Pull-based inventory management has been a widely recognized, effective practice for decades. With a pull-based approach, the signal to replenish downstream inventory is driven by actual demand or usage, rather than by a forecast that pushes products and materials into the supply chain. Yet, in recent years, many companies have been slowly drifting away from pull-based inventory management.
Part of the reason for this drift is that the business environment has changed. Global supply networks are the new norm, with companies getting more and more parts and materials from low-cost suppliers on the other side of the planet, and having them delivered on a slow boat from China. Also, enterprises have become increasingly disaggregated and virtual, which makes supply chains much more complicated and difficult to control.
In addition, experienced operations managers who grew up worshipping at the altar of the Toyota Production System (TPS) and lean are now retiring, handing over the reins to whiz-kid MBAs who put their faith in advanced mathematics and believe that planning and optimization, not pull-based principles, are the truest paths to value. The result has been a marked shift away from pull-based approaches to inventory management, which tend to emphasize simplicity and doing the basics exceptionally well.
As a result, manufacturers are at risk of reverting to a time when inventory processes were out of control, service levels and response times were poor, and there was too much money tied up in too much inventory in the wrong places.