BARILLA Spa Case study

The JIT approach to manufacturing involves timing the delivery of resources so that they arrive just when needed. Inventory optimization models help the firm determine how many of which items in which sizes should be delivered to each specific store during twice-weekly shipments, ensuring that each store is stocked with just what it needs. Trucks serve destinations that can be reached

2. Make some minor changes in the production line to minimize flexibility-accuracy and accordingly reduce the cost.

distributors would have to submit their Stock Keeping Unit (SKU) so that Barilla can control it.

Lastly, the just-in-time (JIT) approach is an operating philosophy that requires that all resources, including materials, personnel, and facilities, be acquired and used only as needed (Mazumder, 2007). The JIT approach works great for manufacturing companies because of their common classes of material that they use which are raw materials, work-in-process, and finished goods (Mazumber, 2007). According to JIT concept raw materials are received just in time to go into production, manufactured parts are completed just in time to be assembled into products, and products are completed just in time to be shipped to customers (Mazumber, 2007). The

In the effort of keeping with the extremely unpredictable demand the production cost may rise dramatically as a result of diseconomies of scale. In addition the set up cost for producing different products in the production line is heavy and Barilla has an enormous product line of different products. The production plant in Pedrignano is big and technologically advanced but at the same time the pasta production is a complicated process and especially the drying of different types of pasta required precision in temperature and humidity levels that could not be changed

4) Exploring the possibility of implementing JIT (Just in Time) system that can reduce the finished goods inventory at

* Employees would not have to work as many overtime hours to fill orders because there would be substantial inventory during heavy demand months

JITD created lot of internal barriers to Barilla; while some of the concerns are easy to overcome others would need more convincing. For example, the sales department, sales representatives receive more on their compensation through commission from their sales. JITD would cut or reduce to zero most of sales people responsibilities, which in turn will squeeze their commission, as one sale man said “Our sales levels would flatten if we put this program in place”. As noted in the case most of the sales come from the

As argued by Lubben (1988), JIT allows businesses to have better management since this ensures that there is no loss as there is sufficient number of clients requiring the equipment. This reduces her to deal with huge deliveries when the clients’ numbers are not increasing. (Lubben, 1988, p.4) also suggested the idea of JIT that “... major elements of manufacturing – capital, equipment and labour are made available only in the amount required and at the time required to do the job.” So it is a good practice by utilising JIT approach as it reduces wastes and ensure the correct amount of equipment is available (Lubben,

The manufacturing cost can be lower as the rearrangement of the production line to meet urgent order can be minimize or even eliminated.

Because of the way Barilla’s manufacturing process works, demand fluctuations have a significant impact on the company’s operations. Tight heat and humidity specifications in factory tunnel kilns require very specific sequences of pasta production, which means Barilla has limited flexibility in ramping up (or ramping down) the production of pastas experiencing unexpected demand levels. Furthermore, because of extremely high holding costs, it is simply not economically viable for Barilla to maintain substantial finished goods inventories to guarantee fulfilling distributors’ fluctuating order quantities.

  1. The Nicholson will be able to reduce the Cost of Goods Sold from 69% to 65% of Total Net Sales as efficiency in manufacturing and inventory can be achieved.

Also, a problem existed with trade promotion events due to the fact that the company did not negotiate or set a price with the trade on what to sale its products for when they were purchased during a trade promotion. By not having set promotional retail prices, the trade was allowed to stock up on inventory at reduced prices. They did not have to extend the savings to the consumer. This ultimately caused a loss in profit for RBS. To make matters worse, these trade promotions often overlapped with consumer promotions. Therefore, it is hard to tell what the actual real incremental profits for the promotions were.

The AAA region was hit by a period of economic uncertainty caused by the slowdown of Chinese growth, instability of Middle East and economic recession in Russia. The Barilla brand market share in value terms increased in all of the key markets in this area: confirmed position as leading competitor at national level in Russia, market leader in Turkey, and further expansion in Middle East and Israel markets with an aggressive dedicated strategy. The substantial investment in the Solnecnogorsk (Russia) for pasta manufacturing will significantly improve flexibility and profitability in this area (Barilla,

According to [5], Just-in-Time (JIT) inventory management enables an organization to gain competitive advantage by not having a large or excessive amount of inventory in warehouse. The organization only needs to order the parts when they are actually needed and new materials are produced only when old materials have finished. One advantage of adopting this strategy is that there will be no excess of inventory that needs to be stored and hence the inventory levels will be reduced as well as the cost of carrying and storing goods. One major disadvantage of this is that the organization will expose it in the risk of ordering problems for example a supplier is not able to provide parts on time. The result of this is that the organization cannot fulfill the order and contributes to customer dissatisfaction.