Retail Inventory PUSH Model Explained
In a Push operating model, products are selected by buyers, a forecast is developed for anticipated sales, products are sent to the stores to supply that forecasted demand and if the products are replenished, they are replenished from headquarters or an HQ system. The most common example of this is in fashion retailing where new lines are sent to stores in a single wave or possibly two throughout a season. In a push model, it is critical that the buyers are very capable of predicting sales trends and forecasting sales rates by store. One of the benefits of this model is that store operators do not have to be deeply trained in product attributes to select their own assortment. Typically, stores cannot determine what products they receive or how many cases they will be shipped. Store operators receive the product and merchandise it as direct by headquarters. In this model vendors are typically limited to influencing the corporate location and consumers. Vendor sales representatives would waste their time trying to influence store managers as they have no control over purchasing.
The benefits of this model are the benefits that come with centralized control. Purchases are made at volume discount levels, stores are uniformly managed and merchandised and vendors are held to standards of delivery. Financial control is more predictable as forecasted sales are managed within a corporate budget.
The drawbacks of this model are the risks involved with having an entity that is so far removed from the end customer making critical decisions. The buyers may not understand the competitive situation in the market or the regional taste of the customers. Furthermore, the forecasting model has to be tremendously accurate to eliminate out of stocks and over stocks at the store level. Store conditions for Push models can deteriorate quickly with loaded pallets on the sales floor some months and empty shelves other months. There has to be a fast response feedback loop from the stores to the central location for this model to be efficient.