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MRP as Pull and Push System

When ever I go for MRP implementation, most often I come across this question. What is the real difference between Push system and pull syst... thumbnail 1 summary
When ever I go for MRP implementation, most often I come across this question. What is the real difference between Push system and pull system? How do we implement JIT, Kanban and other planning systems along with MRP? Can they co-exist? These are typical questions asked during implementation. It is very important, before the MRP implementation these are understood for implementing "an effective implementation process, not just an efficient process".
Efficiency is doing the things right and Effectiveness is doing the right things.

In simple terms, Push system is based on Customer Orders (Demand) and the forecast. Based on the demand, both material and capacity planning is done. Shop floor control is based on the demand and orders. Here both the material flow and the information flow are in the same direction. This is generally suitable for Make to stock situation. MRP is a Push system.

A Pull system on the contrast is based on Made to Order situation. The material is flow is in the reverse direction of document flow. The shop flow control is based on the actual requirements and is close to Just in Time. Pull systems utilize the real demand (Customer Orders received), where as the Push systems are based on the Forecast and build for expected Orders.

So which system is suitable for a given organization? In general the manufacturing units combine both Made to Order and also made to stock situations. There will be forecast errors and there will be Demand variations. Which system is more effective?

A Hybrid system which combines both Push and Pull systems. Careful analysis and planning is required prior to implementing this. In a push system the emphasis is on Material planning and procurement. In a pull system the emphasis is on scheduling. The hybrid system thus makes best use of both material planning and scheduling.

Factors that influence the Hybrid approach and implementation methodology:

Forecast/ Demand variations: Forecast variations determine the extent to which the Push system needs to be in place and the fluctuation on daily demand affects the pull system.

Capacity Constraints: The capacity constraints or bottle necks determine the success of pull systems. Generally, pull systems demand for a modular approach. Otherwise the manufacturing lead time will increase.

Bill of Material (product structure): In most of the organizations I have visited, the BOM is built based on costing requirements. Though there are planning bills, they are practically not used.

To use a hybrid system, it is very essential to identify the boundary of Push against Pull and de couple the Pull system from MRP. In other words, the planning bill should be restricted to plan the critical material requirements and use the pull system for the balance. MRP does well to plan for the material where the forecast variance is significant and also the purchase lead times/Mfg lead times are higher than the delivery lead times. Pull systems will ensure that the products are finished only based on the real orders.

As a thumb rule the low cost and high volume items can be pushed, High cost, low volume parts can be pulled.

Depending on the complexity of products and variety of products, Hybrid approach needs to be defined. Boundary between Push and Pull need to be well defined. As the organization matures, the boundary keeps changing from Push systems to pull systems. The planner plays a key role in determining the boundaries. Shop floor control and the feedback mechanism determine the effectiveness of this approach.