Do you Push or Pull your process? Better question: Do you think your inventory likes all the bullying?
Hi, I’m James, this is Whiteboard Wednesday, and I’d like to thank the same twenty five people that keep watching there. Okay…
Let’s go to manufacturing, talking about PUSH or PULL, and what do you do?
So, quick overview: With the PUSH side of manufacturing, you’ve got your vendor, you’re ordering probably a typical amount from them, they ship it to you, ship it to your business, and you have to allocate a certain amount of space for it, for storage.
Typically, there’s a lot of storage space being taken up for this. You go through the manufacturing process, and in the end it starts piling up, because we don’t necessarily have a demand for it, we’re just putting out a certain amount of product, trying to push it through. It also means we have more shelf space we’re taking up at the end, until a customer eventually buys it.
Now, as we can see here, the whole problem with a push is we’re starting to push a product through, hoping it gets to where it needs to be, and it will, but we’re also just assuming that the sales will follow. Now that works in some industries, but probably not yours. Why do I know that? I’m just guessing.
But, if we look at the PULL side of manufacturing, and that process… same thing for the most part, but it’s more efficient.
So from the vendor, you’re not just ordering a set amount every time, you’re ordering exactly what you need. You’re going to then process that exact amount, you’re not taking up that much storage space for those raw goods or materials. And then when you have that finished product, you ship it directly to the customer.
Now how does this PULL process work? Well, opposite of the PUSH where you’re just making this product. The PULL works, you’re pulling this product along because a customer has ordered it, so you’re basing it on customer orders as they come in. You’re not trying to guess, you’re not trying to forecast, but going off of the information you receive, and producing that product when it is needed.
It leaves for a lot more lean type of manufacturing. You don’t have so much cash being tied up in just raw goods and inventory, or space even allocated to raw goods or finished products sitting on a shelf.
Now what is the one draw back of this PULL method? You need to make sure you’re using all the information that you have at hand, because as soon as a customer orders a product here, you need to down the line let everyone know. You need to order the right amount from your vendor, you need to make sure you have the right amount of your shelves, you need just enough so that you can keep making that product and there aren’t any stock-outs, there are not any waiting periods for those customers.
In order to do that, you need to make sure that all your processes are as automated as possible, that all your information is up to date, in-sync and dynamically changing, letting you know what’s going on. This process requires you to use some type of automated solution so that you can use it to it’s most efficient pattern possible.
So, remember, with Manufacturing, the PUSH versus the PULL, PULL allows you to stay a lot more lean. It allows you to make better use of your cashflow. It allows you to hopefully help your bottom line, so you’re not tying up resources, wasting space, or just inventory sitting there.
That’s this Whiteboard Wednesday, there’s some dogs barking in the background, and it’s driving me crazy.