This system is entirely different from the existing setup and is being opposed by both the distributors and Barilla’s Sales and Marketing Department. Barilla SpA, an Italian pasta manufacturer, is experiencing amplified levels of inefficiencies and rising costs due to variability in demand from its distributors. In order to bring things back in order and to improve its margins. I have studied the reasons for this opposition by several facts and have suggested recommendations. I suggest that in order to condense the Bullwhip effect being experienced by Barilla, their supply chain would have to be centralized.
I have given my rationale for the JITD system to work and have suggested recommendations to resolve all existing issues. I think that a centralized supply chain with Barilla controlling the orders will result in better margins for all the partners. I also believe that by following my recommendations, Barilla will succeed in influencing its distributors and Sales personnel to work together and implement the JITD program. This will not only result in better performance in terms of time and money but also promote trust and good relations among all the partners in the supply chain. Issues with Impact Analysis Issues: Bar-code system will be linked to the supply chain system which will be an added cost to the entire implementation Reduced operational costs and higher profit margins once JITD is implemented The cost of implementing JITD would be very expensive at all the plant locations and distributors warehouses Distributors may not agree to the idea of having a vendor-managed inventory The lack of resources and competencies to gain sustainable competitive advantages
It is anticipated that it would take a lot of time and effort before the implementation of the JITD system to the supply chain would be successful Impacts: For the manufacturer: Increased supply chain visibility Reduced manufacturing costs Increase Distributor’s dependence on Barilla Improvement in manufacturing planning using objective data Reduced inventory levels Better Relationship with Distributors For the distributors: Reduced Inventory holding costs Additional service without any extra cost Improved fill rates to Retail stores 4 Environmental and Root Cause Analysis
The decisions at the moment are not advancing the company’s overall operational success; this includes excess inventory, poor forecasting methods, higher manufacturing costs, and higher transportation costs. Also judging by the discussion of the manager from the largest distributor that summed up during a conversation saying “Managing stock is my job” also the sales and marketing personnel felt as if their responsibilities would be diminished if such a program were put in place. The distributors don’t want to share their data with Barilla.
The lack of communication between the departments and the supply chain is harming the success of Barilla SpA. The new (JITD) system needs to be addressed in a manner that all departments can understand the importance of implementing such a program and how it will benefit the overall success of the supply chain. Overcoming Resistance at Barilla SpA Before trying to convince the distributors, one has to convince everyone at Barilla that the JITD system will be a success. If everyone within the company is convinced and they provide a single front to the distributors, Barilla has a better chance of convincing the distributors.
Some of the steps that Barilla will have to take in this situation are: * Convince and use the Upper Level Management: if they are convinced of its feasibility, they will offer full support in trying to convince the Sales department. It will make a lot of difference if the Upper management talks to the Sales people than if just their Logistics department talks to them. * Involve the Sales Department in all stages: To make the Sales people feel important and wanted, Barilla should involve them in all stages of the JITD proposal.
They should be made to feel that they would have lots to do even after the system comes into effect. * New Compensation System: The Sales department should be informed that they would still be rewarded for good performance, except that in this case it was the performance of the entire company as a whole and not just they individually. The new system would award a percentage of Barilla’s profits to the employees as a bonus. They should be shown that the reduction in costs due to the JITD system would ensure greater margins for Barilla that would then be passed on to the employees.
Convincing Barilla’s Distributors Barilla has to convince them that the plan will work and not only benefit Barilla but also the distributors participating in it. Some recommendations to convince the distributors are: * Show them the money: This is as always the foremost issue on any business enterprises mind. If an enterprise can be convinced that it will make more money, it will be ready to change its current practices. The distributors should be shown that the costs of the system would reduce so much that everyone in the supply chain would save considerable amounts of money. * Address Trust Issues: This is a major issue between Barilla and its distributors and to solve this Barilla should work out some confidence building measures which would prove to the distributors that Barilla was worth trusting and that they were making the right decision. Some of the steps that could be taken to increase trust are: * Barilla should have a transparent policy and should not hide any of its plans from the distributors. * Instead of sending the Logistics personnel to talk to the distributors, Barilla should send the Upper Management.
This would make the distributors feel important and would help in convincing them better. * Barilla should make compromises in its business in order to help its distributors. * Barilla should initiate joint decision-making and planning with its distributors to show them that it cared for each one of them and wanted them to be involved in the process. Alternatives/Options Brando Vitali, Barilla’s previous director of Logistics, had proposed a Just-In-Time Distribution (JITD) system to counter this demand variation.
This system required the distributors to share their sales data with Barilla, who would then forecast and deliver appropriate amounts of products to the distributors at the right time in order to effectively meet demand. This was a major change from the current and more traditional supply-chain setup where the distributors were not sharing any data and could place orders at will. Vitali’s proposal came under severe criticism from not only the distributors but also Barilla’s own Sales and Marketing department for an array of reasons.
Under the proposed JITD system, decisionmaking authority for determining shipments from Barilla to a distributor would transfer from the distributor to Barilla. Having a centralized supply chain with Barilla controlling the orders will result in better margins for all the partners. Specifically, rather than simply filling orders specified by the distributor, Barilla would monitor the flow of its product through the distributor’s warehouse, and then decide what to ship to the distributor and when to ship it. The JITD system proposed something very new and unheard of.
It entailed disclosure of sales data by the distributors to Barilla who would then forecast for the entire supply chain and provide products in the right quantity and at the right time to meet demand. It has many benefits both to the manufacturer and the distributors: Other Recommendations Other recommendations that I believe will help to reduce demand uncertainty and eventually improve overall supply chain performance. They are: * JITD in Exports: Barilla has a 22% market share in Europe and this share is expected to rise as the growth in the export market increases by 20-25% each year.
Barilla could try and implement the JITD 6 system with its distributors, both current and future, outside Italy. If implemented and successful, this idea would result in savings for Barilla in its export supply chain. * Reduce SKUs: Currently, Barilla’s dry products are offered in 800 different SKUs. This large amount leads to a lot of complexity in the order process, distribution as well as inventory and thus increases costs and variability. Recommendation After implementing the JITD system Barilla can look forward to a much more efficient and profitable future.
As a result of implementing these recommendations concerning the JITD system: their demand would become more steady, easier to produce, and transport, as well as their operating costs will be reduce and these savings would result in better margins and the cycle times would decrease allowing the cash flow to become even throughout the supply chain. Implementation Plan and Monitor/Control The implementation of the new (JITD) system will allow for better operational