Impact of the pull and push‐pull policies on the performance of a three‐stage supply chain

We investigate the performance of two common operating policies (i.e., pull and push-pull) for a make-to-stock product in an un-capacitated, three-stage supply chain. The pull policy operates based on periodic orders received from the immediate downstream facility. However, in the push-pull policy, while processes upstream of the order decoupling point are managed by the push policy, the downstream processes are managed by the pull policy. Simulation experiments are conducted to examine the impact of each operating policy under a variety of experimental conditions, characterised by demand uncertainty and lead-time variability. Our results indicate that the relative advantage of the two policies is dependent on the type of uncertainty, the level of uncertainty, the inventory control policy and the performance measures of interest. More specifically, while the push-pull policy results in lower inventory, the pull policy yields a better fill rate. This is in contrast to the notion that the pull policy generally results in superior inventory performance. Our findings suggest that firms should carefully consider the level of uncertainty, the inventory control policy and the performance measures of interest when determining the operating policy.