The case begins with Giorgio Maggiali’s frustration with the fluctuations imposed on the company’s manufacturing and distribution system. He is the director of logistics at Barilla who has been working on the concept started Brando Vitali who was his predecessor. This was the Just-In-Time-Distribution (JITD) concept as an extension of the Just-In-Time Manufacturing concept developed at Toyota. This basically toyed with the idea of delivering its products to its distributors as per Barilla’s customer demand projections and workload on its manufacturing and logistics systems. The core problem addressed in this case is – “How to effectively implement JITD by resolving the issue of having control over the fluctuating demand. “
The company has a very complex distribution network including independent third party distributors and due to such a multi-level network, it has been experiencing large amounts of variability in demand which are resulting in operational inefficiency and increased manufacturing, inventory and distribution costs.
The new JITD system required the distributors to share their sales data with Barilla, who would then forecast and deliver appropriate amounts of products to the distributors at the right time in order to effectively meet demand. This was a drastic change from the current traditional supply-chain setup where the distributors were not sharing any data and could place orders as and when needed. The new proposal came under severe criticism from not only the distributors but also Barilla's own Sales and Marketing department for an array of reasons.
Main reasons for fluctuating demand
Use of promotions in the form of price, transportation, and volume discounts was the main strategy to sell more products to the distributors.
Compensation system in place at Barilla for Sales reps, made them to push more products into the pipeline during promotional periods and not able to sell...
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