Barilla SpA - Harvard Business Case Analysis

The supply chains of L.L. Bean should be able to respond on the large fluctuations of orders (e.g. during Christmas the amount of orders will be

Additionally, forward buying activities from distributors due to frequent trade promotions and volume dis-counts enforce the effect of demand fluctuations. During promotions, distributors buy huge amounts of pasta at a lower price. This forward buying leads to lower demand in future periods and contributes to high peaks in or-der quantity and low levels of orders in the following periods. Connected to this problem is the incentive system of the sales force, which relies heavily on trade promotions in order to achieve quarterly targets. Another factor related to these aspects is batch ordering and

As a result of these benefits, the JIT system has been particularly effective for companies with a high customer demand on newly developed technologies such as computers. If the product is produced when required and as specified by the customer, this not only allows the customer to order exactly what they want with modern technology, but it also benefits the manufacturer who is guaranteed a return on the goods straight

Looking at the fluctuation in Exhibit 12, one could expect that poor coordination in the supply chain would increase costs. Provide a discussion for the cost of poor coordination in Barilla’s supply chain. Items to consider here include production changeovers or setups, inventory levels, facility utilization, transportation costs, quantity discounts and promotions, canvas periods etc.

JITD might also help the relationship between Barilla and its distributors, since Barilla won’t need to use pressure on distributors to hold more finished products than necessary.

• Keurig will gain more control over the production because it’ll be easier to forecast production capacity and there’ll be more inventory control.

JITD distribution ideas was developed to meet and exceed the demand supply of Brailla brand fresh and dry products by streamlining a forecast based supply management system. Barilla’s total product range comprises of 75% dry and 25 % for fresh products having 21 days and 12-18 months of shelf lives respectively.

Distributors would not stock their inventory with Barilla products that exceed the real demand. Thus, the JITD program would help Barilla’s partners reduce distribution costs and allow them to be more efficient. The project also might help improve Barilla’s relationship with its partners, as Barilla won’t exert pressure on distributors to hold more finished products than necessary. The implementation of the program will eventually improve the planning procedures for Barilla and enable the company to provide exceptional service to its customers at low costs.

As it was already mentioned, in 1988, the Barilla’s Logistics Director, Brando Vitalli addressed the company’s problems in manufacturing and distributions systems and proposed an idea that would fix all the problems caused by fluctuating demand and radically changed the process of ordering and delivering. This idea was later supported by Giorgio Maggiali, the Chief of Barilla’s Logistics Department, who was trying to implement the Just-in-Time-Distribution (JITD), taken from ‘Just-in-Time’ manufacturing concept. The purpose of JITD system was reaching operating efficiency. The main idea of JITD was that instead of letting the distributors determine the quantity and delivery schedules, Barilla’s own logistics would be responsible for doing this. Barilla would look at all the distributor’s shipment data and send only that quantity what was needed at the store. JITD would look at the

Approximately 65% of Barilla’s dry products were supplied through outside distributors to supermarket chains and independent supermarkets who would eventually get the product into the hands of the ultimate user. Distributors would receive their product from one of the two Barilla’s central distribution centers (CDCs) where movement of product would be assessed based on its category which would be either “dry” or “fresh”. Barilla maintained different distribution systems for its dry and fresh products due to their differences in perishability and retail service requirements. Brando Vitali’s JITD proposal focused solely on dry products sold through Barilla’s distributors who I am going to examine. There is an industry culture around the supply and demand of Barilla products. Internal and external politics are at the root cause of the resistance to change around the distribution channels. There are issues that Barilla needs to address internally before the idea of JITD can come to life externally. Barilla’s sales and marketing personnel have expressed a range of concerns because this new philosophy could

If Giorgio were to implement JITD to control the demand fluctuations, there would be several issues he would need to address. Internally, Barilla 's own sales and marketing organizations saw the idea as infeasible and risky. The sales representatives are apprehensive that their functions at the company would be reduced. The proposed JITD system required the sharing of sales data from the distributors with Barilla. Barilla would then forecast and deliver appropriate quantities of the products to the distributors at the accurate time in order to meet demand effectively. This would be a fundamental change from the current traditional supply-chain system where there was no sharing of information from distributors and they could place orders as they saw fit. The JITD proposal received severe disapproval and criticism from the distributors and from Barilla 's own Sales and Marketing department. The distributors are unconvinced and unwilling to share warehouse data with Barilla. They lack both faith and trust in Barilla and

Toyota is famous for their production system called Just-In-Time inventory (JIT) strategy which is referred as a production strategy to employ an increase in the level of efficiency and reduce waste by receiving goods only in the form they are required in the production process; this reduces inventory costs. This method calls for the producers to be capable of forecasting demand accurately. The main benefits associated the Just-In-Time inventory strategy includes reducing the setup

If JIT is implemented, it will improve on Winkler’s delivery lead time and give it a competitive advantage over their competitors.

To support this statement, I would like to present Starbucks ' supply chain reorganization started in late 2008. The initials first step was to simplify a complex structure in four essential supply chain functions. Every supply chain job fell in plan, source, make, and deliver. If someone involved in production planning or replenishment or new product, was part of the planning department. Sourcing functions split between coffee and "non-coffee" procurement. At that time Starbucks spent in the average US $600 million on coffee a year and total US

JIT inventory systems have the ability to stabilize operating system because a steady rate of output can be used to meet demand on a smaller scope and create a sense of consistency in inventory sizes. Within manufacturing of a good, JIT systems prohibit specific workstations to push a product through to the next step unless there is a need for said product. Only focusing on small batches allows for manufactures to reduce inventory needed throughout the production process which can greatly reduce costs, especially costs associated with housing inventory (Collier 380).