Barilla SpA (A)
1 Diagnose the underlying causes of the difficulties that the JITD program was created to solve. What are the benefits and drawbacks of this program?
Underlying Causes, Benefits and Drawbacks of This Program
The basic reason for introducing the just in time distribution approach was to improve variation in demands, cooperation, communication and the existing relationships between the Barilla SpA and the distributors. Furthermore, they also wanted to reduce the workload on the Barilla SpA logistic system and overall manufacturing. Implementing the just in time distribution approach will also help them in increasing their competitive position and can play an optimistic role in development of the company itself and their distributors. The fluctuation that needs to be corrected through the implementation of just in time distribution approach includes the smoothness of demand from the Barilla SpA’s distributors. Such un-necessary demands or variations are known as Bullwhip effect, which makes quiet difficult for the Barilla SpA to predict and meet the genuine demands from end consumers.
The just in time distribution approach will help Barilla SpA in producing the actual demanded quantity so that the loss of inventory and waste can be avoided. The tremendous variations occur in demand due to the many factors. Like the distributor places an order on the basis of the retailer’s orders and with respect to the shelf place available in the warehouse, as an impact sometimes the distributor are short of space for new arrivals and sometimes they are overloaded because of the unauthentic demand prediction. By not implementing the just in time distribution approach Barilla SpA and its distributors most of the time faces a relatively high cost because there is no concept of predicting the actual demand. This unawareness of the actual demand causes the overstocking issues at the distributor ends, which result in increasing of distribution cost. By implementing the just in time distribution approach the company will know which particular pasta is more famous in particular season or which product is likely to show a low demand in near future, etc. Moreover, the range of dry products in 800 so it is nearly impossible to predict demand without a proper forecasting system. By using the just in time distribution approach, the lead time issue can be removed because currently Barilla SpA is taking around 8-14 days in fulfilling the order, which is relatively high for such category of products.
This JITD approach will help Barilla SpA in predicting the real demand, which will automatically align many issues. One more advantage of this just in time distribution approach is that after getting the prediction data the production plan can be accordingly schedule. The lead will also reduce after applying this approach because manufacturing will only place when the actual figure will be presented. Just in time distribution approach will also result in reducing the cost associated with the distributor of the products from manufacturing facility to the warehouse and from warehouse to the retailers. This will further help in increasing the relationship with the distributors because there will now be limited pressure on distribution. Additionally, this JITD approach will help them in improving their planning procedures to run smooth operations.
Just in time distribution approach also possess some disadvantages like for example it is really not possible for some retailers to provide the daily sales data to the company because many retailers are not equipped of the latest technology. Furthermore, the retailer or the distributor may hire a new employee, who will actually responsible for producing the sales report on regular basis that will result in an extra expense. Moreover, this system can create some serious conflicts between the Barilla, distributor and the retailer because many of the distributor and retailer might not agreed on sharing the sales figures. By making a way out from these problems the Just in time distribution approach can be implemented successfully.
2 What conflicts or barriers internal to Barilla does the JITD program create? What causes these conflicts? As Giorgio Maggiali, how would you deal with these?
Before implementing the just in time distribution approach Barilla will face some problems that may play a role of hurdle. Like for example, first a formal approval needs to be taken from all the concern bodies that actually plan the supply chain framework. These internal bodies will for sure have a detail look at the possible pros and cons of the approach and will recommend the changes or it may be a possibility that they may not approve the idea. Furthermore, the people belong to marketing and sales department will found them less competitive in predicting the sales for future because the implementation of this system will eliminate one of the major responsibilities of the sales forces, which may result in reduction of motivation. This will also reduce the commissions for …………………
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Barilla SpA, an Italian manufacturer that sells its retail mainly through third-party distributors with experience widely fluctuating demand patterns from its distributors in the late 1980s. This case describes a proposal to address this problem by implementing a program of continuous replenishment, according to which the responsibility for determining the volume of deliveries to distributors to move from distributors Barilla. Describes the support and resistance in the various functional areas of Barilla and distributors Barilla approached with the offer. “Hide
by Janice H. Hammond Source: HBS Premier Case Collection 21 pages. Publication Date: May 17, 1994. Prod. #: 694046-PDF-ENG
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