To fulfill customer demand in the most efficient, cost-effective way, companies can use push- or pull-scheduling or something in between. Which one works best? That depends on the characteristics of your product and market.
Pull Scheduling Characteristics
Most people have purchased a Coca-Cola® soft drink. After all, it has wide usage and practically infinite demand. And while this beverage’s secret formula is legendary, by and large, it’s simple to produce. It has two main ingredients, sugar and water, which are both readily available.
This ubiquitous soft drink exemplifies the characteristics of products that fit best with pull scheduling. Businesses usually make them on high-speed production lines without stopping for changeovers. Their objective is to build inventory as fast as possible to meet predictable daily demand. The challenge they face centers on scheduling labor as efficiently as possible.
Push Scheduling Characteristics
In contrast to Coca-Cola®, it’s probably safe to assume that few people have purchased an aircraft. There’s limited demand.
An aircraft is like the Rubik’s® cube of scheduling—it takes careful planning to sync all the requirements of supply and demand. That’s because you need a myriad of parts from multiple suppliers, likely located around the globe, to build one. Also, many required components have long lead times. Finally, manufacturers must customize an aircraft to each customer’s needs.
Adding to the challenge, manufacturers cannot sit back and wait for the customer to specify all of their requirements before they start production. If they did, lead times would exceed customer requirements. While customers understand it may take a few months to fulfill orders, they are unwilling to wait a year or so. One-piece flow, where you order the parts when customers place their orders, is not possible because there’s a disconnect between customer expectations and component lead times.
Such a lean manufacturing process would not only force customers to wait too long, but it would also be inefficient, expensive and impossible due to minimum order quantities. For instance, you cannot buy one casting if your Chinese supplier is equipped to sell and ship them in quantities of 100 or 1000. Even if the manufacturer made an exception, the production and shipping costs would be exorbitant.
Because of their small volume and complexity, aircraft fall naturally into a push schedule. Businesses generally produce them in a job shop with frequent changeovers. To conquer lengthy lead times, they order some components and put together common sub-assemblies before receiving orders. Then, as they lock into a customer’s specific needs, they customize the aircraft, adding, for example, the upholstery and design elements that reflect an airline’s brand.
The Push-Pull Hybrid
Not all manufacturing situations fit neatly within either the push- or pull-scheduling buckets. They can fall anywhere on the push-pull spectrum. For example, a food manufacturer may make mushroom soup that they brand in a few ways— their own label plus those of several supermarket chains. The manufacturer has a good idea of the amount of soup that they need each month. They are less sure, however, of how to package it to meet demand. As a result, they will likely choose to mass-produce the mushroom soup and inventory it in unlabeled cans until orders materialize. Then they can quickly label the cans and ship them out when customers place their orders.
Another complexity is that the manufacturer is unlikely to be producing mushroom soup 24/7 because they also need to produce other types, such as cream of celery and tomato. Rather than running the soup on a non-stop production line, changeovers are necessary between batches. And since you can switch from mushroom to cream-of-celery soup more easily than switching from the brightly colored tomato soup to the lighter cream of celery, you must plan ahead for changeovers.
While the mushroom soup leans toward the pull schedule in terms of its simplicity, it exhibits some push characteristics due to its customization (however minimal that may be) and changeover requirements.
How to Schedule Your Production Effectively
The purpose of the sales and operations process is to achieve the optimum balance between holding inventory and the cost of labor, equipment and space.
To attain an efficient, cost-effective process, you need to align your sales forecast with operations, producing what you expect to sell. To do so, you need to evaluate the trade-offs between:
- Investing labor and materials in the wrong inventory
- The opportunity cost of not having product when the customer wants it
- The cost of ordering components as needed versus taking advantage of economies of scale. For example, it does not make sense to order one casting at a time from China and is likely not even feasible with minimum order quantities.
Once you understand the trade-offs, you can evaluate your strategy, weighing the risks and rewards you would derive working from each point along the push-pull scheduling spectrum. You need to find the spot on the graph where labor efficiencies, equipment efficiencies, inventory holding costs and demand requirements intersect. If necessary, you should also determine the best way to handle changeovers between batches.
To perform an analysis that enables you to make informed decisions, you need an effective management system that harnesses the data and provides the analytics you require. It should measure how well your business complies with procurement, inventory, maintenance, and production plans and the results of such compliance.
Once you implement your scheduling strategy, managers must revisit the analysis regularly, perhaps monthly or seasonally depending on the business, to identify variances and make adjustments. When they do, they should ask:
- Do we have too much inventory?
- Are we meeting customer demand?
- Overall, are our assumptions correct?
- If necessary, how do we course-correct and get back on track?
- Does our scheduling strategy still fall on the right place on the push-pull scheduling spectrum?
Clearly, it can be complex to align supply and demand. Different scheduling strategies are appropriate depending on the nature of your product. However, by determining the right strategy, measuring it with an operating system, and adjusting as necessary to variances, you can increase your efficiencies and boost your bottom line.
