Thursday, November 17, 2011

Lean Operations Management: Push or Pull?

When we saw the Boeing system in action, it was evident to us that the rate at which the incomplete airplanes traveled on the assembly floor was entirely dictated by the demand for aircraft from the consumers (i.e. an airline company would form a contract with Boeing to produce a certain number of airplanes in a certain amount of time). What if, however, production is NOT dictated by demand? What if production is driven by the amount of input/raw material available for production?

I dug up my old operations management textbook to learn more about lean processes. In this book, they have a section on lean operations modeling that directly describes the differences between push and demand pull.

Under demand push, production is based on several assumptions:

Information about process times, inventory, and product specifications must be accurate
Forecasts of finished goods must be correct
No variability in processing times

Sounds like a lot of big assumptions doesn't it? It should. Based on what we learned about demand variability (aka the Bullwhip Effect) and forecasting methodology, it shouldn't surprise us that these assumptions are rarely met in the real world.

The alternative is demand pull. Pull stipulates that when a customer orders something, each station in the production process reacts to a "downstream" signal from the buyer.

There are 2 requirements:

Each process must have a well-defined "customer" (that is, the thing doing the ordering)
Each process must produce only the quantity needed

Here's a site that illustrates the differences:

In a Push scenario, if we have 100 of A and 100 of B, we'd make all of A and then all of B, regardless of demand.

In a Pull scenario, someone would tell us to make 100 of A and then we would wait for further instructions on what to do next. In particular, a lean system relies upon the kanbans to facilitate this interaction--"consumers" send down their specific needs and the "supplier" meets them.

There are obviously different scenarios in which push or pull methodology would be applicable (mostly related to the demand from consumers). However, it behooves us to understand how the demand is structured, and whether or not we meet the assumptions for push and pull. Can you think of industries that fit either methodology?

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