Ordering systems come in two basic flavours: push and pull, plus any number of hybrid systems. All have pros and cons, and each is most appropriate for a specific situation. In this first article in a miniseries on push and pull systems, I will discuss the basics: what exactly are pull and push systems and when would you use either.
Push versus pull
In the push model, “higher”, central levels decide on supply allocation for “lower”, local levels; these decisions are typically based on supply at hand and in the pipeline, and on calculated expected consumption – the latter often approximated, based on (in the case of medical supplies) patient numbers or population data. In the pull model, “lower” levels decide on the necessary supplies for the next supply period, which are then either procured independently or obtained/ordered from the “higher” level.
The basic difference between the two models is the responsibility for timely, complete, and accurate initiation of distribution: in the push model this is the “higher” level, in the pull model the “lower” level.
| Push model | Pull model |
| The “higher” level usually knows better what is available in central stock and pipeline. Furthermore it can “weigh” the needs of the respective elements of the lower level. Consequently, especially in situations of scarce supplies, it can allocate supplies more effectively and equitably. | The “lower” level usually knows better what the expected consumption for the next period will be. Furthermore, it usually knows better what is available in peripheral stocks and what can be procured locally. Consequently, it can assign supplies more efficiently, avoiding the bullwhip effect. |
| If (central) buffer stocks are sufficiently large and the serviced lower level is sufficiently big, fluctuations in availability and consumption can more easily be accommodated by temporary under-allocation. | As the lower level usually knows better and further in advance what expected fluctuations will be, it can tune its orders and procurement more flexibly towards these fluctuations. Consequently, lower (buffer) stock levels are necessary. |
| As higher levels service a larger population than the lower level, they would usually be able to obtain more extensive and specialist knowledge in the field related to the supply line (supply management, pharmaceutics, pharmaceutical market…). Consequently, they will be able to manage supplies more effectively and efficiently. | As lower levels are closer to the consumption than the higher levels, they would usually be able to obtain more extensive knowledge about necessary supplies and quantities, and possible (or impossible) substitutions. Consequently, they will be able to manage supplies more effectively. |
From this table, it will be clear that push systems are best used when pipeline fluctuations and interruptions are rife and unavoidable, when funds tied up in buffer stocks are not an issue, and when expertise is too scarce to be decentralised; and that pull systems come into play in the opposite situation.
Hybrid models: the best of both worlds?
Many commercial manufacturers use a hybrid system. E.g. when you order a Dell computer, your sparkling new machine does not come from stock but will be newly assembled; however, the parts (which are fairly generic and can be used for a variety of different models) are not ordered as your order comes in, but come from a pre-determined stock, the size and composition of which is calculated using expected overall numbers of orders for various models. Dell can do this exactly because many different models can be made from various parts.
We rarely use hybrid systems in global health and aid. In the next post in this series, I will look at the reasons why, and offer some ways in which hybrid models can help us solve some of our most pressing problems.
{ 6 comments… read them below or add one }
Hi Michael,
That is a rather simplified image of aid reality you’re painting here!
I do disagree that hybrid systems aren’t used in the aid sector. They are especially used in the aid sector. The preparedness system is becoming more and more common towards disaster risk reduction and global pre-positioning of emergency goods. Like parts of a Dell computer, blankets, tarpaulins, buckets, mosquito nets and medical emergency packages are also quite standardized these days…
And the call forward system is often used in aid organizations when transitioning from the emergency phase towards the more developmental phase.
Having said that, the supply system of a good INGO is dynamic in the sense it adjusts to the state of the programme, being either emergency, transitional or more developmental or towards disaster risk reduction and preparedness.
Dennis
Thanks, Dennis! I agree that emergency preparedness (almost always) and the transition phase (usually) are good examples of hybrid models, but it is also a very small part of what aid organisations do — and don’t forget that I am writing here not only about aid, but about health systems as well! On the whole, both aid and global health organisations are very reluctant to go to truly hybrid models; for very good reasons, as a matter of fact, which I will discuss in the next instalment, but reasons that are becoming less relevant as we progress, which opens the way for much more flexible and dynamic systems — which, as you rightly point out, is essential for a well-working supply line.
