In a world where change has become the rule, Barilla is facing challenges to satisfy the demand of its customers. Founded in 1875, Barilla is the world’s largest pasta manufacturer. It sells a wide range of products, to a considerable number of retailers through distributors. Recently, the company faced demand fluctuations, which, due to a lack of accurate forecasting, negatively impacted its manufacturing and distribution system. Distributors use a system of replenishment ordering, without using any forecasting methods. Implementing the Just In Time Delivery (JITD) system would counteract the bullwhip effect the company experienced. Instead of distributors ordering products ...view middle of the document...
This could be a definite asset in a price sensitive market. The sharing of information would improve the relationships of Barilla and its customers. Forecasting demand would allow all the members to decrease their inventory levels, which are very costly. The distributors would enjoy additional service at no extra cost and a better lead-time receiving their stocks.
However, the program also comes with disadvantages. Barilla’s manufacturing plants specialize in specific products to maintain high quality and low incremental costs. If the demand forecast is wrong and one product is out of stock, it would be very costly to adapt the machines to produce it. The machines are set up to produce large quantities, instead of being flexible. This could result in a decrease in market share and leave distributors in a vulnerable position, as they would not be able to meet their retailers’ needs in a timely manner. In this sense, it is no wonder why distributors feel that they would heavily rely on Barilla and lose control of their activity. Finally, the sales representative jobs would be at risk. Part of the program will take over their work and their future remains uncertain, compromising their efficiency. If Barilla makes the orders for its distributors, what would happen to the promotions they used to give? Another important issue would be the space left in the warehouses of the distributors. Competitors could fill the void with their own products and offer even larger discounts.
Barriers and Conflicts to the implementation of the JITD program
Barilla attempted the idea of JITD before appointing Giorgio Maggiala as the new director of logistics. The JIDT will supposedly improve the manufacturing and distribution system of the company in a very competitive market. Barilla does not have an accurate demand forecast, nor can it respond to the changing needs of its customers. The result is a high rate of inventory and an increase in costs due to the extensive lead-time in delivering its products. This could cause the company lose market shares. It is important to note Barilla SpA operates every step of the supply chain; from owning flourmills to distribution warehouses. Indeed, the company is very well vertically integrated.
The first barrier concerns the promotion Barilla gives to its customers. If the JITD is put in place, they won’t be able to use this kind of methods to push their products into the storing shelves of the distributors. So far, distributors have enjoyed volume and transportation discounts, as well as promotions on some products, which evolved throughout the year. Distributors could also order the amount they needed with no restriction on quantities. This could greatly affect the decision of the Barilla’s customers. If the company were making the choice on which products to deliver, how would the prices be determined? The pasta market is price driven and the end customer would notice any change.
As for the second barrier, “Barilla dry...