Jit and Marketing Strategy

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The Concept of Just-in-Time Delivery and Its Implications on the Marketing Strategy of a Company. by Mara Bateman July 26, 2008

1. Diagnose the underlying causes of the difficulties that the JITD program was created to solve. What are the benefits and drawbacks of this program?

2. What conflicts or barriers internal to Barilla does the JITD program create? What causes these conflicts? As Giorgio Maggiali, how would you deal with these?

3. As one of Barilla's customers, what would your response to JITD be? Why?

The underlying pasta demand pattern in Italy is relatively flat. The pasta demand pattern at the distribution centers (DCs) shows a rather large fluctuation. The extreme fluctuation in Figure 5-3 on page 150 is truly remarkable when one considers the underlying aggregate demand for pasta in Italy.This appears to be because of the channel policies and dynamics:

Cause of demand fluctuation:

Transportation discounts
. Volume discount
. Promotional activity
. No minimum or maximum order quantities. Product proliferation . Long order lead times
. Poor customer service rates. Poor communication

What is the JITD System?
– Decision-making authority for determining shipments from Barilla to a distributor would transfer from the distributor to Barilla – Rather than simply filling orders specified by the distributor, Barilla would monitor the flow of its product through the distributor’s warehouse, and then decide what to ship to the distributor and when to ship it.

Key elements of JITD:
Replace the current delivery pattern with one that it better suits the entire channel (i.e., sequential myopic optimization vs joint optimization). ﰁ JITD program eliminates a “false” economics that drive traditional ordering processes. Key concept of JITD:

Replace sequential optimization with global optimization. Who will optimize?Eliminate some of the ‘false’ economics that drive traditional ordering processes

Implementation Issues Resistance from the Distributors
Managing stock is my job; I don’t need you to see my warehouse or my figures.” ﰁ “I could improve my inventory and service level myself if you would deliver my orders more quickly; I would place my order and you would deliver within 36 hours.” ﰁ “We would be giving Barilla the power to push products into our warehouse just so that Barilla can reduce its costs Clearly, the implementation issues are much broader than just a logistics program. ﰁ Maggiali needs to view it as a company- wide effort and get top management closely involved in this. ﰁ Trust needs to be developed and conditions created for people to change Demonstrate that JITD benefits the distributors (lowering inventory, improving their service levels and increasing their returns on assets); Run experiment at one or more of Barilla’s 18 depots ﰁ Maggiali needs to look at JITD not as a logistics program, but as a company-wide effort; Get top management closely involved. Develop trust. One of the major factors that prevent real and full implementation of the SCM strategy is that of the trust.Other reasons vary from suppliers being part of the chains of the other direct competitors to the questionable practices such as misrepresenting or withholding of key information and conflicting objectives etc. The principles of shared rewards and risks are hardly put into practice, which is essential for the trust factor to infuse. The problem of trust is not only faced on the inter-organizational front, it is clearly an issue to be dealt within the confines of an organization. For example the Barilla case study, illustrates this problem where not only distributors rejected the JITD program (where Barilla’s logistics would specify appropriate delivery quantities as compared to the distributors order placements) fearing relinquishing control and mistrusting that the rewards would go towards Barilla while risks will move towards the distributors; marked resistance within the organization was also...
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