I think the main causes for large fluctuations in orders observed at the Pedrignano CDC are too frequent trade promotions, volume discounts, and distributors’ use of periodic review inventory systems. Collectively, Barilla experienced the bullwhip effect in its distribution network. With the use of trade promotions to push product into the grocery distribution network, Barilla distributors could buy as much product as desired to meet current and future needs. Without a ceiling in order quantities from distributors, Barilla saw significant and unpredictable demand spikes based on how distributors took advantage of trade promotions to forward buy inventory to no limit. With volume discounts, distributors were also encouraged to order in larger quantities than they usually may. Thus, if a distributor only required an LTL of demand, they may order up to a full truck of product. In the case of Barilla’s egg pasta, distributors may have ordered up the 3 truckloads to reap the 4% discount when they may have required far less. Finally, because distributors used a period review system, they were typically only placing orders once a week. With a continuous review inventory system, distributors would most likely place orders with Barilla every time they required a TL of inventory. However, with period review, if there was a fluctuation in POS for the week prior, distributors would reactively vary their order quantities as well.
I think the JITD program would be successful, especially since I used to work in a CPFR (Collaborative, Planning, Forecasting, and Replenishment) or VMI (Vendor Manager Inventory) role. By looking at all distributors’ shipment data and sending only what is needed at the stores, Barilla would be offering the customer an additional service at no extra cost. By improving visibility, it would improve the collaborative relationships between Barilla and its distributors. Lastly, the JITD system would allow Barilla to improve its own...
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