Barilla Spa Case Study Essay
Barilla Spa Case Study
1. Diagnose the underlying causes of the difficulties that the JITD program was created to solve. What are the benefits and drawbacks of this program? One of the underlying causes of the difficulties that the JITD program was created to solve was the effects of inconsistent demand that came from Barilla’s distributors. The extreme demand variation strained Barillas manufacturing and logistics, and made very hard for Barilla to meet that demand.
For example, as noted on the case “the specific sequence of pasta production necessitated by the tight heat and humidity specifications in the tunnel kiln made it difficult to quickly produce a particular pasta that had been sold out due to unexpectedly high demand” (Barilla SpA). One of the benefits of implementing the JITD is to reduce the manufacturing cost. As Brando Vitali then Barilla’s director of logistics explained “we could try to reduce our own distribution costs, inventory levels, and ultimately our manufacturing costs if we didn’t have to respond to the volatile demand patterns of the distributors” this meant JITD will help reduce the costs associated with distribution channels, likewise distributors would not need to stock inventory that exceeds their real demand, and intern help them reduce their cost.
Another benefit is that JITD will help improve Barilla’s visibility with trade and make the distributors more dependent on Barillas. As Vitali said “I think JITD should be considered a selling tool, rather than a threat to sales. We’re offering the customer additional service at no extra cost. In addition, the program will improve Barilla’s visibility with the trade and make distributors more dependent on us-it should improve the relationships between Barilla and the distributors rather than harm them.” Though this would require daily sales data input from distributers on products they shipped out from their warehouse to retailers during previous day and their current stock level, this would help barillas own forecast and would be just one step behind the retailers sell-through information.
JITD might also help the relationship between Barilla and its distributors, since Barilla won’t need to use pressure on distributors to hold more finished products than necessary. While the JITD program has many beneficial it also has its drawbacks. One of them is the perception that the power will be transferred to Barilla, as one of the distributors was quoted “we would be giving Barilla the power to push product into our warehouses just so Barilla can reduce its costs.” Another drawback is that some of the distributors are not comfortable or willing to share their warehouse data, which is a vital piece in order for JITD program to work. Furthermore, it might be hard for some retailers to report daily sales simply because they might not have the point-of-sale technology at their stores.
2. What conflicts or internal barriers to Barilla has JITD created? What causes these conflicts? How would you deal with them? JITD created lot of internal barriers to Barilla; while some of the concerns are easy to overcome others would need more convincing. For example, the sales department, sales representatives receive more on their compensation through commission from their sales. JITD would cut or reduce to zero most of sales people responsibilities, which in turn will squeeze their commission, as one sale man said “Our sales levels would flatten if we put this program in place”.
As noted in the case most of the sales come from the promotions or incentives that marketing department advertises or promotes, JITD program would heavily affect the marketing department, and would make their job almost an obsolete. As one marketing representative quoted “we wouldn’t be able to run trade promotions with JITD, how can we get the trade to push Barilla product to retailers if we don’t offer some sort of incentive?” These conflicts are mostly caused by fear of losing jobs. Since these are legitimate concerns and a very possible outcome if JITD is implemented, from my opinion there are only two options either retrain all the employees that would be affected in a different positions or get rid of the JITD program all together and if it was up to me I would scrub the whole program all together.
3. As one of Barilla’s customers, what would your response to JIDT be? This would depend on whether I am a big retail store or a distributer. As a Barilla’s Distributor, my response to JIDT would be, why would I share my sales data to a supplier who also supplies the same products to my competitors? In addition, what makes Barilla’s management think that they can do superior job by making a better demand forecast then I do. I would think that Barillas is only looking after their interest by trying to reduce their inventory cost and as result dumping their product on me. On the other hand if am a big retailer the JITD program would help me reduce my overhead that comes from keeping a weeks of supply from Barilla in my store, and if there are any time gaps between when product is out and when new comes in I can use the shelf to move other quick turnaround products.
4. How would you proceed? I would cancel the whole JITD program all together. Although the program has some benefits, its draw back and difficulties to implement out weight more than the benefits. The main problem that Barilla has is there average lead time which is 10 days and their distributors would prefer three days lead time; this was caused mainly by Barilla’s production line and machines as noted previously in the case, the specifications of each pasta and the time it takes in the tunnel kiln made it hard for Barilla to quickly produce and keep up with the demand. Barilla should look ways to improve the production line, whether by adding more lines to the production or building a smaller factories allocated strategically in the country, since, most of the Barilla’s products is consumed with in Italy, and depending on the region north or south, each consumes more type of Barilla product than the other.
University/College: University of California
Type of paper: Thesis/Dissertation Chapter
Date: 18 November 2016
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