Inventory management is esential to business success. Just by seeing how a company manages its own inventory you can know if a company has profits or losses, that is why an efficient system is so important, since a bad inventory management can generate a very high level of costs making unprofitable to invest. However, not everything has to be analyzed from the point of view of efficiency, since according to the inventory management system you choose you can have different kind of benefits, for instance, in terms of marketing, adopting a pull system (JIT) could be suitable in order to obtain some information from the consumers or increase loyalty in the company as the product is normally a customized product.
So the main question is, which one is the best inventory system?
In my opinion, the answer is it depends. It depends on what kind of product you’re selling. For example, in the case of homogeneous products, it’s natural to follow a Push system since in this type of market, consumers normally want the products inmediatly. Whereas if the product is more customized, consumers are willing to consume the product after since it is harder to find the same product in other stores.
LT is also very important in order to analyze which system is better. For instance if the product has a very high LT, the pull system is not very attractive.
Some companies choose to do a mix (Push-Pull) which normally it consists into follow a “Push” system for the raw products and WIP whereas in the time to assemble the final product a “Pull” strategy is followed. Thus following a “Push” system in the initial stage, the LT is reduced making a “Pull” system more suitable.
By: Félix Xu