Let’s define push systems. In inventory, a push system is one where your business orders products, then does its best to sell the products it has (or “push” their existing inventory on the consumer).
Push inventory management relies heavily on forecasting. Basically, your business forecasts how many units of a specific product you’ll need for the next month, quarter, or year. You then order all the units you’ll need at once.
On the one hand, the push system is simple since you have to order and ship your products only once for the time period in question. You’re also more likely to have products on hand when you need them (assuming you did your forecasting right).
Most importantly, though, push systems reduce the cost of manufacturing your items. Most manufacturers charge fees for each order you submit, but many also offer better pricing the more units you order at once. So ordering everything you need for the coming month on a single order helps you minimize your manufacturing costs.
This gives you a healthier profit margin when you sell those items—or it can give you the flexibility to pass those savings on to your customer (thereby making your business more competitive).
Here’s the problem, though: you need hyper-accurate forecasting to make a push system work for your business. If you forecast your product sales incorrectly, you could easily wind up ordering more product than you can sell. And if you can’t sell the product, you can’t recoup the cost of making and storing that product.
Ordering all your product in bulk can also increase your storage costs, since you’ll have more inventory on hand at a time. If you have limited storage space, you may need to scale back your inventory on certain items to make room. Finally, purchasing tons of product at once ties up your working capital, so you can’t invest that cash in other areas of your business.