The Italian Pasta Manufacturer, Barilla SpA, is experiencing inefficiencies and increases in cost due to variability in demand from its distributors. Giorgio Magialli, the Director of Logistics, wants to implement a Just-In-Time Distribution (JITD) system to gain more control. The JITD system was originally proposed by Barilla's former Director of Logistics, Brando Vitali. The new system is untraditional and is being rejected by both distributors and Barilla's internal departments. I have reviewed the reasons for opposition and have made recommendations to gain support for the new JITD system.
Statement of Issues
The main reasons for the fluctuations in demand are:
Promotions: Barilla's sales strategy relies on the use of trade promotions. They divided the year into 10 to 12 canvass periods, during which various products were offered at a discount. Incentives for sales reps were based on targets for each canvass period. Barilla offered volume discounts to its distributors for orders placed in full truck loads, and sales reps offered discounts for multi-truck load orders. Sales Representative: Barilla rewarded its sales reps based on amount of product sold. Therefore, they would push product during the promotional period but were not able to sell as much during a non-promotional period. Lack of Forecasting: Although nearly all of the distributors had computer supported ordering systems, few had sophisticated forecasting systems for determining order quantities. Lack of Order Control: Barilla does not require its distributors to place minimum orders, or have a maximum order amount in place during its promotional periods. Implications of Fluctuation Demand:
Manufacturing Costs: These costs would increase substantially as the demand variation increased.
This was because of the pasta specific temperature and humidity requirements for drying. This process could not be changed fast enough to accommodate the fluctuating demand for...