The Strategy Of Barilla 's Managers Struggle With Forecasting And Inventory Managing Issues

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

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

Barilla, the leading pasta manufacturer in Italy, faces increasing problems related to demand fluctuation. Their distributors also suffer from high inventory holding costs and low service levels on the other hand. This report explains, why the company and their distributors are troubled with this situation and how Barilla intends to solve it. The problem Barilla experiences is called the “Bullwhip Effect”, i.e. that demand variability increases when moving up the supply chain. Several factors enforce this Bullwhip Effect, e.g. high lead times, poor demand forecasting, and batch ordering. In this report we will point out, that exactly those aspects can be identified as the underlying reasons for Barilla’s problems. In a

During the game, I realized that wide gaps in orders of every role in the supply chain such as factory, distributor and retailer create inventory management challenges. For example, distributor records 0units between week1-week 4 compared to retailer within the same period. The retailer records 3units, 5units, 2units and 2units between weeks 1- week 4. The same applies to factory with 0units from weeks 2-4. Addressing inventory management problems requires developing an average unit level to avoid disappointing customers when demand

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.

“The business environment has never been more challenging than it is right now. The foundation that is required to react to dynamic changes in supply and demand is based on understanding your supply chain’s capacities.” By planning out in advance with capacity planning, Riordan

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.

A more targeted approach to implementing the JITD system will increase the likelihood of success. Due to the high number of SKU’s we move through our supply chain, the project is considerably more complex than necessary. We should use a Pareto analysis to select a smaller number of SKU’s that account for 80% of our throughput. This will maximize the impact of our efforts, while keeping them achievable.

We can counter the concerns of both the sales and distributors by first convincing the barilla’s employees and the top management by creating trust within the organisation and with distributors by building long-term relationship. There needs to be a collaboration between barilla and the distributors so they can share the sales data with barilla who would then forecast and deliver appropriate amounts of products to the distributor at right time at the right place, Thereby distributors can lower the inventory and improve the services and decrease the distribution cost. We can convince the distributors about the benefits by running JITD

Inventory control is the biggest challenge because of inappropriate inventory management system. There is a requirement of proper food service for better inventory control and also for identifying the important requirements. There is a need to develop the inventory methods for the products and with a standard inventory management company should try to minimize the wastes in terms of future. (Gartenstein, 2012)

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,

With JITD, the number of urgent order will be decrease. Barilla can put more focus on managing the standard order with the normal manufacturing setup. Extra work on rearranging the production line will not be required frequently. The whole operation can be more efficient and standardize.

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.

Barilla’s products are divided into Fresh products and Dry products. The demand for these two distinct kinds of products is quite different, and the order, shipment and delivery methods for them are also various.