Pull Production: Have you achieved global maxima?
In one of my earlier blogs, I had mentioned the pitfalls of using a ‘Pull Production’ in case of a remanufactured product where there is a combination of new and salvaged percentage of components. Even with a new product manufacturing and pull production, you may not have optimized your global supply chain.
Typically when we talk about a pull production, we see it from a firm’s viewpoint and hence the firm is able to make substantial improvements in terms of holding lesser inventory. But somewhere in the supply chain, one of the partners is actually bearing the brunt of holding excess inventory. So in this case what we have achieved is local maxima and not global maxima.
This leads to the argument that as a company why should you care to achieve global maxima when you have made substantial savings by achieving local maxima. If as a company, you think that you can bully your channel partners to do so, you can still continue with this practice. But in the long term this may backfire as we move more and more towards a collaborative workspace.
Let us accept the fact that with an ever changing business scenario, speed is the key and it is very difficult for a company to singlehandedly respond to market changes on a sustainable basis. What is required here is a collaborative environment where the partners can manage the lesser critical portions of the supply chain.
If we look at maximizing the global optima, we need to look at the supply chain from an end to end perspective with the role played by each partner. And there needs to be an incentive for the partner to take risk and store excess inventory to avoid hiccups in the chain. What this boils down to is to compensate the partner for this risk. After all the bankers must have told you that more the risk you take the more you gain.
Read more - http://infosysblogs.com/oracle/2009/01/is_pull_production_the_final_w.html
Comments
Sandeep, I think you have added a new dimension to the whole idea of pull and JIT.
The main reason we have inventory is because of uncertainty (tho' there are n other reasons). If the entire supply chain collaborates and the end consumer demand is accurately forecasted and driven across the supply chain, then pull can be used in a better way.
Still when we say pull or push, it's the degree of how much we are doing 'push' and how much 'pull'. It's kinda not possible to entirely be 'pull'.
Good post !
Posted by: Kartik Chandrasekharan | March 4, 2009 5:34 AM