Assignment Description for Pull-Push Simulation

Solutions and Rubrics

A key issue in Production Planning and Inventory Control is the choice of
mechanism that triggers production in any process or at any workstation (an
area where a particular task or set of tasks is done). I.e., if I’m responsible for
a workstation in an operating process, how do I know specifically what to
do? For example, in a manufacturing process that makes components for
three models of computers (laptop, desktop, tablet), and that process
requires some changeover time to switch production from one model to
another, when I finish a batch of one model, how do I know what to do next?
The answer to this question has profound implications for the ability to meet
demand, for inventories, and for capacity utilization. There are two basic
mechanisms that are common in practice – PUSH and PULL.

A PUSH system relies on a detailed schedule, typically prepared well in

advance by Production Planning staff, for each workstation that specifies
what is to be produced at each time of the day. For the example above, a very
simple PUSH system would say,

“Make a batch of x components for the laptop model, then change over to y
components for the desktop model, and then when that batch is complete,
change over to, and make a batch of size z for the tablet. Repeat this cycle for the
day.”

A PULL system, in contrast is reactive, typically to the workstation, which

immediately follows it. E.g., if, in the production of these computer
components, task A is followed by task B, workstation A will work on
whatever model is needed most by Task B. A typical PULL model would
thus dictate,

“Whenever you finish a batch, ‘look’ downstream and see what task B is
running out of, and then change over to, and make a batch [specified size] of the
model that B has least of. If B has enough of everything [specify what’s ‘enough’],
then stop production”

Assignment Objective:

• To give students some intuition about production flow in a

complex, multi-stage process, and how that flow is influenced by
bottleneck and production triggers;

• To contrast the dynamics of PUSH, PULL, and mixed systems;

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 • To explore the relations between batch size and set-up times in
those systems.

Simulation Description
This is in some ways a complex process, but it has numerous simplifications
compared to many real world processes, for example, we ignore any
transport time between workstations. Every workstation follows a strict
batch discipline – batches only move when the entire batch is complete. Each
workstation has a batch size, a change-over time (denoted “set-up” time), a
run time, and is either set to PUSH or PULL. The user can change any of
these parameters for any of the workstations. For simplicity, there is a
universal settings box at the top of the screen that the user can employ to
make changes to all workstations at once. Also notice that the user can
change “Run time per unit”, but that it can only be changed by using this
universal settings box. It is pre-loaded with a value of 4 minutes for all
scenarios.

The parallel workstations that feed a single downstream workstation are

meant to be working on components or subassemblies that must be
assembled at the next workstation before it begins its work. Thus, for
example, workstations G and H must both finish their work on a batch of the
same model before both batches can be delivered to L. They are immediately
combined at L and go into L’s “raw material” inventory (the quantity of
which is shown by the colored bars to the left of each workstation) and
become part of the system’s work-in-process inventory. In the same way, the
subassemblies at O, P, and Q are combined (instantaneous, in this
simplification) to become finished goods at the retailer. Think, for example,
of Dell, which combines multiple components and subassemblies to produce
various computer models.

Using the above example as an illustration, we have tried to make this

process more concrete by picturing the finished product as one of three
models of computer. However, in this exercise, the customer arrives and
expects the product to be on the retail shelf (e.g, Staples). Any product
demanded by a customer is considered a “stockout” if it is not in finished
goods at the retailer when the customer arrives.

Customer arrivals follow a Poisson process with mean inter-arrival time of

ten minutes. The customer chooses a model at random, with all three models
being equally likely. This variation in demand patterns causes some
fluctuation in the performance measure results from run to run. The demand
process has autocorrelation built in, to reduce the variation in mix. In
particular, the same model can’t be demanded twice in a row, which

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confines the variation to a level that shouldn’t interfere with student
learning.

Work-In-Process (WIP) inventory cost is $30 per unit (an obvious

simplification, since it would build from far less than that for simple
electronic raw materials to far more than that for complex subassemblies).
Finished goods inventory, at the retailer, are valued at $300 per unit.

The exercise runs ten hours per day, seven days per week, for a week. This
results in average demand of (4200 minutes/10 minutes) 420 units. That is a
long-enough run to dampen the worst variation.

See the “How-To-Play Instructions” for more detail on the specifics of the
model and the exercise set up.

