Barilla Spa - 8

            One reason that could have led the ice cream sale to fluctuate could have been due to Price of Related goods. For example, frozen yogurt is a substitute for ice cream, so when the price increases, more ice cream is demanded. However, hot fudge is a compliment for ice cream, therefore when its price goes up, less ice cream is demanded. Second reason leading for the ice cream sale to fluctuate could be due to income. For normal goods, the higher your income, the more you buy. For inferior goods, the higher your income, the less you buy. Taste is another factor. When taste changes, the quantity demands change.  For example, our taste for ice cream might depend on the weather. Expectations are also an important factor.  Expectations about future income or prices affect the quantity demanded today.

Since Donna Dubinsky and Roy Weaver did not address Mr. Jobs questions regarding the 1985 Distribution Business Plan, he assigned Debi Coleman to develop a new Distribution Strategy Proposal based on the “just-in-time” concept. Ms. Dubinsky was not proactive in presenting her issues and concerns regarding the “just-in-time” concept. It is assumed that she considered the idea not feasible and that it would not gain momentum; however, the exact opposite occurred.

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

L.L. Beans approach to a one shot order increases the risk of lost sales due to insufficient inventory as well as increases the risks of higher costs due to excessive inventory. The case indicates that lead times are significantly long from their suppliers (in the order of 8 to 12 weeks). We are not clear on the size of these orders but assuming these are mostly a one shot batch, it is feasible to estimate that these lead times would be reduced for a smaller quantity per order and more frequent orders. Although this approach would increase the transactional costs with suppliers (because a higher volume of individual orders would be placed at the supplier) it might generate significantly more impactful benefits such as:

A third factor contributing to the Bullwhip Effect is the specific production process of pasta. Barilla cannot re-act to demand changes quickly enough, due to production restrictions as e.g. heat and humidity specifications. That means, if a product is out of stock it cannot be produced and delivered immediately.

a. After analyzing Pro-Forma Income Statement for all four quarter the utilization of Just-in-time strategy in Quarter 2-3 would have made Lean in Enterprises for more profitable. Since the premise of Just-in-time is to reduce waste and make sure that the supply chain is working efficiently to meet the customer demand. Just-in-time inventory is the minimum inventory necessary to keep a perfect system running. In Operation Management Heizer and Render define JIT inventory as the exact amount of the good arrives at the moment it is needed. (p. 2010) The ability to implement this strategy in Quarter 2 and Quarter 3 would have been very beneficial to the company expenses. The Just-In-Time strategy would have help the company avoid the $8,163 holding cost an excess capacity cost of $491,524. Just-in-time strategy would have prevented additional production after the product had low customer demand. Just-in-time would have also prevented the same waste

The core problem facing Barilla is the high degree of demand variance that it experiences by product and throughout the year. The main causes of the demand variance are limited visibility downstream, and reliance on promotions to push product downstream.

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.

30. Just-in-time delivery systems typically shift more responsibility for PD activities to the customer rather

Businesses benefit from having a good relationship with their suppliers of raw materials and components. In manufacturing, companies are adopting “Just-in-time” manufacturing. This means that businesses only produce when they have an order, and they only get materials delivered when they are needed. Businesses require reliable and efficient suppliers to be able to order their stock last-minute.

One of the underlying causes of the difficulties that the JITD program was created to solve was the effects of inconsistent demand that came from Barilla’s distributors. The extreme demand variation strained Barillas manufacturing and logistics, and made very hard for Barilla to meet that demand. For example, as noted on the case “the specific sequence of pasta production necessitated by the tight heat and humidity specifications in the tunnel kiln made it difficult to quickly produce a particular pasta that had been sold out due

Even though direct competition has decreased, the tendency of retailers to get their products directly from manufacturers puts the company in a position of relooking its competitive edge as a distributor. The marketplace is shifting from an individuality to supply chain performance – the ability to meet end-customers needs through product availability and responsive and on-time delivery. Supply chain performance crosses both functional lines and company boundaries. Brunswick must change their way to fill customer orders faster and more efficiently than the competition.

The other side of the problem is caused by Barilla’s sales and marketing practices, which are based on achieving sales goals without regard to efficient operations. Barilla promotional “canvass” periods are the most problematic of these discounts because they make it in a distributors best interest to invest in months’ worth of stock of a discounted product.  This bulk purchase is unrelated to the near term retail demand and muddles the picture for a Barilla operations manager trying to tailor operations to demand. The volume discounts less problematic because they are incremental, and lead to small changes in orders to achieve a truck-load quantity. This saves on Barilla distribution costs and is unlikely to induce large swings in demand for a given product as trade promotions do.

Excellent customer service is a way to set the organization apart from its competitors. Differentiation can be achieved through fast and correct execution of product ordering. To improve on the order process it is important to have the correct information provided in a timely fashion to all divisions. For integration to be successful information must be available throughout the entire supply chain.

Just-in-time delivery needs good collaboration with vendors of distribution services and of products. The distributor needs a continuity of demand and the chance to define routes, loads and schedules well ahead. By working toward longer-terms, higher-volume procurements with vendors, prices can be cut due to larger transport volume over a long period of time. Just-in-time delivery will cut down the operating costs if the business is substantial for the distribution partner. Just in time delivery needs more frequent deliveries from vendors however it does not voluntarily imply higher transportation costs.