Operations & supply chain management
1 Is there any evidence that Barilla faces the bullwhip effect? If so, what causes of the bullwhip effect are present?
Barilla has two products lines, “dry products representing 75% of sales” and “fresh products representing 25% of sales”. Products are shipped from plants to one of the two central distribution centers (CDCs). Each CDC held about a month’s worth of dry product inventory. There are three types of retail outlets: small independent grocers, supermarket chains, and independent supermarkets. * Small independent grocers: 35% of Barilla’s products were distributed directly from CDCs to small independent shops and the t inventory level within these small shops was 2 weeks. * Supermarket chains and Independent supermarkets: 70% of Barilla’s products were distributed through a large distributor “GD” and Organized distributor “DO”. Both GD and DO purchase products from CDCs and hold a 2 weeks of dry products in inventory. During the late 1980s, Barilla suffered bullwhip effect due to demand fluctuations and inaccurate demand forecast, which caused inefficiencies in its operations including distribution and manufacturing systems and also increased production, inventory and distribution costs. According to exhibit 12, demand variability was very high and led to either inefficient production; reduced service level to meet customer needs, or holding excessive inventory levels to meet distributors’ order requirements. Sometimes distributors were asked to carry additional inventory to mitigate the fluctuations in orders, but with their inventory levels, the service levels to retailers were not acceptable according to exhibit 13 and suffered high stock out rates.
The reasons of the increased variability can be summarized as below: 1- Trade promotions: There were 10 to 12 “canvass” periods; each corresponding to a promotional program and during each period...