Barilla spa

Group A9 | Section A
Amanjot | Peeyush | Sahil | Sonam | Rajeev | Thiyagarajan
Fundamental reasons for Demand Fluctuation




Price fluctuations
Division into 10 canvass periods with different promotional schemes
(discounts from 1.4-10%) enables distributors to stock for current and
future needs
Bad demand Forecasting
Lack of information systems and sales equipment for retailers
Lack of sophisticated demand forecasting systems for distributors
Variability in lead times between CDCs and GDs and DOs
Minimum 8 days to a maximum of 14 days changes the base stock
and safety stock quantities
No minimum or maximum on order quantities
Poor communication
Due to decentralized demand information
Large number of SKUs





Is it a reflection of change in
customer preferences?

It may be due to change in
preferences caused due to
retailers introducing new
products into their stores ,
which in turn alters the
customer demand and
preferences
JITD Model - Benefits
It is a vendor managed inventory concept
Has variety of benefits for the manufacturer
Lesser manufacturing costs
Lesser inventory
More supply chain information visibility
Planned production cycle
Has benefits to the distributor as well
Quick response
High service level additional service provided to retailers at zero cost
Inventory carrying costs reduces

JITD model will it solve Barillas problem?

Avoiding inventory backlog caused by a higher production
Distributors surplus inventory will be eliminated
Solving the difficulties faced by the production and logistics departments in predicting demand
Enable the company to respond to customer demands faster
Reduced bull whip effect and hence reduced demand variability
Cost efficiency
By eliminating cases of interruption due to new orders
By eliminating inventory costs due to excess inventory
Distribute workloads in a more efficient manner
Manufacturing and logistics operations would not be under pressure
Smoother production processes
Final decisions on distribution lie in the hands of Barilla


Do you think JITD is useful for Barilla but risky
for DOs?
It is useful for Barilla because:
It will minimize the Bullwhip effect by controlling order demand and supply to the retailer
Minimized lead time since they no longer will have to wait for orders
It will be risky for DOs because
The shared information might be divulged to their competitors and hence might be misused
against them
They will lose control over their business
It might lead to cost saving for Barilla alone
What explains the resistance to JITD?
Resistance from Internal Sources
Threat of reduction of responsibilities of sales
representatives
Risk of inability to adjust shipments quickly to
meet the changing patterns
Inability to run increased promotions
Decrease of inventory would lead to more free
shelf space ; risk from competitors to utilize that
free shelf space
More pressure on distributors to push other
competitors products if they occupy more shelf
space
Any immediate/unlikely disruption in supply
chain would lead to stock out of product

Resistance from External Sources

Distributors were not convinced about the JITD
model as none of them were ready to share
inventory or service level information
They believed that they would be giving power to
Barilla to push the product into their warehouses in
order to reduce their own costs
Distributors were skeptical about how effective the
new system would be?
Maggialis mistakes

Not sufficient involvement of the top management in the implementation of JITD
Looked at JITD as a logistics program
Top management could have solved the problem of internal resistance (from Barillas own sales
and marketing organizations)
Did not get a third party view/opinion
External opinion could have helped in solving external resistance



What should he do now?
Implement JITD in Barillas own depots first and then present the findings to customers
Propose a pilot run of JITD for particular time period and then compare the result of
inventory and frequency of stock out of both new and old methods
Make distributors as shareholder of company
By this both parties can benefit without distributors losing their independence
Trusted objective consultant can be hired for both parties to get third party opinion
THANK YOU