Barilla's Just-in-Time-Distribution Program - Case Report

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Barilla’s Just-in-Time-Distribution Program - Case Report

I. Part 1:Executive Summary

Barilla, the word’s largest pasta producer, is confronting with huge fluctuation on its production because the production is dictated by distributors’ orders. This variation leads to expand production price as well as piled up inventory at distributors’ depots. However, there was also stockout registered at retailers. My decision is to implement Just-in-Time-Distribution at Barilla, in order to reduce the demand fluctuation. Just-in-Time-Distribution concept assumes that the delivery, and implicit the manufacturing, will be dictated by the consumers’ needs and controlled by the Barilla. Having the possibility to do this, based on Barilla’s own logistics, the variation for manufacturing and for distribution would be smoothed out. Furthermore, Just-in-Time-Distribution will avoid either the accumulation of the inventory at the distributers’ depots or the running out of stock for retailers. Taking into consideration that Barilla is a vertically integrated corporation, the rise and fall in demand affect not only the pasta plant but also the flour mills, transportation, etc. This means a change from arm’s-length policy to a supply chain management one. But there are some problems. The costumers of the world’s largest pasta producer were reluctant either to share the detailed sales data with Barilla or to lose their control over the placing of orders at their willingness. Moreover, company’s own sales and marketing people feel their position threaten if this concept will be implemented.

I. Part 2: Table of Content
I. Process Elements/Table of Content
Part 1Executive Summary2
Part 2Table of Content3
II. Issue with Impact Analysis4
III. Environmental & Root Cause Analysis5
IV. Alternatives and/or Options5
V. Recommendationsand Implementation5
VI. Monitor & Control6
VII. Conclusion & Management Plan7

II. List of Issues with Impact Analysis

The main issue at Barilla is the huge fluctuation in orders. The reasons for these oscillations in demand are due to Barilla’s trade promotion, the combination between weekly orders and lead time, and customers’ response to other companies’ trade promotion.

Barilla has 10-12 canvass periods, each corresponding to a promotional program. These trade promotions create incentive conflicts because they allow customers to buy as much as they wish, not considering the real requirements on the market. On the one hand the customers save some money from typical promotion discounts (1.4% for semolina pasta, 4% for egg pasta, 4% for biscuits, 8% for sauces, and 10% for breadsticks) and from volume discounts (2% to 3% for full truck-load, 4% for minimum three truck-loads of egg pasta). On the other hand they lose money for stocking huge quantities of products and sometimes they are not able to sale all the merchandise they had bought from Barilla in time (out of shelf lives). Another reason for fluctuation in orders is the combination between weekly orders and lead time required when placing an order. When the distributors order only once a week, there is variability in demand. Furthermore, the average lead time of 10 days raises the forecasting mistakenness.

It is true that Barilla is the world’s largest pasta producer, but it is competing with more than 2,000 Italian pasta manufacturers. Some fluctuation may appear as customers respond to other trade promotions than Barilla’s.

III. Environmental and Root Cause Analysis

I believe that the Just-in-Time-Distribution program can help not only Barilla but also the entire downstream supply chain (the Distributors, the Chain Supermarkets, the Independent Supermarkets, and the Signora Maria Shops). Sharing information about sales and shipping along the entire supply chain will reduce the fluctuation of the manufacturing and distribution. Based on...
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