Barilla Spa- Assignment1

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    Barilla Spa

    1. What are the greatest sources of economic benefit that the JITD program is

    intended to provide?

    The Just-in-Time Distribution was created to solve many difficulties that Barilla andtheir customers were facing. If implemented properly, The JITD system has thepotential to substantially reduce costs. To get the things placed correctly, Barillashould implement JITD within its own Depots first and then expand with pilot projectswith its the Distributors.

    Below is the analysis about the methods by which implementation become moreviable than what it was in the past. Ideas such as reducing the number of SKUs andrearranging distribution channels should also be explored in the long term as theycould also be helpful in reducing costs.

    Benefits to the JITD program include delivering only what was needed to thedistributors to avoid large inventories, limiting the variation in order swings from weekto week for dry products, and improving operations to determine quantities anddelivery schedules. If Barilla didnt have to respond to volatile demand patterns fromtheir distributors, they could reduce distribution costs, inventory levels, and ultimatelymanufacturing costs. They could respond to the ultimate demand (from the end -consumer), by using the consumersinput to produce orders. Barillasreplenishmentdecisions would be based on forecasts created from actual daily demand from eachdistributor. In the end, the distributors cost would be lowered because they would notneed to carry as much inventory. They would only receive what they needed to

    supply their retailers from the manufacturers) and Barillas strain on their logistics

    and manufacturing processes would decrease. The JITD program would also allowdistributors and retailers to carry more variety with fewer inventories.

    The JITD program would limit Barillas ability to run frequent, and expected,trade promotions to push products into their grocery distribution network. They wouldno longer be able to run traditional "canvass" periods (times when distributors couldbuy as much product as desired to meet current and future needs) and would needto eliminate volume discounts. Elimination of the periods would discourage salesrepresentatives who used these periods to sell more products to distributors to

    achieve sales targets. The volume discounts that were offered to the distributors fortruck load quantities and multiple truck load purchases of pasta would also cease toexist with the JITD program. The entire relationship between the salesrepresentatives and distributors appears to weaken with the JITD program, as thesales representatives lose their traditional areas of influence and the ability fordistributors to control their inventory is taken away.

    The JITD program is a short-sighted view of a model based on point-of-sale demand(i.e. from the end consumer). In other words, even though the end-customer demandwould be used to generate production quantities, the demand would not be pulledfrom the downstream process, i.e. the distribution centers.

    The program would completely cut-out the distributers needs and the majority ofthe distributors and supermarkets did not have the infrastructure to realize Barillas

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    vision. Most grocers in Italy were not equipped with the necessary barcode scanners and computer linkages to provide actual retail sell through data toBarilla. On the other hand, Barilla was not prepared to invest in their vision to thedegree they needed to in order to succeed with the JITD program. An overwhelmingopposition between Barilla and its distributors continued for over two years.

    2. Which distributors should barilla target for the JITD program and why?

    Three alternatives for an initial distributor implementation exist-

    1. The Grande Distribution (GD),2. Distribution Organization (DO) and3. Barilla run depots.

    The JITD program eventually should be implemented throughout the entiredistribution system. However to make implementation process smother, it is

    important to target smaller sections of the distribution channel at the first step.

    Since GDs are the largest part of the supply chain and they use morestandardised processes within the company, it is beneficial to use them. Initialuse of GDs should be restricted to one or two due to implementation difficulty dueto its large size.

    About Dos it will be more difficult to implement as they serve independentsupermarkets. Therefore they use less sophisticated or less standardisedinventory management procedures. Hence they are more vulnerable to thepressure from other supplier.

    Depots would make the most sense as information would be more available If theGDs do not immediately sign on running a pilot project with the 18 Barilla Run.However as it is an internal part of the distribution chain, its success may be lessconvincing to sceptical distributors.

    Finally my suggestion would be that the JITD should target the Depots first, theGDs second and the DOs last.

    3. What were the strengths and weaknesses of barillas approach to continuous

    replenishment? How could Barillas JITD program be improved?

    Strengths of implementing JITD:

    By using more sophisticated techniques, barilla forecasted the demand more

    accurately than its distributors. Costs associated with inventories stored at central

    distribution centers and productions cost could be reduced drastically due to better

    forecast of production and shipping requirements.

    Implementing JITD led to reduction in stock outs greatly. One of the Barillas

    organized distributor, Cortese was in the stock out range of less than 1% which wasearlier 2%.

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    Bull whip effect was greatly reduced due to by obtaining information from

    distributors. Bull whip effect is an phenomenon that happens in a supply chain where

    orders submitted to the vendors have greater variability than hat is received by the

    customer. The distributor could also see the Barillas inventory and placed orders forproducts whose level fell below a specified level, thereby fluctuating the demand.

    Productions schedule was well decided due to the data obtained from centralization.

    This helped barilla to reduce its inventory and benefit complete supply chain. Hence

    reducing the costs for same. When JIT was implemented in the Florence warehouse,

    lead time from the time of order to delivery was reduced from 10 days to 3 days.

    This improves customers to build more trust on Barilla and hence improved

    relationships. This also improved supply chain transparency.

    Weaknesses of JITD for Barilla:

    Due to the introduction of JITD Barilla sales jobs were reduced.These jobs were

    more of demand as they were giving incentives for getting more sales at the first

    place. So this caused a threat of losing out trustworthy people and loss of staff in a

    way.

    Unclear information to get the actual benefits from the JITD was more prevalent.

    More training to get hand on the system was required. Set up would cost Barilla and

    will need in line technological people to handle the new challenge.

    Finally strengths overweigh the weaknesses for Barilla and hence it should go ahead

    with implementing JITD system to get the market niche.