Barilla
Barilla SpA currently must decide the logistic planning of its future production and distribution systems. The company is suffering from issues dealing with fluctuating demand from distributors, and the lack of end user sales and demand information. Brando Vitali, the former director of logistics for Barilla, suggested the use of a Just-In-Time Distribution (JITD) system in order to fix these issues. After much resistance from distributors and Barilla employees itself, a decision as to whether to implement the JITD system or other alternatives much be chosen.
Causes for the Bullwhip Effect and other Issues
Promotion The largest issue effecting distributor demand is Barilla’s promotion offerings. The year is broken down into 10 to 12 canvas periods, where distributors could gain a discount anywhere from 1.4% to 10%, dependent on the product category. Promotions are offered in the forms of transportation, price, or volume discounts. Selection as to what product will be discounted does not seem to be based on any statistical basis seeing as how no end user information is available. Fluctuation of demand arises when distributors purchase high amounts during promotional periods whether that particular product is needed or not. This creates overstock in distributor warehouses if demand is low, causing a decrease in sales order for the next purchase period.
Minimum and Maximum Requirements Barilla does not require minimum or maximum sales orders. The lack of a minimum requirement increase productions costs by not allowing Barilla to achieve economies of scale. The absence of the maximum requirement allows distributors to purchase high quantities during promotional periods, creating false demand for Barilla.
Distributor Issues Barilla sells to two types of distributors: Grande Distribuzoine (GD), large distributors that sell to supermarket chains, and Distribuzoine Organizzata (DO) that sell to independent supermarkets. Both groups lack forecasting
Causes for the Bullwhip Effect and other Issues
Promotion The largest issue effecting distributor demand is Barilla’s promotion offerings. The year is broken down into 10 to 12 canvas periods, where distributors could gain a discount anywhere from 1.4% to 10%, dependent on the product category. Promotions are offered in the forms of transportation, price, or volume discounts. Selection as to what product will be discounted does not seem to be based on any statistical basis seeing as how no end user information is available. Fluctuation of demand arises when distributors purchase high amounts during promotional periods whether that particular product is needed or not. This creates overstock in distributor warehouses if demand is low, causing a decrease in sales order for the next purchase period.
Minimum and Maximum Requirements Barilla does not require minimum or maximum sales orders. The lack of a minimum requirement increase productions costs by not allowing Barilla to achieve economies of scale. The absence of the maximum requirement allows distributors to purchase high quantities during promotional periods, creating false demand for Barilla.
Distributor Issues Barilla sells to two types of distributors: Grande Distribuzoine (GD), large distributors that sell to supermarket chains, and Distribuzoine Organizzata (DO) that sell to independent supermarkets. Both groups lack forecasting