Agile manufacturing: what it is and how it works
If you’ve been around the business world for long enough, you’ve heard plenty about something called agile methodology. Here’s how it applies to manufacturing.
Have you heard of push and pull manufacturing? If you run a business that delivers physical products, you already use one or the other (or a combination of the two) — regardless of how well-versed you are in their meaning. Here’s everything you need to know.
The terms “push” and “pull” come from the supply chain management (SCM) world.
In push manufacturing, businesses produce products based on demand planning. Production is pushed out to meet customer forecasted demands, even if those customers have not yet placed orders.
In pull manufacturing, production is based on actual customer orders. As soon as an order arrives, work begins to manufacture that product. There is no predicting or forecasting involved. In a pure pull system, no product is made until there is an order for it.
Those are the basic definitions, but there is a lot more to learn about both before you try to decide which is right for your company. You might need to see some push vs pull manufacturing examples to understand — and is there a third option, somehow combining the best parts of both?
Below, we’ll dig into the specifics of push and pull manufacturing, how they differ, and the benefits of using a hybrid approach supplemented by some powerful ERP and MRP software solutions.
Pretend that you run a small company that sells widgets:
In push systems, you would produce 1,000 widgets every day. You would store the 900 extras in inventory until they are needed. When an order arrives, you would pull the necessary widget(s) from inventory and ship them to the customer.
You would then have your workforce replace the widgets in inventory, so you always have 900 on hand.
The main advantage of push manufacturing — also known as make-to-stock (MTS) — is that it reduces the time between when an order arrives and when the customer receives the product.
In our widget example, if a customer orders 10 widgets, those 10 can be taken off the shelf and shipped immediately. The customer does not have to wait for you to produce the product they want. That can be a significant advantage, especially in time-sensitive industries.
The main disadvantage of push manufacturing is that it can lead to high inventory costs. In our widget example, you are paying your workforce to produce 900 widgets, even though you might only sell 100. That extra 800 widgets sitting in inventory cost money.
Excess inventory takes up space, which could be used for other things and they tie up capital that could be used elsewhere in the business.
On the other hand, in a pull manufacturing system — also known as make-to-order (MTO) — you would produce 100 widgets per day, the number you sell on average. When a customer orders 10 widgets, your workforce produces those 10 specifically for that order.
The advantage of this manufacturing system is that you never have any inventory.
You are only producing what you need when you need it. This is sometimes referred to as just-in-time inventory (JIT) or the Kanban pull system, and can still come with some disadvantages. It can lengthen manufacturing lead times, for instance.
In our widget example, if a customer orders 1000 widgets, it will take 10 days for them to receive their product. That can be a big problem if the customer needs the widgets tomorrow.
Also, in a pure pull system, your workforce and production facilities can often be left idle. It can also lead to huge delays if a supply chain issue arises and you can’t get the raw materials you need to produce your product.
Push manufacturing would be the way to go in a world where you don’t have to pay for warehousing, inventory, or even raw materials until you’ve sold your product.
You produce what you can sell and store the excess inventory until it’s needed. When an order arrives, you fill it in from inventory and then replace what was sold, so you always have stock on hand. But that’s not the world we live in, so pull manufacturing can also be an appealing solution for businesses that have trouble developing accurate forecasts or don’t have the capital to afford inventory sitting on the shelf.
For many small businesses, this is the case. They use a pull system like manufacturing ERP software for small businesses because it’s affordable and helps them manage this inventory control.
There may be a middle ground developing that leverages the benefits of both push and pull methods of manufacturing.
In this type of system, you would keep a small amount of inventory on hand to cover unexpected spikes in demand and fill customer orders quickly. But you would also produce items to stock the shelves based on historical data and customer trends so that you’re not caught unaware when your demand forecast predicts an uptick.
This hybrid push vs pull manufacturing strategy could give you the best of both worlds:
The ability to quickly fill orders and have products available when customers want them, without tying up all your capital in inventory that may never sell
The challenge is maintaining the supply of materials and components needed to support the production of goods when you want to keep a certain number of products on hand while also facing a variable customer demand.
It can become expensive to maintain (and train) an inventory management team that stays on top of that without the help of comprehensive software.
That’s where solutions like Katana come in, with end-to-end enterprise resource planning (ERP) and materials requirement planning (MRP) technology.
By coordinating all the moving parts of your manufacturing operation, from your supply chain system to sales and customer service, you can develop a lean and agile organization that’s responsive to market changes.
And by tying together all the information about your customers, products, inventory, and suppliers, you can identify patterns and trends that would be difficult to spot otherwise. That way, you can make adjustments to your production process as needed so that you’re not overproducing or underproducing goods.
You can deliver the best of push manufacturing by having goods available when your customers want them, and the biggest advantage of pull manufacturing is that manufacturers can leverage a pull system to reduce waste and maximize efficiency.
What’s more, you can do all this without relying on overworked (and often error-prone) humans to keep track of everything manually. That’s the power of a well-designed ERP system.