Impact of the pull and push‐pull policies on the performance of a three‐stage supply chain

Abstract

We investigate the performance of two common operating policies (i.e., pull and push-pull) for a maketo-stock product in an un-capacitated, three-stage supply chain. The pull policy operates based on periodic orders received from the immediate downstream facility. However, in the push-pull policy, while processes upstream of the order decoupling point are managed by the push policy, the downstream processes are managed by the pull policy. Simulation experiments are conducted to examine the impact of each operating policy under a variety of experimental conditions, characterised by demand uncertainty and lead-time variability. Our results indicate that the relative advantage of the two policies is dependent on the type of uncertainty, the level of uncertainty, the inventory control policy and the performance measures of interest. More specifically, while the push-pull policy results in lower inventory, the pull policy yields a better fill rate. This is in contrast to the notion that the pull policy generally results in superior inventory performance.Our findings suggest that firms should carefully consider the level of uncertainty, the inventory control policy and the performance measures of interest when determining the operating policy. IntroductionIt is challenging to manage a multi-stage supply chain in an environment characterised by uncertain customer demand and variable manufacturing and distribution lead-times. In such environments, the performance of a multistage supply chain is manifested in terms of excess inventory, poor customer service, or both. The push, pull and push-pull (referred to as 'hybrid' here thereof) operating policies are the three principal policies utilised to control production and distribution systems (Karmarkar 1990). Whilst in the push policy sourcing and production and distribution processes are purely based on anticipated demand, or forecast, in the pull policy such processes are triggered after the customer order is received (Spearman and Zazanis 1990). Alternatively, in the hybrid policy, processes upstream of the order decoupling point (i.e. point of differentiation) are managed by the push policy, while the processes downstream of the order decoupling point are managed by the pull policy (Pyke and Cohen 1990).While several studies have examined the push, pull or hybrid policies in a single-stage supply chain, evaluation of the policies in a multi-stage supply chain is rather limited and the insights are either incomplete or case-specific (see Masuchun et al. 2004). This can be attributed to a higher level of operational challenges in multi-stage supply chains than in single-stage chains. As such a comparative assessment of the three policies is difficult because the workings of the three policies are distinctly different, and the criteria for evaluating the performance while accounting for the difference in their workings are not clearly outlined.To address the knowledge gap, we investigate the performance of two of the three policies (i.e. pull and hybrid policies), while ac...

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