Push System: is a system in which we produce goods based on our best projections of what the market

wants. Essentially the production of goods is scheduled and based on a plan with deadlines. We then
push these goods to the market.

»Pull System: is a system in which the production of goods is initiated by the person or organization
who consumes that good.

Essentially, push describes a situation where inventory is pushed to the consumer of the good, and pull
describes a situation where inventory is pulled from the producer by the consumer.

In general, we recommend using a push inventory management system if your business meets the
following criteria:

Push System Application

You’ve been in operation for more than a year: If you’ve been in business for less than a year, you
probably don’t have a large enough data set to accurately forecast demand and account for seasonal
shifts in sales.

You’re profitable enough to take a hit: If your business is well established, offers a lot of products, and
has a healthy bottom line, you can afford to take a few minor hits if your forecasting is off.

You handle a high volume of sales: If your product flies off the shelf, having excess inventory isn’t such a
big deal (since you can be confident your product will turn around quickly in the future).

You deal with high manufacturing fees: If your manufacturer charges high fees on each order, it may be
more cost-effective to order in bulk and risk the losses associated with overstocking on unsellable
product.

In our opinion, a pure push inventory system is probably best for larger small businesses that have a
good handle on how inventory turns within their business. If you’re a small startup or a new main-street
business, you may want to go with a hybrid push-pull system.

A pull inventory management system may be right for your business if any of the following apply:

Pull System Application

You don’t have a lot of storage space: If you don’t have the room to store tons of product (or don’t want
to pay more storage fees than necessary), a pull system can help you minimize the number of items you
keep on the shelf.

You have minimal working capital: If your company doesn’t have the cash to buy thousands of products
at a time, a pull system can spread your costs out more evenly.

You’ve sold your product for less than a year: If you don’t have a large enough data set to predict
demand for your product, a pull system can help you minimize losses by tying up less of your capital in
unsellable inventory.

You have a small clientele: If your product isn’t selling by the thousands, there’s less risk of running out
of stock when using a pull system.
You work with a local manufacturer: If you don’t have to worry about shipping your inventory from an
international manufacturer, you can replenish stock more quickly and pay less in shipping costs.

Your manufacturing fees are low: If your manufacturer doesn’t charge high fees on each order, it’s
easier to place frequent orders with fewer items without driving up the cost of production.

Generally, we think most main-street businesses can run a pull inventory system without any major
mishaps.