(Notes from a talk at a Panel Discussion @ S P Jain Institute of Management and Research)

Bob Dylan could not have been more apt and relevant today with his song “times, they are a-changin’ ”. With the advent of every new device and technology, the pace of change is increasing and business need to evolve constantly to stay relevant. One such phenomenon is the transition of the ‘Push’ based business model to a ‘Pull’ based model. While this debate has been live for more than a decade now, certain aspects have precipitated this shift over the last few years. These are :

a. Penetration of the Internet : The internet provided a platform to create alternative business models which didn’t need to follow the traditional produce-store-ship-store-sell model. You could now showcase your offering virtually and fulfil demand without a brick and mortar setup.

b. Growing affluence of the consumer : The new age consumer demands greater variety over a wider range of products. This has led to a proliferation of SKUs and the need to offer choice.

c. Popularity of Social Media : Social networking sites have led to faster formation of consumer preferences and build-up of demand (or vice versa). Secondly consumers have begun to make decisions basis their search rather than rely on messages of mass media.

d. Need to rationalise inventory and material handling costs : Measures to become more competitive will always exert pressure on cost and consequently to cut inventories

e. ‘Push’ can stifle Innovation : The Push system demands adherence to processes and can stifle the possibility to improvise and innovate

The need for moving to a Pull system will manifest itself across the organisation

Classical connotation of ‘Push to Pull’ has always been about supply chain. The phenomenon of ‘whiplash effect’ and examples of P&G, Dell, etc. spring to mind. However, in recent years the ‘Pull’ system has become relevant across the organisation. I did a quick twitter poll and the 2 main functions which were considered critical in this transition were Marketing and Innovation!

- Marketing : Companies are realising that Pull marketing is more sustaining and creates a more stable brand image than traditional push marketing. Some responses from the twitterarti : “you need to attract rather than shove services in their faces” and “the modern consumer is repulsed by the trailing salesman”

- Innovation: Innovation is best driven from the consumer end and success depends heavily on understanding the pulse of the consumer. Open-innovation has been seen in several companies especially Pharmaceutical and Chemical firms.

- Supply chain: The issues here are well established, I will not delve in to them

- Human Resources: The transition of Push to Pull will have to be propelled by people across the organisation; requiring adequate empowerment

The advantages of the transition are well known; i.e. Less wastage, Lower inventories, Increases employee involvement and satisfaction, Dynamic product enhancement and new product introductions, etc. However there are also challenges in……

However there are also some challenges

1. Ability to gauge customer needs and changing trends quickly: If the business model is to be driven by the ‘Pull’ factor, then it is critical to have a good idea of the pulse of the customer and the corresponding demand patterns. This would mean implementing listening mechanisms and close monitoring of demand – which can demand significant investment. Leveraging social media could help to address this challenge

2. Flexibility in manufacturing: Production should be able to respond to changes in a dynamic manner. This would need to be supported by appropriate planning and execution systems

3. Small lot sizes, ruining the economies of scale: A natural corollary (and common pain point) of the Pull system is the need for smaller lot sizes and the ostensible loss of economies of scale. Sure it needs a different approach and management style, but if Zara designers create approximately 40,000 new designs annually, from which 10,000 are selected for production leading to over 300,000 SKUs, I am sure there is a way to manage the complexity profitably.

4. Need for Decentralisation: A quicker response time in the ‘Pull’ system will necessitate greater empowerment across the organisation and decentralisation of decision making. Do you have faith in your front line sales people?

5. Supplier relationships (acceptance): Your suppliers will need to be equally reoriented to suit the demand of the new paradigm. Hence there is a need to educate and train the entire supply chain.

A combination of Push and Pull is desired

Depending on the industry segment, some of these challenges can make a pure ‘Pull’ model impractical. In fact there are several examples of such firms retracting and bringing an element of Push model e.g. Amazon. And others have maintained a mix of the two, e.g. Dell. So while there is a definite case to migrate towards a Pull model, practically speaking, one would have a mix of Push and Pull systems in place.