The Combined Decision Problem: “Pull” vs. “Push” and the Degree of Centralization of Warehousing in the Field of Physical Distribution

The article presents the problem of efficiency of the distribution system with different strategies - “Pull” or “Push” and different sizes of distribution networks. The problem relates to the case where products are shipped to the customers through the distribution network. The problem addressed by the author concerns the method of replenishing stocks in these warehouses by the production plant. The author hypothesized that the profitability of using the Pull or Push strategy depends on the number of warehouses - and vice versa: not only how many warehouses (or distribution centers) there are, but also how the stocks stored in them are replenished. For this reason, both of these decision problems should be considered together. The profitability of a particular combination of these two strategies depends on the costs of the logistics and production processes, the parameters of the distributed products and the parameters of demand. This hypothesis has been confirmed. The author developed a simulation model to calculate the effects of applying a given strategy on the availability of these stocks to customers and the levels of stocks. The model was used to simulate different scenarios (different demand distribution - Gauss or Gamma and different demand fluctuations). The results obtained can be further used to calculate the economic efficiency of these strategies, which is also presented in the article as an example of the application of this model. With more expensive goods and higher fluctuations in sales, there is a certain tendency to centralize storage and use Pull strategies. A given strategy - Pull or Push - is not necessarily related to a given competitive strategy (competing with lower costs or better service). Each of these strategies may result in lower total costs or higher level of Logistics Customer Service measured by the availability of the products to customers.