The Combined Decision Problem: “Pull” vs. “Push” and the Degree of Centralization of Warehousing in the Field of Physical Distribution with a Special Focus on the Polish Market

Abstract

Featured Application: This article presents a method for calculating the benefits of using the strategy of replenishing stock in warehouses in the field of distribution (“Pull” or “Push”) in connection with the problem of determining the number of warehouses. The author developed a model to calculate the profitability of different strategies. The use of this model was presented using sample data but based on real cases of companies and processes that the author encountered in Poland in the course of his research. T his article concerns the efficiency of the distribution system with different strategies—“Pull” or “Push”—and different sizes of distribution network in terms of when products produced by the manufacturing plant are sent to distribution warehouses. The article hypothesized that the choice of how to replenish stocks in these warehouses—“Pull” or “Push”—and the choice of the degree of centralization of the distribution network (number of warehouses) were two decision problems that should be considered together. This hypothesis was confirmed. A simulation model was developed to conduct simulations for different scenarios (different demand distributions—Gaussian or Gamma different demand fluctuations and the timeliness of replenishing inventories in warehouses). With more expensive goods and greater sales fluctuations, there was a certain tendency towards centralizing storage and using the Pull strategy. The choice of a given strategy had a significant impact on the costs of logistics processes and on the profitability of enterprises. The cost savings ranged from 17% to 54%. The average share of distribution costs in the sales value was 6%. In some cases, it was over 10% (the level of profitability of industrial enterprises In Poland). Choosing the right strategy could, in some cases, change profits by 20%. In most cases, the most cost-effective strategy was a flexible Pull system and centralized storage, which is consistent with real-life business cases.