is a demand for them. The upfront investment in inventory is lower, and the business faces minimal losses on unsold products.
The pull system does come with disadvantages as well. When a business follows this model, they have lower stock levels and face longer fulfillment times if there is an unexpected rise in demand for products. The company also places more orders, which often results in higher manufacturing costs per item.
Utilizing a Push and Pull Inventory Management System
Some businesses do not rely on only the push system or only the pull system. Each system comes with a unique set of advantages and drawbacks. In addition, some products are better suited to one system over the other. A company that stocks a wide variety of items may fall into both categories — both push and pull — at any given time.
Many companies often use a hybrid push and pull inventory management system. This system can be a bit complicated, especially for growing businesses and those with large inventories. If you think this solution may be a good fit for your business, you’ll need an effective inventory management system to appropriately manage both systems. Inventory management software can go a long way to lighten the load. Schedule a demo with our team.
Make the Most of Inventory Management With Finale Inventory
Whether your company relies on a push system, a pull system or a combination of both, Finale Inventory can help you stay on top of inventory management and maximize your profits. Our experienced domain experts can work with you to create a personalized solution to meet your specific business needs. Contact us to learn more or start your free trial today to see the difference for yourself.