EXECUTIVE SUMMARY Barilla Health spa, world’s major manufacturer of pasta operating out of Italy can be experiencing extreme demand variability resulting to detailed inefficiency and increased expense. To fight the key concerns stated my own decision should be to implement the Just In Time Circulation (JITD). This new system, unlike current system Barilla features will get rid of Bullwhip effect and inventory outs with centralized info, there will be data transparency among Barilla and distributors.
Distributors provides actual sales data which is the basis of forecasting and production thus increasing in efficiency in operation and alleviating stock out among marketers. JITD can lead to better supplier-customer romance which in the future can be regarded as a win-win situation. Inside resistance coming from Sales and Marketing will probably be resolved simply by involving the best management and by presenting the benefits of the JITD in statistics and by focusing that role of Salesforce in JITD is of paramount to the execution.
External amount of resistance will be combated by thorough discussion delivering the long term advantages of all parties involved. Implementation of JITD as soon as possible will position Barilla on possibly stronger pasta producer and may potentially enhance growth charge of the business resulting from improved business efficiencies and reduced cost. Barilla may have a pilot operate on the DO (Distribuzione Organizzata) where product sales representatives features are dominating, sales associates are one of many key elements on the success of JITD implementation.
Every week meeting between Barilla and DO will have to come about for few months upon execution to keep an eye on its status. CONCERN IDENTIFICATION A. Immediate Concern Because Barilla is facing extreme variability in demand over time which causes operational inefficiencies, excessive inventory and stock outs, Maggiali is fighting for the implementation of Only In Time Circulation (JITD) system despite of the interior objection by Sales and Marketing team and external resistance from distributors. M.
Systemic Problems ¢Poor Foretelling of system Mother nature: StrategicTiming: Short term , Long-term Most marketers like GDs and DOs check products on hand levels and place orders with Barilla once per week using simple periodic assessment. They do not stick to any predicting model, that they just do renewal ordering with no minimum/maximum amount. Barilla does not have visibility on actual info, their foundation production is usually per distributors’ information per week and this triggers pressure about manufacturing , distribution staff of Barilla. Too many SKUs , Higher level of inventory Nature: StrategicTiming: Long term , Short term In dry goods alone, Barilla offers 800 SKU. Pasta is made in 200 different shapes and sizes and has more than 470 packed SKUs. Commonly distributors hold 150SKU away of 800 SKUs Barilla leaving excessive inventory around the CDC. There may be high level of inventory across the chain, overall there is about 2 months of products on hand on the whole supply cycle at any given time. ¢Frequent Trade Promotion leads to Volume Ordering Mother nature: Tactical Time: Short term
Barilla has 10-12 canvass period which each corresponding to a promotional software. During the canvas distributor can buy as much as he wants in order to avail the promotion which is welcome by sales representatives mainly because their incentive is dependent about achieving product sales goal for your canvass period. Barilla offers volume low cost and transport discount entirely truck load order amounts. The situation contributes to bulk placing your order which causes require fluctuation. ¢Long Lead period Nature: StrategicTiming: Long term and Short term
Vendors place so that it will Barilla once per week only applying simple routine review system and business lead time is usually eight to fourteen days, because of long business lead time marketers either order high products on hand or it results to stock out for distributor’s consumer. ENVIRONMENTAL , ROOT CAUSE RESEARCH Barilla is definitely the largest manufacturer of teigwaren in the world, making 35% of most pasta bought from Italy and 22% of pasta bought from Europe. Nevertheless , Barilla is suffering from Bullwhip effect due to enormous variability popular that lead to operational inefficiencies just like increased price on transport, distribution , inventory. stock out (see exhibit 1). On the development itself the set up are very specific, the company is incapable of meeting rising and falling demand since they consider sequential creation to avoid enormous set up price. When require fluctuates production and syndication team experience too much pressure. Barilla has complex division, presence of multiple intermediaries slows down the delivery lead time to supreme customer. Holding too much variety on dry out products, 800 SKUs likewise leads to long production lead-time because they maintain sequence of development based on style of dinero to reduce set up cost.
Share out arises due to the fact that marketers maintain just 2 weeks inventory and delivery lead time from CDC is 8-14days. On desk below it truly is evident that stock can occur in DC/DO level because 2 weeks delivery lead-time and maintaining 2 weeks inventory on the shelf. Price improvements due to promotions and incentives cause require fluctuation too. Barilla does not have any visibility in what is happening actually with the stream of their goods in the market. Barilla lacks centralized information and sophisticated predicting capability also because of this bullwhip effect occurs ( discover exhibit 2).
Due to extreme fluctuation in demand Barilla is pushed to increase the buffer of finished items to avoid inventory out and this only means increase in raw materials inventory, transporting cost, transportation cost and production expense which is detrimental to the growth in the company. As Barilla’s production is based on input of suppliers, Barilla in the long run may reduce the market discuss if vendors find that others are selling the decide to take competitor’s merchandise instead.
Lack of knowledge on the actual revenue data out there will have a negative effect on Barilla, it has to create smooth business relationship with all the supply chain programs and not only with all the distributors.. ADVICE From my own overall examines given the important points presented I actually strongly recommend to proceed with option quantity 1- to implement JITD. Reason is because thru JITD Barilla may have the centralized information and may have access to actual sales details which they will be using to program procurement of raw materials, creation, logistics, safety stock, inventory accordingly.
As well, thru JITD Barilla will have a chance to set up good supplier-customer relationship with all the distributors and with the grocery stores, this is very important in jogging successful organization. Barilla will have the control of production and not based on the order of distributor. Eventually Bullwhip effect will be been able. First phase would be to implement with the CARRY OUT because of the occurrence of sales representatives within the area. It would be so much easier to implement the plan since sales representatives of Barilla generally spends 90% of the time in DO.