Barilla: Just-In-Time Distribution System

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Executive Summary

My decision for this case is to implement the Just-In-Time Distribution (JITD) system that was proposed by his predecessor Brando Vitali. This system is entirely different from the existing set up and is being opposed by both the distributors and Barilla’s Sales and Marketing Department. Barilla Spa, an Italian pasta manufacturer, is experiencing amplified levels of inefficiencies and rising costs due to variability in demand from its distributors. In order to bring things back and to improve its margins. I have studied the reasons for this opposition by several facts and have suggested recommendations. I suggest that in order to condense the Bullwhip effect being experienced by Barilla, their supply chain would have to be centralized. I have given my rationale for the JITD system to work and have suggested recommendations to resolve all existing issues. I think that a centralized supply chain with Barilla controlling the orders will result in better margins for all the partners. I also believe that by following my recommendations, Barilla will succeed in influencing its distributors and Sales personnel to work together and implement the JITD program. This will not only result in better performance in terms of time and money but also promote trust and good relations among all the partners in the supply chain.

2. Identification of the problem

Transportation Costs: As a result of uneven demand, Barilla had to transport more products to its distributors in periods of high demand in lesser time than when compared to periods of low demand. The greater number of trucks, etc. that it required in periods of high demand increased its Transportation costs. 3. Environmental and Root Cause Analysis

Quantitative
Trade Promotions
Barilla's sales strategy relied on the use of trade promotions to push product into the grocery distribution network. Barilla divided each year into 10 or 12 "canvass" periods, typically four to five weeks in length, each corresponding to a promotional program. During any canvass period, a Barilla distributor could buy as much product as desired to meet current and future needs. Incentives for Barilla sales representatives were based on achieving sales targets set for each canvass period. Different product categories were offered during different canvass periods, with the discount depending on the margin structure of the category. Barilla also offered volume discounts. For example, Barilla paid for transportation to distributors, and offered incentives of 2% to 3% for orders in full truck-load quantities. In addition, a sales representative might offer a buyer a 1,000 lire/carton discount (representing a 4% discount) if the buyer purchased a minimum of three truck-loads of Barilla egg pasta.

Sales Representatives and Customer Service
Barilla sales representatives serving DOs spent an estimated 90% of their time working at the store level. In the store, sales reps helped merchandise Barilla product and set up in-store promotions; took note of competitive information including competitors' prices, stock outs, and new product introductions; and discussed Barilla products and ordering strategies with store management. In addition, each sales rep spent half a day in a regularly scheduled weekly meeting with the distributor's buyer, helping the distributor place its weekly order, explaining promotions and discounts, and settling problems such as returns and deletions associated with the last delivery. Each rep carried a portable computer for inputting distributor orders. The rep would also spend a few hours a week at the CDC, discussing new products and prices, discussing problems associated with the previous week's deliveries, and settling disputes about different discounts and deal structures. In contrast, a very small sales force served the CDs. The CID sales force rarely visited the GD's warehouses; CDs usually sent their orders to Barilla via fax. As a result some customers...
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