Tweak push vs. pull for supply chain benefit

Combining push and pull techniques, rather than opting for one or the other, can aid supply chain planning. Via a hybrid approach, in which forecast data are integrated into a pull-based scheduling system, one drugmaker reduced finished goods inventory by 50 to 70 percent, depending on product line.

The unnamed manufacturer used the hybrid to manage production scheduling across multiple plants, some in developing economies, according to pharma ops specialists at McKinsey & Co. The secret, they say, is deciding how much product to make based on permanent versus disposable kanbans--the lean production signals (usually cards or software messages) that drive upstream production.

McKinsey finds that forecast error and demand variability are the key factors. Use 100 percent permanent kanbans when forecasts are poor and demand variability is low. The consultancy has developed an empirical formula that determines the percentage of permanent kanbans for all intermediate cases. The trusted portion of demand can be 50 to 80 percent of the total, depending on product portfolio, market dynamics, and supply chain characteristics.

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