What is supply chain?
Supply chain is the name of all those processes involved in manufacturing commodities. It is the services, goods and even the locations, the finances.
There are two strategies of supply chain.
1. Push supply chain strategy.
2. Pull Supply chain strategy.
- Push Supply Chain Strategy:
Push supply chain strategy is the one which usually involves supplier, the market, who provides good and services to the consumers. In this case the products are manufactured by producer based on unknown demand. It is not necessary that demand is always known exactly. In this strategy demand variation is less, having good economies of scale, low manufacturing costs.
- Pull Supply Chain Strategy:
Pull supply chain strategy is the one in which producer supply commodities on the exact demand available for those commodities. In other words it is the supply which is to meet the known demand. In this strategy demand variations are high, low economies of scale, high manufacturing cost.
How can both work together?
Supply chain works with the collaboration of both strategies. Foe example if there is a product available at the store, the push supply chain is working but if that product is not demanded by the customer then pull supply chain stops. When it stops the equilibrium does not exist, then the whole supply chain is disturbed.
What are the basic goals for the successful push/pull strategy?
The basic goal for the successful push/pull strategy is to maximize the profits. Success is measured by the difference in the revenue obtained from the sale of product and the cost incurred in production of a product. When the revenues are more then it will be successful. When the supply chain is successful it means there will be continuous and nonstop flow of the products, and thus the prices will not go up
Example from real world of successful push/pull strategy:
In a store, when a customer comes and demand for certain product, the store provides that product. After buying that product the money is gone for the further production, the demand is created and thus supply chain goes on and the push/pull strategies goes on in the market. And it is successful if the store provides that commodity and thus maintaining the equilibrium.
So summing up the push/pull supply chain consists of:
- Raw materials.
- And finally the distributors.