And yes, I totally agree that this is a simplified image — as could hardly be expected otherwise in a 600-word article. If it all were this simple, people like you and me would hardly be needed.
Watch this space!
I’m looking forward to hear these very good reasons!
I hope you will discuss the current funding base of INGO’s and the behaviour of donors. Especially with respect to proposal based fundraising, pooled funds and funding pools.
The UN has created pooled funds in several countries – notably the Common Humanitarian Fund (CHF) in Sudan and the Pooled Fund (PF) in the Democratic Republic of Congo, both of which focus on financing field-level relief and recovery efforts through NGO or UN actors.
UN pooled funds need to be signed off by the receiving governments. In some instances governments will not sign off on pooled funds, because they do not want to acknowledge the problems at hand or because a power vacuum created a situation in which there is not one single power to take into account. In one of such situations in Zimbabwe, a consortium of (I)NGO’s sat down with a group of donors and developed a funding pool called the Joint Initiative (JI) without the use of the UN and as such with no political connotation.
The initiative performed extremely well: of the 16 activity targets in the original proposal, the consortium met or exceeded 13. It is reasonable to believe that (I)NGO consortia could likewise manage comparably large multi-project funds involving multiple donors in other areas. The JI example has also been used with great success in the Abyei area of Sudan and in the UN-(I)NGO cluster system approach, especially beneficial with respect to the logistics cluster development.
See:
1. Wendy Fenton and Melissa Phillips, Funding mechanisms in Southern Sudan: NGO perspectives, Humanitarian Exchange Magazine, Humanitarian Practice Network at ODI, Issue 42, London, UK (March 2009);
2. UN-OCHA, Humanitarian Appeal 2010 – Consolidated Appeal Process (CAP), United Nations Office for the Coordination of Humanitarian Affairs, http://www.humanitarianappeal.net (2010).
Yes, you just hit on one of the reasons for a reluctance to get to hybrid models. Not an insurmountable one, but one that does cause a lot of headaches. More later!
Another point would be overhead funding and a changing view from the side of donors.
See:
1. Lynn Eakin, Supporting Organizational Infrastructure In the Voluntary Sector, background paper prepared for the Voluntary Sector Initiative, VSI Secretariat, Ottawa, Canada (May 2002);
2. OECD, Harmonising Donor Practices for Effective Aid Delivery – Volumes 1 to 3, OECD, France, Paris (2003 – 2006).
Another point would be the organizational structure, which needs to be able to cope with supply chain changes following programmatic changes. Given international NGO’s, I’d look at the geographical matrix structure.
A (almost) last point would be that product segmentation does not necessarily follow the rules of responsiveness, efficiency and implied uncertainty… in the sense that products needed for the different programme phases are not necessarily segmented in line with the subsequent supply chain types and their behaviour.
A really last point now… The changing supply chain types asks for a lot of flexibility from the side of suppliers. The question is whether suppliers are eager enough to think along the same lines as INGO’s when it comes to changing dynamics (and with it management lines and responsibilities) during a programme’s lifetime, changing the supply chain type from disaster preparedness to push, to call forward, to full pull – and perhaps a few times back and forth, depending on the field situations.
Oh man, where and when did you get a sneak peek into my next post in the series? 😉
You managed to hit on almost all points I was planning to make. The only one you haven’t pointed out (and I will do that here before you think of that one too) is the changing technological environment that enables us to deal with hybrid supply lines much more easily. This works in two ways: ICT improvements enable us to address issues around accountability and control in hybrid supply lines that would otherwise be prohibitive; and transport and storage improvements allow hybrid supply lines to be more responsive than they have ever been before, even more so than pull/decentralised systems.
And now I must seriously consider whether it is still worthwhile to publish that next article in the series…
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