Barilla Spa - 5
Barilla SpA (A)
Christel Bou Farhat
Notre Dame University
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? In your answers, consider the Barilla and distributors points of view (400-500 words).
* Barilla’s Supply Chain suffered from the bullwhip effect that was mostly caused by the demand fluctuations and damaging the company’s manufacturing and distribution system. This fluctuating demand occurred due to: * Product variability: Different types of products (Fresh and Dry) with different shelf lives and the large number of stock keeping unit (800 SKUs), causing the channels of distributions to be more complex. * Promotions and volume discounts: As stated in the case: “Barilla’s sales strategy relied on the use of promotions to push its products into the grocery distribution network” (Hammond, 1994) They divided each year into 10 to 12 canvass, in which they offered different discounts, ranging from 1.4% on semolina pasta for example and up to 10% on other products such as breadsticks. * Long Lead Times: Barilla shipped their products to their distributors between 8 and 14 days after ordering, making the average lead time of 10 days. This is a long period and can amplify the bullwhip effect. * Distributors inaccurate forecasting: According to the case: “Most distributors used simple periodic review inventory systems” (Hammond, 1994) and “only few had forecasting systems or sophisticated analytical tools for determining order quantities” (Hammond, 1994). * Benefit and drawbacks of the JITD program: * A JITD approach will save the entire supply chain money as it will: reduce the distribution and manufacturing costs, reduce the level of inventory, increase the service level, and improve the operations for Barilla and its customers; and all that by not responding to the fluctuating demand caused by distributors. * With the
Christel Bou Farhat
Notre Dame University
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? In your answers, consider the Barilla and distributors points of view (400-500 words).
* Barilla’s Supply Chain suffered from the bullwhip effect that was mostly caused by the demand fluctuations and damaging the company’s manufacturing and distribution system. This fluctuating demand occurred due to: * Product variability: Different types of products (Fresh and Dry) with different shelf lives and the large number of stock keeping unit (800 SKUs), causing the channels of distributions to be more complex. * Promotions and volume discounts: As stated in the case: “Barilla’s sales strategy relied on the use of promotions to push its products into the grocery distribution network” (Hammond, 1994) They divided each year into 10 to 12 canvass, in which they offered different discounts, ranging from 1.4% on semolina pasta for example and up to 10% on other products such as breadsticks. * Long Lead Times: Barilla shipped their products to their distributors between 8 and 14 days after ordering, making the average lead time of 10 days. This is a long period and can amplify the bullwhip effect. * Distributors inaccurate forecasting: According to the case: “Most distributors used simple periodic review inventory systems” (Hammond, 1994) and “only few had forecasting systems or sophisticated analytical tools for determining order quantities” (Hammond, 1994). * Benefit and drawbacks of the JITD program: * A JITD approach will save the entire supply chain money as it will: reduce the distribution and manufacturing costs, reduce the level of inventory, increase the service level, and improve the operations for Barilla and its customers; and all that by not responding to the fluctuating demand caused by distributors. * With the
References: Hammond, J.H. (1994). Barilla SpA (A); Harvard Business School. [Case].