QUESTIONS:
Question 1 (15 points)

1. Alter Scenario 2, so that workstation I has a 25-minute set-up time (all others
with 20 minute set-up times and batches of 5 units for each of the three
models, and all workstations set to PUSH). Before you run it,
a. Where is the bottleneck? (3 points)

Answer: It should be clear to any operations student who has learned bottleneck
analysis that, by inspection, the bottleneck is the slowest at workstation I. If we look
at the average processing time per unit, all other workstations run at an average per-
unit time of:

(20 minutes setup time +20 minutes run time)/5 units

or 8 minutes per unit. For the bottleneck, workstation I, the average time per unit
(using the same arithmetic) is 9 minutes per unit.

b. At which workstation(s) do you expect the lowest capacity utilization? (3

points)
Answer: In a PUSH system, every workstation follows its schedule, and we’d expect
100% utilization. However, with station I as the bottleneck, the workstations that
depend on it (M and P) will sometimes be starved (and thus idled) and therefore we’d
expect their capacity utilization to be below 100%. Running the simulation confirms
this, with the average utilization of these two stations at 89%.

c. Will the process be able to keep up with demand? (3 points)

a) Yes

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 b) No

c) Can’t tell from the information provided

Answer: On average, customers arrive every ten minutes while, working at the
bottleneck rate, 9 minutes per unit, and, while we’d expect the system to be able to
keep up with demand, uncertainty clouds the issue. Running the simulation shows
that the variation is, indeed, small enough that the number of stockouts (compared to
the average weekly demand of 420 units) is zero or very small. Indeed, the system
runs at a rate faster than demand, so finished-goods (FG) inventory grows steadily
over the week.

d. Where, if anywhere, will work-in-process inventory (WIP, shown as a

workstation’s “raw material”) build up? (3 points)
Answer: Since the upstream feeder of bottleneck station I (workstation C) is
controlled by a PUSH mechanism, it will continue to pump material into the bottleneck
whether it needs that material or not. Thus, we’d expect that WIP would build up at
workstation I. Running the simulation supports that expectation.

Now run the exercise. When you have a sense of how the process works, click on
the fast forward button to run the exercise to the end of the week. How do you
explain the results? How would you now answer the questions above?

e. The cost of WIP shown in the performance results seem to be far too
high given the WIP that you can see. Where is this “hidden” WIP? (3
points)

Answer: Strangely, however, the WIP at workstation I seems to be no more than 40

units per model. Because we expect that WIP to increase steadily during the week, the
end-of-the week results should represent the maximum WIP, rather than the average
WIP. So, the average WIP is below 120 units of intermediate product. At $30 per unit
WIP cost, the upper bound on the WIP cost would be $30 * 120 = $3600. The
simulation shows the WIP to be more than twice that. Where is “the hidden”
inventory? The clue to discovering the answer to this is to recognize that the entire
“line” C-I-M-P runs slower than the rest of the system, because of the bottleneck at
station I. Thus, finished inventory will build up at workstations O and Q, waiting to be
matched to a batch from the slower workstation P. This inventory is sizeable.

Question 2 (15 poins)

Now click on the “push” arrow on the upper right to change all workstations to
PULL. Answer questions (a) – (c) as in question #1, and follow the same directions.
What is different? Why?

a. Where is the bottleneck? (4 points)

Answer: Pull systems don’t change the bottleneck, or its effect on output. Workstation
I remains the bottleneck, and we’d still expect the process to run at the bottleneck
time of nine minutes per unit.

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 b. At which workstation(s) do you expect the lowest capacity utilization? Do
you expect the average capacity utilization to be (a) higher than in
question 1; (b) lower than in question 1; (c) the same as in question 1; or
(d) need more information to be able to answer. (5 points)

Answer: (b). Again, the lowest capacity utilization should be at those workstations
that are starved by the bottleneck. However, in a PULL system, workstations will
occasionally shut down because their “customers” don’t need product. Thus, other
workstations will occasionally be idle, and we should expect system-wide capacity
utilization to be lower. Does this lead to more stock outs?

c. Will the process be able to keep up with demand? (3 points)

a) Yes

b) No

c) Can’t tell from the information provided

Answer: (a). A PULL system responds faster than a PUSH system to downstream
demands. A PUSH system follows a schedule, independent of what “customers” (real
customers or the downstream workstation) needs. In this case, rewarding high
utilization does nothing to better serve customer demand, but simply build inventory
(as we saw in question 1)

d. Run the exercise again, two or three times. What changes? Why? (3 points)

Answer: Because there is variation in both the arrival pattern and what model
customers demand, we should expect that there will be some variation in the
“results”. Much like real life, we would not expect one week to be exactly like the
next.

