What does a "pull" system in supply chain management signify?

A "pull" system in supply chain management signifies that production begins only when actual demand is received. This approach is inherently aligned with just-in-time manufacturing principles, where the focus is on reducing excess inventory and responding directly to customer needs. By operating under a pull system, organizations can minimize waste, reduce costs associated with holding inventory, and improve responsiveness to changing market conditions.

In this framework, demand drives the production schedule, ensuring that products are created in direct response to customer orders. This leads to a more efficient use of resources as production aligns closely with market demand rather than estimates or forecasts. Consequently, businesses are better positioned to manage inventory levels, reduce the risk of overproduction, and enhance overall supply chain effectiveness.