Supply Chain

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The Barilla SpA
(Harvard Case)

Qian Wang
Tsai-Lan Huang
Xiaoqing Ge

February 2, 2000

Summary

The JITD initiative at Barrila drew a lot of internal and external objections which made it unsuccessful in terms of implementation. An in-depth analysis of the Barrila’s case reveals the various sources of objections. As an attempt to solve the traditional problems within the uncertainties-affected supply chain, the JITD idea is commendable. But the problem lies in its lack of tactics to win the stake-holders’ support. But the problem lies in its lack of tactics to win the stake-holders’ support. Possible solutions corresponding to different aspects of problems are discussed along with the problem analysis. Finally, a stake-holder consortium based on a real-time vendor managed inventory system is suggested.

Problems and Possible Solutions

The problems that JITD intends to solve:
* Demand fluctuation and low customer fill rate: As the Exhibit 12 showed, the demand variability is huge. On the other hand, the production line of Barilla can not afford frequent changes in order amount due to the long setup process. It comes out that if the forecast is unreliable, they will either need to build up huge inventory or lose the customer fill rate, none of them is favorable. Also, the Barilla customers will face stockout due to the low fill rate of Barilla. Another reason could be the big order policy (refer to Conflicts internal to Barilla) makes GD/DO stockouts by “buying the wrong product a lot” but “having no extra space or money to buy the correct product to meet the demand”. * High Inventory at distributors and No Space or further investment available: As Exhibit 13 shows, the distributors have huge inventory and stockouts rate, which indicates that new product keeps coming out while old products still keep their spaces.

Advantages of JITD:
* Decrease the Total Inventory in the Whole Supply Chain: JITD helps to reduce inventory held at the distributors since it builds inventories at the central warehouses and then delivers only the quantities required by the end-users through checking inventory at the distributors more frequently. Theoretically, it eliminates the needs for each distributor to hold it own “Safety Buffer” which causes demand fluctuation. Therefore, it benefits the distributors through releasing their inventories space and cost. Actually, the distributors will be more competitive to react to the demand variability, such as, new product, after season stock…etc. * Better Customer Fill Rate both in Barilla and the Distributors: JITD emphases quick response. Since the inventory data and delivery pattern are controlled by Barilla, their central factory and CDCs are therefore easier to schedule their production and deliveries to meet the customer demand. For the distributors, since their flexibility and reaction speed have all been increased due to the lowered inventory level, they surely could have better customer fill rate and less stockouts rate than before. * Further Distribution and Manufacturing Cost Reduction based on Scheduled Production (less hurry orders interruption): As mentioned before, Barilla has long changeover time to setup for another product. The less interruption, the more cost-efficient. But this is only true for bottleneck machines. This is also true for distribution cost. In contrast to the fluctuating due to unknown situations in the past, a better delivery schedule could be built by using complete data obtained from the end-users.

Drawbacks of JITD:
* Inventory could increase at Barilla: The concept comes intuitively that if...
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