Table of Contents
Environmental and Root Cause Analysis3
Alternatives or Options4
Recommendation and Implementation5
Monitor and Control6
Barilla’s high stock out rates along with large average inventory numbers are the main reasons why Maggiali is looking to continue on with Vitali’s dream of implementing the Just In Time Distribution system. However, faced with great external resistance to its introduction, Magialli must look to top management to hop on board and facilitate its acceptance among all partners in the supply chain. Using internal distributors as experiments will allow Barilla to showcase better stock out and inventory results. By doing so, Barilla can gain the acceptance and approval of other distributors. With everyone participating in the JITD, Barilla will be better able to forecast demand and not over react to movements at the consumer level.
Giorgio Maggiali, the current director of logistics for Barilla SpA, faces much resistance when he tries to implement a new manufacturing concept called Just-in-Time Distribution (JITD). Initially, this idea was proposed by the prior director, Brando Vitali, but is heavily supported by Maggiali as well. Because of the existing structure in the organization, fluctuations in demand at the end-user/customer level cause the whole system to react adversely. The result is an excess “safety stock” at all levels of the supply chain, leading to extra costs. This is commonly referred to as the “bullwhip effect.”
Due to the resistance Maggiali faces, he must make a decision on whether or not the JITD is feasible for Barilla SpA and how to implement it with the unsupportive partners in the supply chain.
Environmental and Root Cause Analysis
The first concept we must understand is how significant pasta is in Italy. “Per capita pasta consumption in Italy averaged nearly 18 kilos per year, greatly exceeding that of other western European contries.” (pg. 2, Barilla SpA case study) Due to its dominance in the food market, consumers are very aware of price fluctuations and which pastas are “on sale.” Because of this, forecasting consumer demands is a vital component of the JITD. Without it, the traditional way of order-filling leads to common stock outs and excess inventory throughout the year. Because of the process pasta is made, Barilla cannot simply change its production on a whim. Its production plant must keep the kiln’s humidity and temperature at precise specifications for different types of pasta. As a result, sequential production is optimal to keep downtime and costs low for pasta manufacturing.
The JITD was developed to address issues such as stock outs and to make inventory levels more manageable due to better forecasting. It will also allow Barilla to make the production and inventory decisions from a top down perspective rather than bottom to top reactionary chain (bullwhip effect). As shown in the Sales and Stock outs Chart at the Cortese Northease Distribution Centre (Exhibit 13, Barilla SpA Case study), stock outs are a regular occurrence due to the fluctuations in sales throughout the year.
The main resistance from Barilla comes from sales and advertising. “Barilla’s sales strategy relied on the use of trade promotions to push product into the grocery distribution network.” (pg. 6, Barilla SpA case study) It is with these sales that enable sales representatives to meet their target goals. If Barilla decides to implement the JITD, the need to push sales for the Distributors would cease to exist. Essentially, Barilla will be replacing sales by deciding how much inventory to stock each distribution centre with. It is quite clear that the sales department fears this system due to job security issues.
The external resistance plays a large factor in why Maggiali is unable to introduce the...