Questions 3 and 4

3. Go back to the values of question 1 (all PUSH). If you could change one
workstation to PULL, which would it be to reduce total inventory cost
without incurring stock outs? Simulate to test out various options. (From here
on, if you like, you can choose “Run to End” rather than “Simulate”) Which
is best? Why? (10 points)

Answer: P. The most effective overall view of this system is as three “lines” that lead
to the retailer. With the bottleneck at workstation I, the “middle” line will be the
bottleneck. Thus, any changes must be made to this “line”; workstations C, I, M, and P
are the only ones worthy of consideration. From question 1, we know that WIP
inventory will build up at any workstation which is preceded by a PUSH workstation.

4. Now set workstations C, I, M, and P to PULL, and run the process again.
What happens? Why? Why is the WIP inventory cost so much higher? (10
points)

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Answer: We can verify all of the choices (C, I, M, and P) to ensure that none result
in stockouts. We should pay particular attention to the resulting WIP Inventory costs
as they experiment:

1. C at PULL: finished goods inventories build up, but WIP at workstation I is kept
in check; total mean inventories are in the low $20,000’s range.

2. Workstation I and M are worse. They are symmetric; thus, setting either one to
PULL has the same effect: WIP builds up at workstation I, without reducing the
finished goods that build up. Total average inventories are around $25,000.

3. Setting workstation P at PULL limits the finished goods inventory that goes to the
retailer and prevents the build-up of expensive finished goods inventory. This comes
at the expense of greater WIP (at workstations I and P, totally around $15,000). This
is often the configuration chosen in practice, particularly if the retailer has the power
in the supply chain. Who pays for the WIP is often the subject of much supply chain
dispute and animosity. Note that, in this particular simulation, WIP is valued at only
10% of finished goods. Where WIP is valued more highly, workstation C will begin
to dominate workstation P as the “one” at which PULL is more valued. With the
entire middle “line” set at PULL, we’d expect “visible” WIP to be quite small. The
“invisible” WIP at workstations O and Q still dominate. Still, this is the best
configuration of the four tested in this question.

Question 5

Now run the Default Scenario 1 with all workstations set to PUSH, and answer
questions (a) – (d) of problem #1. (10 points)

Answer (a) : Again, the bottleneck is the slowest workstation, again I. As in earlier problems
all other workstations run at an average per-unit time of 8 minutes/unit (Except for
workstation Q, which runs at

(12 minutes setup time +20 minutes run time)/5 units

or 6.4 minutes per unit, and will thus be idle more often. For the bottleneck, workstation I,
the average time per unit (using the same arithmetic) is 9.6 minutes per unit. This is
dangerously close to the demand rate of 10 minutes per unit.

Answer (b): As we saw in question 1(b), in a PUSH system, every workstation follows its
schedule, and we’d expect 100% utilization. Again, with I as the bottleneck, the
workstations that depend on it (M and P) will be sometimes be starved (and thus idled), and
thus we’d expect their capacity utilization to be below 100%. And the fast workstation Q is
even idler.

Answer (c): If this were a deterministic system (i.e., one without uncertainty), the average
system cycle time of 9.6 minutes per unit, lower than the demand rate, would allow the
system to keep up. But, here, uncertainty gets in the way, and stockouts will be non-
negligible. If you run the simulation several times, you’ll see that, indeed, the number of
stockouts varies quite a bit, but can easily run 10% - 30% of the average weekly demand of
420 units. Here, with the system unable to keep up with demand, finished-goods inventories

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will be much smaller. And, retailer inventories will usually be unbalanced – the inventories
of the model(s) in which we’re stocking out are depleted. The other(s) will grow.

Answer (d): Since the upstream feeder of bottleneck station I (workstation C) is controlled
by a PUSH mechanism, it will continue to pump material into the bottleneck, whether it
needs that material or not. Thus, we’d expect that WIP would build up at workstation I.
Running the simulation supports that expectation.

Questions 6 and 7

6. Now, run the process as all PULL. What changes? What doesn’t change?
Why? (10 points)

Answer: With the bottleneck rate running at 96% of demand, there’s little hope that
the system will keep up. However, with all resources focused on making what’s most
needed, stockouts will tend to be smaller than in the mirror PUSH system. (You may
need to run the simulation several times to see this trend.) Interestingly, even while
focused on meeting demand, there will be times when there are sufficient inventories
to do so, and PULL workstations will stop producing so that utilizations will be in
the low 80% range. This is an important seeming paradox in operating systems:
When the system cannot keep up with demand, why is it that the best systems still
run with less than 100% utilizations. The following problem (7.) demonstrates why
that is true.

