Barilla Case Study Essay Example
Barilla Case Study Essay Example

Barilla Case Study Essay Example

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  • Pages: 6 (1542 words)
  • Published: December 20, 2017
  • Type: Case Study
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The Just-in-Time Distribution was created to solve many difficulties that Barilla and their customers were facing. Barilla increasingly felt the effects of fluctuating demand. Orders for Barilla dry products often swung widely from week to week. With this demand variability, it strained Barilla’s manufacturing and logistics operations.

Even though JITD was created to solve the problems they were having, many stakeholders did not agree with the program.Some manufacturing and logistics personnel would rather ask distributors or retailers to carry additional inventory to reduce the fluctuation in distributors’ orders even though with their current inventory levels, many distributors’ service levels to the retailers were unacceptable. Others felt that the distributors and retailers were already carrying too much inventory. Customers were not helping also. They were simply unwilling to give up their authority to pla


ce orders as they pleased.But what was more disconcerting was the internal resistance from Barilla’s own sales and marketing organizations, which saw the concept as infeasible and dangerous.

Barilla and their customers are now realizing that they do not have enough room in their stores and warehouses to carry the very large inventories manufacturers would like them to. It is not easy to increase shelf space in retail outlets and manufacturers are constantly introducing new products and wanting retailers to display each product on the fronts of their shelves.Distributors feel similar pressure, both to increase inventory of items they already stocked and to add items they currently did not carry to their product offerings. Both manufacturers and retailers are suffering from thinning margins. The JITD proposes to rather than send product to the distributors according to their internal planning processes, they should look

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at all of the distributors’ shipment data and send only what is needed at the stores.

They will send no more and no less of what is needed.With the way they are currently operating, it is nearly impossible to anticipate demand swings, so they end up having to hold a lot of inventory and do a lot of scrambling in their manufacturing and distribution operations to meet distributors demand. Also the distributors don’t seem to do a good job serving their retailers because the DOs (“Distribuzione Organizzata” Organized Distributor) have experienced many stockouts in the last year. With the JITD, the director of logistics, Brando Vitali, believes they could improve operations for Barilla and their customers if they were esponsible for determining the quantities and delivery schedules. Barilla would be able to ship products only as it is needed, instead of building enormous stocks in both of their facilities. They could try to reduce their own distributions costs, inventory costs, inventory levels, and they manufacturing costs if they did not have to respond to the unstable demand patterns of the distributors.

With the JITD, every day each distributor would have to provide Barilla with data on what products it had shipped out of its warehouse to retailers during the previous day as well as the current stock level of each Barilla SKU.They will then look at all the data and make replenishment decisions based on their own forecasts. Barilla would need to improve their own forecasting systems to make better use of the data they receive from their distributors. They will also need to develop a set of decision rules that they can use to

determine what to send after they have received new data and made new forecasts. There are many disputes about integrating this proposal. There is internal resistance from Barilla’s own sales and marketing organizations.

A number of sales representatives felt that their responsibilities would be diminished if the JITD were put in place.There were a range of concerns that were expressed from the bottom to the top of the sales organization. Some concerns were, “We run the risk of not being able to adjust our shipments sufficiently quickly to changes in selling patterns or increased promotions,” or “we increase the risk of having our customers stock out of our product if we have disruption in our process. ” To counter the concerns, the director of logistics said, “I think JITD should be considered a selling tool, rather than a treat to sales. We’re offering the customer an additional service at no extra cost.The program will improve Barilla’s visibility with the trade and make distributors more dependent on us—it should improve the relationship between Barilla and the distributors rather than harm them.

” Another problem was that distributors did not like the program. The manager of one of Barilla’s largest distributors said, “Managing stock is my job. I don’t need you to see my warehouse or my figures. I could improve my inventory and service levels myself if you would deliver my orders more quickly…” Another distributor said, “What makes you think that you could manage my inventories any better than I can? Distributors felt Barilla was asking for too much control over their own facilities. If I were a customer of Barilla, I would just be

concerned with getting all the products I need in a fast time and in good quality.

If they could do that, then I would be happy. If I were an investor in the Barilla company, my perspectives would probably not change regarding JITD. I feel that the program will help the company enormously. It will create more revenues for the company, reduce working capital, and it will provide better service to the customers.If they provide better service, customers will return and they could also get new customers.

I feel it would be a great investment. Maggiali can increase the overall likelihood or percentages that JITD would be adopted by convincing their distributors, sales and marketing organizations that the program will work better than anything they have tried before. It would bring higher revenue because it will reduce working capital, and it will provide a better service to their customers at no extra cost.To do this, he can come up with an agreement with the distributors to use the program for a certain amount of time as a trial to see if the program will deliver a positive result. This will let the employees have an idea of how the JITD will work and what is expected of them.

If the results are negative they can go back to whatever method works best for them. I do believe the Just-in-Time Distribution would be feasible and effective. Distributors and retailers are asked to hold an excessive amount of inventories and it is very costly for any company to hold a lot of inventory.This program will help them carry the amount of inventory needed; no more no less.

Rather than following the traditional practice of delivering products to their distributors on the basis of whatever orders the distributors place with the company, their own logistics organization would instead specify the appropriate delivery quantities.

It would more effectively meet end consumer’s needs and would also evenly distribute the workload on their manufacturing and logistics system. The idea is good, but they can not only send what the end users need.They also need to have safety stock on every item in their distribution centers. They also have to make sure their production line has the capacity and reliability to produce and deliver the product when the distributors need it. They need to have better communication between manufacturers and distributors.

Barilla increasingly feels the effects of fluctuating demand and this demand hurts their manufacturing and logistics operations. This program will help them improve operations for themselves and their customers. They would be able to hip products only as it is needed, rather than building up large stocks in their facilities. Without the demand swings, they will be able to work more efficiently and effectively and get their products where they need to be in a faster cycle time.

If the program works well, they would be able to target new customers like restaurant chains. They could also go overseas to sell their products in international chains. If the proposal was based upon the environment in today’s world, I would not go forward with the Just-in-Time Distribution. It would not be feasible or effective in our time today.

In the 1990’s, nearly all of Barilla’s distributors had computer-supported ordering systems, but few had sophisticated forecasting systems or analytical

tools for determining order quantities so the JITD would help them a lot with their orders. Also Barilla’s GD (“Grande Distribuzione” large distributor) sales force usually sent their orders via fax which is rarely ever used in our time today. The JITD would not work today because we have so many new upgraded technological machines that are used to communicate so much easier and faster than in the 1990’s.We have new technology that already holds all the information needed.

The JITD would end up putting more work on Barilla and their distributors and would cause inefficiency. The JITD would cause them to lose profitability because they would be wasting their time in gathering, collecting, and interpreting the data and information given to Barilla from the distributors. Now we use technology programs to help with inventory management and make everything more effective and efficient.

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