1. LESSON 2 Push and Pull Systems
29 August 2014

2. Lesson Objectives
Upon completion of this lesson, you should be able to:
Differentiate push, pull, and hybrid systems
Demonstrate use of the Kanban tool
Explain the function and benefits of a base-stock inventory policy

3. Lesson Topics This lesson will cover the following topics:
Types of Production Strategies
Kanban
Base-stock Inventory Policy

4. What’s In It For Me?
If you understand push and pull type systems, you’ll:
Be able to tailor questions to the methodology the contractor is using, and
Understand where methodology’s risk will occur.

5. Lesson Introduction
How are push and pull production strategies used by your contractors?

6. Types of Production Strategies
Lesson Topics:
Types of Production Strategies
Kanban
Base-stock Inventory Policy

7. Types of Production Strategies
There are three general production strategies:
Push
Pull
Hybrid

8. Push Production Push production is based on forecasted demand
There are many real-world examples of pure push production
Common when:
Demand is stable (i.e., low demand variability) and the end user won’t wait until you produce something
Make-to-Stock Strategy (Pure “Push”)
Components
Sub-Assemblies
Finished Products
Inventory
Pull
Push

9. Pull Production Pull production is based on actual or consumed demand.
One of the main principles of Lean manufacturing
There are not many real-world examples of pure pull production systems

10. Pull Production (cont.)
Appropriate when:
Demand is unstable, although pull prefers stable demand
The end user does not require instant gratification
The business does not want to risk procurement of the wrong materials or build-up of the wrong end item due to the inventory investment costs and opportunity costs involved
The plant has standard processes and long term supplier relationships
Make-to-Order Strategy (Pure “Pull”)
Components
Sub-Assemblies
Finished Products
Inventory
Pull
Push

11. Pull System Benefits Pull systems:
Limit inventory in a plant or in a pipeline
Reduce lead time through the plant
Make quality problems visible
Give more predictable lead times to customers

12. Push vs. Pull Push Production Hybrid Production Pull Production
Strategy
Make-to-Stock
Assemble-to-Order
Make-to-Order
Based on
Forecasted demand
Combination
Actual demand
Use when demand is
Stable (low demand variability)
Unstable (demand variability)
Use when customers
Want instant gratification or when they don’t differentiate between competitors’ products
They want it fast but also want to have choice in final product
Are willing to wait a short amount of time for their product or want customization
Inventory (finished goods)
Large
None
Limit Work-In-Progress (WIP) in system
Old: Does not limit WIP
Modern: Does limit WIP
Some subassembly WIP no finished Product WIP
Deliberately sets a limit on WIP

13. Hybrid Production Inventory is principally at the Push-Pull Boundary
Make-to-Stock Strategy (Pure “Push”)
Components
Sub-Assemblies
Finished Products
Inventory
Pull
Push
Assemble-to-Order Strategy (“Hybrid”)
Components
Sub-Assemblies
Finished Products
Inventory
Pull
Push
Make-to-Order Strategy (Pure “Pull”)
Components
Sub-Assemblies
Finished Products
Inventory
Pull

14. Question and Answer
This type of production strategy is used when demand can not rely on actual numbers but, instead, has to be forecasted:
Push system
Pull system
Hybrid system

15. Question and Answer
A contractor with an aircraft spare parts contract experiences large demand variability The spare parts use materials and subassemblies that are common across other product lines and have a high probability of use. Which production approach should they use?
Push system
Pull system
Hybrid system

16. Exercise 1: Push vs. Pull Small Group Exercise
Find a partner or work in a trio
Refer to Module 3, Lesson 2, Exercise 1 CMM100_M3_L2_E1_Exercise_FINAL.docx
Read directions on the Push vs. Pull exercise
Complete the activity; be prepared to share your responses
Time allowed: 30 minutes

17. Exercise 1: Push vs. Pull SCENARIO
Custom Cable, Inc. (CC) is sub-contracted to provide shielded cables to Stockton & Gamble, Inc. (S&G) for inclusion in a Light-duty Fighting Vehicle System (LVS).
CC has inventory issues that risk S&G’s ability to fulfill its contract.
At CC’s manufacturing plant:
excessive Work-In-Process (WIP) inventory
most of the workstations appear to be operating at maximum capacity.
CC will release the entire work order in question to the shop floor at once in an attempt to push the job through as quickly as possible.
You meet with CC to discuss Push, Pull, and Hybrid systems and how CC might benefit from selecting the most appropriate system to use.

