Barilla Spa Case Study Analysis

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Diagnose the underlying causes of the difficulties that the JITD program was created to solve. What are the benefits and drawback of this program?
Brando Vitali, Barilla’s director of logistics, proposed the idea of Just-In-Time Distribution (JITD) in the 1980’s as an alternative to Barilla’s traditional practice of delivering products to their distributors (Hammond, 1). Instead of distributing Barilla’s products based on the orders the distributors placed with the company, Barilla’s own logistics organization would determine the product quantities to distribute that would most effectively meet end-consumers needs. This in turn, would more evenly distribute the workload on Barilla’s manufacturing and logistics systems (Hammond, 1). Vitali hoped his innovative idea would solve the tremendous fluctuation that occurred from week to week in the number of Barilla dry products being ordered by the distributors. The extreme demand variability seriously strained Barilla’s manufacturing and logistics operations. Barilla’s highly automated manufacturing system was not designed to accommodate large fluctuations in demand nor, was it designed to accommodate sudden changes in demand or product. The manufacturing sequences of pasta production made it very difficult to produce particular types of pasta that had been sold out due to unexpectedly high demand. The temperature and humidity in the kiln had to be precisely specified for each size and shape of pasta and had to be tightly controlled to ensure that quality was maintained (Hammond, 3). This procedure limited the ability to rapidly shift production between different pastas. Different sizes of pasta were also made in different plants based on the variety of equipment required for pasta production (Hammond, 3). This limited Barilla’s production flexibility to shift plant locations as needed to meet product demand.

The JITD program was also created to address the amount of inventory being held at Barilla’s Central Distribution Centers (CDC’s), their Grande Distribuzione (GD’s), their Distribuzione Organizzata (DO’s), and their retailers. Some distributor’s inventory levels were so low that they were experiencing high-stock out rates when attempting to fill retailer orders (Hammond, 7). Other distributors and retailers were carrying too much inventory. Barilla felt their customers were realizing that they didn’t have enough room in their stores or warehouses to carry the large inventories Barilla wanted them too (Hammond, 8). On the other hand, the distributors felt that they were being pressured to increase the inventory levels they had already stocked and to add items they didn’t carry to their product offerings (Hammond, 8). The JITD program would look at all the distributor’s shipment data and send only what was needed to the stores (Hammond, 8). This would eliminate Barilla scrambling to meet demand swings from the distributor. It would also improve operations for Barilla and their customers. Barilla would be able to ship products as needed, rather than build huge stocks in their facilities (Hammond, 8). Finally, holding sufficient finished goods inventories at Barilla’s CDC’s to meet distributor's order requirements, was extremely expensive when weekly demand fluctuated so much and was so difficult to predict. Production sequencing based on type (and size of facility), made it cost prohibitive to change-over product runs or mix multiple types. Flexible scheduling based on orders from distributors could not be achieved. Vitali’s position on the JITD program was that it would save manufacturers and retailers money due to thinning margins by taking costs out of the distribution channel without compromising service. Barilla would use forecasting systems and analytical tools to determine product quantities in a sensible and logical manner. They would look at data provided by the distributors and make decisions based on their forecasts...
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