7. Without changing any of the process times, what could you do to improve
the process? Run the exercise to test out various alternatives. What’s the best?
(10 points)

Answer: In a nutshell, we want to bring the system back to a cycle time of something
closer to 90% of the demand rate, and reproduce the conditions of question 2. Note
that we have been calculating the system cycle time as the cycle time of the
bottleneck, equal to

(set-up time + 4* run time) / batch size

If we can’t change the numerator, perhaps changing the denominator – batch size –
would help us. We want something like

(28 minutes set-up time + 20 minutes run time = 9 minutes /unit) / batch size

Thus the best batch size for workstation I (the others can remain unchanged) is
greater than 48/9. A batch size of 6 is the smallest that meets this criterion. Running
the simulation verifies that this brings stockouts down to zero (or close to zero).
Indeed, even running this system with station I’s batch size at 6, and all stations set
to PUSH meets demand, albeit with higher inventories.

If we want to reduce batch sizes further, we could set workstation Q’s batch size to
3 without stocking out.

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Questions 8 and 9

8. Now, make the system run significantly faster. In the upper right corner of
the screen, there is an input box to change all set-up times. Change them all
to 15 (minutes). Then go to workstation I, and change its set-up time to 20
minutes. Change all batch sizes back to 5 units. This process now has every
workstation setting up five minutes faster than the process that you started
with in question 1. Run this process in both all-PUSH and all-PULL
configurations. What do you see? Why? (10 points)

Answer: At this point, the results should be no surprise. While workstation I remains
the bottleneck, the system now runs at 8 minutes per unit, significantly faster than
the demand rate. Thus, whether PUSH or PULL, there are no stockouts. PULL keeps
inventories down, with utilizations only averaging 70%. In PUSH mode, utilizations
run close to 100% (except the stations following the bottleneck), but total inventories
run six times higher.

9. Without changing any of the process times, what could you do to minimize
batch sizes, while still keeping stockouts minimal? Run the exercise to test
out various alternatives. What’s the best? Is all PULL better than all PUSH?
Along what dimensions? (10 points)

Answer: This is an interesting question, with seemingly counterintuitive results. From what
we’ve observed above, we know that we need to set the bottleneck’s (workstation I’s) batch
size to at least 4, because at a batch of 3, the system cycle time would be

(20 minutes set-up time + 3*4 minutes run time) / 3 units

which is more than 10 minutes per unit, the demand rate. At a batch size of 4, the system
cycle time is

(20 minutes set-up time + 4*4 minutes run time) / 4 units

or 9 minutes per unit (90% of the demand rate), which, from our observations above, seem
ideal. The other workstations are symmetrical, so we’d expect that their batch sizes would
be identical. How low can we go? At batch sizes of 3, their cycle times are

(15 minutes set-up time + 3*4 minutes run time) / 3 units

or, again, 9 minutes per unit. Perfect. At a smaller batch size, their cycle time exceeds 10
minutes per unit, so the minimal workable batch size is 3 for all workstations other than I.
We can verify this by running the system with all workstations set to PUSH. (Make sure to
set all station batch sizes to 3, except station I which should be set to 4.) Run the simulation
a few times. As you’ll see, stockouts are zero or very small, as we would predict. Now
switch all workstations to PULL, and run the simulation several times. Surprise! While, as
we’d expect, finished goods inventory drops, stockout increase! Why is this? Note that with
station I’s batch size at 4, and all others at 3, all workstation cycle times are the same (9
minutes per unit). Thus there is no bottleneck; the system is perfectly balanced. This is

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perfect for a PUSH system – the balance allows a rhythm to be established and continue
throughout the simulation. Note that all workstations run at 100% utilization.

When we switch the workstations to PULL, we destroy this balance. Note that average
utilizations are around 90%. This is because, approximately 10% of the time, the
downstream workstation doesn’t need product. (note that except for I, production for an
upstream workstation doesn’t trigger until the downstream workstation’s inventory of a
model drops to 2 units.)

There are two ways to think about the impact of this:

1. At 90% utilization, we are losing 10% of our productive capacity. A theoretical cycle
time of 9 minutes/unit (60/9 = 6.667 units per hour) becomes an actual cycle time of 10
minutes/unit (90% * 6.667 = 6 units per hour). With uncertainty, we can’t keep up with
demand.

2. With workstations becoming idle whenever their downstream counterparts haven’t

triggered the need for product, the balance discussed above is broken, and shifting
bottlenecks move through the system, confusing product flow. This is an important
example. While PULL systems will generally outperform PUSH systems, this is not
universally true. The key management decision for this system is whether the substantial
drop in finished goods inventory is worth some (relatively small, on a percentage-wise
basis) stockouts.

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