Just-In-Time Distribution and Barilla SpA
Anybody who knows something about business had heard the term Just-in-time (JIT) inventory. It involves producing only what is need, when it is needed. The principle of Just in time is to eliminate sources of manufacturing waste by getting the right quantity of raw materials and producing the right quantity of products in the right place at the right time.(1) In this way, manufactures receive parts and materials "just in time" to meet the day's manufacturing quota with hardly any extra.(3)
JIT is a manufacturing management method developed in Japan during the 70's to meet customer demands. The individual most credited with the development of JIT is Taiichi Ohno, the vice president of Toyota Motor Company. After Toyota introduced JIT and was proven to be successful, it was tried by other companies shortly after and now today is widely used by many companies. JIT can be applied to almost any type of industry and channel relationships. JIT could someday become the norm of the business world. Before the introduction of JIT, there were a lot of manufacturing defects in the system such as inventory problems, product defects, risen cost, large lot production, and delivery delays. Some other problems also included equipment breakdowns, and uneven production levels. The inventory problems included unused inventory that was unproductive and the extra effort of storing and managing it. To store inventory, it costs money called a Carrying Cost, which can be expensive. However, with the use of the JIT system, inventory costs can be reduced by as much as 50 percent if not more. For product defects, the manufactures knew that a single product defect can cause breakdown the producer's creditability so they must have a defect-free process. Instead of a large lot production, manufactures decided they should produce more than just one good and have a diverse line of products. And finally, the way they were running things did not manage well for the fast delivery request, so there was a need to have a faster and reliable delivery system in order to handle customers' needs.(1) With the use of the JIT system, these problems were solved and made things run a lot more smoothly with a lot less cost. To make the JIT system successful the cooperation between manufacture and its channel members and a good logistics system is a must. Besides the few that I mentioned above, JIT has a wide range of benefits, such as: reduced inventory, improved quality, lower costs, reduced space requirements, shorter lead time, increased productivity, greater flexibility, better relations with channel members, simplified scheduling and control activities, increased capacity, better use of human resources, and more product variety. One study showed that the average benefits accrued by US manufactures over 5 years from using the JIT system were extraordinary. There was 90 percent reduction in the manufacturing cycle time, 70 percent reductions in inventory, 50 percent reductions in labor costs, and 80 percent reductions in space requirements.(2) All these benefits affect the channel relationship in some way and will benefit the end user, whether it's the cost of the product or the quality.
Now that I've given a little overview on the JIT system, I want to talk about a new concept that a company called Barilla SpA wanted to try called, Just-in-time Distribution (JITD). But before I talk about JITD I want to tell you a little about the company.
Barilla SpA was founded in 1875 when Pietro Barilla opened a small shop in Parma, Italy. Connected to the shop was a small laboratory that Pietro used to make the pasta and bread products that he sold in his store. Eventually over the years, the company grew and was handed over to Pietro's grandchildren, Pietro and Gianni. Over this time, Barilla evolved from the small shop into a large corporation with flour mills, pasta plants, and bakery-product factories that are still today...
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