Valley Steel Case Study

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However, Sehgal mentioned, “All supply chains must be a combination of push and pull processes -- purely push or purely pull supply chains exist only in theory” (2009). The above figure shows guidance on how the push-pull boundary functioned in a distribution channel. For this channel of distribution that Valley Steel is in, I would say the push-pull boundary lies between the retailers and Valley Steel itself. The pull boundary would apply to retailers in this channel of distribution because they react directly to the demand of the customers itself. Valley Steel is in both push and pull boundary because they serve both to the retailers and to end users. However, based on the low amount of end users that Valley Steel sells to, Valley Steel is…show more content…
According to Sehgal, “The push/pull decisions afford a balance between the responsiveness (agility) and cost (lean) (2009)”. Pull systems must be responsive to be effective; push systems are generally more cost effective. Retailers have response immediately to consumer demands but wholesalers like Valley Steel can hold inventories and generate economies of scale to reduce cost.
This push-pull boundary will most likely change for if Valley Steel is getting more end users as their customers instead of retailers or distributors. Valley Steel will then have to react directly to consumer’s demand, which is a primary factor of the pull-boundary. If this situation does occur, Valley Steel would then have more power in determining the amount of supplies they should get from their suppliers instead of getting forecasted amount of supplies from their suppliers. However, Valley Steel will have to bare the excess in demand from the customer that leads to loss of opportunity cost if the company does not have capacity to fulfill the demand. The benefits that they once obtained from the economies of scale would also reduce since they cannot scale up the productions and
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Inventory would no longer be a good option for them since holding inventory in a rather quick selling environment is deem bad for the company, showing inability to sell based on consumer demand and has to pay inventory cost. They would also need to implement and focus more on consumer demand, increasing the need to hire market researchers and so on to evaluate the right amount of products to supply. Great customer service will be required in order to satisfy large amount of end users rather than just dealing with a few B2B
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