In a Pull retail inventory model, the stores select which products and how much they will carry. They place their replenishment orders. This is typical in co-op models (like True Value or independent grocers.) Or in franchises like Hallmark stores.
How it works.
First, store managers select from products offered by the wholesaler(s). They decide what the store will carry, where it will be merchandised and how much to carry. Stores create their replenishment orders. There is an opportunity for automation. If sales are transmitted to the warehouse, it can create automated orders to maintain minimum store inventories. Vendors who call on “pull” retailers can influence new item selection and order levels.
One benefit of a Pull retail inventory operating model is that the decision is close to the customer. So store managers can anticipate demand better. That should improve product selection, quantities and timing. Thus, a store in Minneapolis can postpone receiving garden supplies until May. While a store in Dallas stock them in February. In addition, store managers can quickly address customer requests. When it is done well, they can manage the inventory levels to store sales.
There are drawbacks. One is little control to prevent poor decisions from scuttling store performance. Store selection can vary wildly. Thus, store presentation to customers varies. Inventory bulges and shortages crop up unpredictably across the system. Vendors who wield control through relationships may not have the best interest of the retailer’s finances. Purchases are made without reaching full volume discounts. The financial performance of the entire system is more unpredictable. IN addition, vendors can multiply if each store finds their own source for common goods. Which erodes power buying opportunities.
In conclusion, the pull inventory management model gives stores great flexibility. But with great power, comes great responsiblity.