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Production and distribution decision rely on long-term forecasting of demands. The demand forecasts used by manufacturers are based on customer orders received from retailer warehouses.
Since the movement of inventory towards the customer happens only if an order is made, manufacturers tend to respond very slowly to demand. Push-based supply chains take longer to react or adapt to the changing marketplace. Such delays create inefficiencies within companies as supply chains are unable to meet the changing market demand patterns and demand for certain products disappears leading to obsolete inventory back in the warehouses. Also the variability in orders tends to increase as they are received from the retailers and warehouses. What happens then is that the company holds excess inventory as safety stock. Excess inventory due to increased variability then creates unacceptable service levels and makes a product obsolete as warehouses cannot accurately match the expected demand to supply (Levi et. al, 2007).
This system indicates that processes are executed in response to a customer order and tend to be reactive in nature. Demand and companies drive production and distributions do not hold any inventory. Manufacturing is only undertaken when the customers make specific orders. Pull supply chain activities depend on fast flowing information mechanisms within the supply chain participants .this information regards customer demand orders (Chopra, 2007).
Levi et. al (2007) states that pull systems are popular as they reduce lead times. This is due to the ability of the chain to almost accurately anticipate and respond to incoming orders. They reduce inventories at the warehouse and retailers. Order variability is also reduced especially at the manufacturers level due to the decreased lead time once variability is reduced, and inventory also decreases as the manufacturer can better match demand to supply hence no need of safety stock.
A pull system is
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