18. Exercise 1: Push vs. Pull Populate the table Push Pull Hybrid
Push
Pull
Hybrid
Description
Inventory
Advantages
Disadvantages
Conditions when most appropriate

19. Case Study Activity Individual Activity
Refer to the case study’s Domestic Vehicle Ordering and Inventory Management System section (pages 3-5) and The Scion Experience section (pages 14-18)
Identify which production strategy is used to fulfill domestic orders for Toyota’s Scion
Be prepared to share your response

20. Kanban System Lesson Topics: Types of Production Strategies Kanban
Base-stock Inventory Policy

21. A Kanban card is a visual signal that something needs to be done
Kanban System (1 of 4)
Kanban:
A tool used in Just-In-Time systems to control material flow
Limits Work-in-Process/ inventory buildup
Synchronizes
Process steps
Customer demand
Based on visual commands/cues
A Kanban card is a visual signal that something needs to be done

22. Kanban System (2 of 4)
Ex: Inventory is limited to the number of cards between two production steps
Pull tool used in Lean Manufacturing
Nothing is produced/processed unless a demand signal from downstream
is received
Synchronizes/coordinates flow
Between operations
With customer demand

23. Kanban System (3 of 4) Kanban card rules:
A card not attached to goods is a signal to
Produce goods, or
Move goods
If all cards are attached to goods, then
Stop processing at that production step

24. Kanban System (4 of 4) Kanban signals need not be physical cards
Kanban squares
Electronic signals
Empty material racks
Any visual signal that works for
the processes using it

25. Scenario 1: Kanban System
Large Group Scenario
Refer to Module 3, Lesson 2, Scenario 1 CMM100_M3_L2_S1_Scenario_FINAL.docx
Read directions on the Kanban example
Complete the activity as a class

26. Example: Kanban System (cont.)
Legend
Kanban Card
Kanban Card Path
Empty Slot
Card
Empty Slot
Card
Card
Card
Layup
Station 1
Card
Card
Autoclave
Station 2

27. Kanban is a tool used in this system:
Question and Answer
Kanban is a tool used in this system:
Statistical Process Control
Six Sigma
Just-In-Time
Ishikawa Cause and Effect

28. How does a Kanban limit work-in-process inventory?
Question and Answer
How does a Kanban limit work-in-process inventory?
Work is only released when all Kanban cards are attached to items
Work is only released when a Kanban card is available
Work is only released when new Kanban cards are added to the system

29. Exercise 2: Kanban System
Small Group Exercise
Find a partner or work in a trio
Refer to Module 3, Lesson 2, Exercise 2 CMM100_M3_L2_E2_Exercise_FINAL.docx
Read directions on the Kanban System exercise
Complete the activity; be prepared to share your responses
Time allowed: 30 minutes

30. Exercise 2: Kanban System
You are visiting a company that is going through performance reviews and using a kanban to keep the meetings on time.
Answer the following:
What is the drum?
What is the drumbeat?
What is the rope?
What is the buffer?
Is this a Kanban system?
If yes, what device provides the Kanban signal?

31. Base-Stock Inventory Policy
Lesson Topics:
Types of Production Strategies
Kanban
Base-stock Inventory Policy

32. Base-stock Inventory Policy
Base-stock policies:
Limit inventory in the pipeline
Allow control over the total amount of inventory
Are pull systems; as inventory leaves, you release an order for the same amount
Like a Kanban, it keeps a limited amount of
inventory in the system
Commonly used when ordering from parts suppliers

33. Base-stock Inventory Policy (cont.)
Orders are placed:
At constant time intervals
In quantities to keep total inventory in the pipeline and on-hand constant
The key is to determine how much inventory should be in the pipeline to manage the tradeoff between:
Inventory investment
Service level

34. Example: Base-stock Inventory Policy (1 of 3) You need to account for all raw material sitting in the company’s stockroom as well as the raw material in transit due to an order that was placed previously.
Orders (O), Lead Time (L) = 3 weeks
Pipeline Inventory (I)
On order/ In transit inventory
Beginning Inventory (BI) at beginning of week 4
Replenishment order in pipeline
Inventory
Supplier’s Inventory
I Supplier
Company Inventory
BI4company
Order placed on week 3 O3
Order placed on week 2 O2
Order placed on week 1 O1

35. Example: Base-stock Inventory Policy (2 of 3) Procurement needs to remember to eliminate the amount used by production during the period of interest so that an accurate amount of inventory need is calculated.
Supplier’s Inventory
I Supplier
Company Inventory
BI4Company
Order placed on week 3 O3
Order placed on week 2 O2
Order placed on week 1 O1
+ O1
-D4 D4

36. Example: Base-stock Inventory Policy (3 of 3)
Supplier’s Inventory
I Supplier
Company Inventory
BI4Company
This week’s order O4=D4
Order placed on week 3 O3
Order placed on week 2 O2
+ O1
+ O1
-D4 D4
Inventory in system at start of week 4 = BI4Company + O3 + O2 + O1 Inventory in system at end of week 4 = BI4Company + O1 - D4 +O3 +O2 +O4

37. Question and Answer
What is the purpose of a base- stock inventory policy?
Increase WIP inventory at point of origin
Limit total inventory in the pipeline and on-hand
Increase the inventory levels onsite

38. Question and Answer
In which manner are orders placed when using a base-stock inventory policy?
In quantities to keep inventory on hand constant
In quantities to keep total inventory in the pipeline and on-hand constant
In quantities to match on-hand inventory with last year’s inventory levels

39. Summary Having completed this lesson, you should now be able to:
Differentiate push, pull, and hybrid systems
Demonstrate a Kanban
Explain the function and benefits of a base-stock inventory policy

40. Summary (cont.) You can now:
Question the amount of inventory flowing through a system,
Question the amount of inventory flowing across a factory floor,
Question how inventory is controlled in the factory (so that the Government doesn’t pay for excess inventory),
Understand what types of questions to ask for what types of production model is being used