Case ID: 694046     Solution ID: 36801     Words: 1161 Price $ 45

Barilla SpA A Case Solution

Abstract

The explanation behind the presentation of JITD was based on the demand. This is only the icy mass' tip, and there are numerous explanations behind these vacillations. One of the critical explanations behind the vacillation sought after was determining issues in the interest of the wholesalers as the needed specialized aptitudes to foresee request. The merchants, as well as, Barilla itself needs logistic predominance creating an increment in lead time. It supplies the items to merchants with a normal lead time of 10 days in the wake of getting the requests. This lead time is entirely yearn for interest to change. Another conceivable reason for variance is the substantial number of SKUs as, just their dry items were offered in more than 800 SKUs. More the SKUs are more is the unpredictability


The JITD program was an additional service offered by Barilla to its distributors at no extra cost, the program would improve Barilla's visibility with the trade, and make the distributors more dependent on Barilla, which would hence improve the relationships between Barilla and its distributors. What's more, the information regarding the supply at the distributors' warehouses would provide Barilla with objective data that would permit Barilla to improve its own planning procedures.


Is this JITD program feasible in our environment? The problem which Barilla met was the famous Bullwhip Effect in supply chains, and the causes of the Bullwhip Effect, in this case, were: 1) The demand forecast came from retailers to distributors then to Barilla. Barilla did not have the knowledge about the consumers' or even the retailers' demand, they just produced and shipped whatever their distributors told them to. 2) Few distributors had sophisticated forecasting systems or analytical tools for determining order quantities. 3) The delivery lead time was 8 to 14 days, average 10 days normally. 4) The trade promotion strategy of Barilla and the sales targets for its sales representatives for each canvass period.


Due to the Bullwhip Effect, Barilla saw huge fluctuation on the distributors' orders, and it caused high inventories and high backlogs and low service level to the retailers at the distributors' level. The production management system at Barilla, in this case, was a PUSH system, and the inventory was pushed from manufacturer Barilla to its distributors and all the way to the retailers. In the PUSH system, the whole supply chain from manufacturer to distributors to retailers would keep a high level of inventories in order to fulfill consumers' demand. As the demand fluctuated largely, it caused high inventory and low fulfill rate throughout the supply chain. Also, high inventory would impact the cash flow in the entire supply chain. The JITD program proposed a different production management system - PULL system, and the inventory would be kept as finished goods, semi-products or raw ingredients at the manufacturer Barilla's factory/plants, this inventory model is called Vendor Management Inventory (VMI). The JITD program was trying to remove the Bullwhip Effect in the supply chain, which proposed that Barilla's distributors provide them the Barilla products' delivery data to the retailers and the on-hand stock of Barilla products on daily basis. From the above analysis, the JITD program was feasible in the environment as it could help to remove the Bullwhip Effect in the supply chain. However, Barilla still needed to do more, such as to improve its own forecasting systems so that they could make better use of the data they would receive, they also needed to develop a set of decision rules that they could use to determine what to send after they received new data and made new forecasts.


Apparently, Barilla met resistance internally and externally on the JITD program implementation. For internal resistance, Barilla can improve its incentive system for a sales representative, such as to tight the sales representatives' performance to the whole companies' performance: overall profit, inventory turns, as well as the fill rate to the customers. In order to get confidence in the distributors, Barilla needs to improve its forecasting system, the decision-making rules, and after that, Barilla can do trail run in its own facilities first, as the Barilla-Run Depots were like the distributors, they also ordered through Barilla's CDC's, then distributed the products to small independent shops. If the JITD could really reduce the inventory and improve the fill rate to the small independent shops, it would be much easier to convince the distributors to join the JITD program.


During the trial run, Barilla can invite some of its large distributors to visit Barilla's facilities and actually involve in the implementation event, so the distributors would have first-hand information and actually experiences the improvement progresses. Meanwhile, instead of convincing the distributors by itself, Barilla can involve a third party consulting firm to help convince the distributors. A professional consulting firm would be very helpful. With the consulting firm's help, Barilla could target the large distributors in the second phase, then medium and small distributors in the third phase.


The implications from this case are: 1) the more layers in the distributing system, the easier the Bullwhip will occur; 2) the PULL system focuses on the end-users' ultimate demands while the PUSH system focuses on meeting end-customers' demand by putting inventories in every distributing layer; 3) Different inventory management methods would have different effects in the entire supply chain, so to choose appropriate inventory management method is very important; 4) To make changes especially big changes would take time, sometimes maybe years.

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Questions Covered

  1. Diagnose the underlying cause of the difficulties that the JITD program was created to solve.  What are the benefits and drawbacks of this program?
  2. What conflicts or barriers internal to Barilla does the JITD program create?  What causes these conflicts?  As Giorgio Magggiali, how would you deal with these?
  3. As one of Barilla’s customers, what would your response to JITD be? Why?
  4. In the Environment in which Barilla operated in 1990, do you believe JITD (or a similar kind of program) would be feasible? Effective?  If so, which customers would you target next? How would you convince them that the JITD program was worth trying?  If not, what alternatives would you suggest to combat some of the difficulties that Barilla’s operating system faces?
  5. Suggest a web/online strategy for the firm.