Barilla Case Study

BARILLA CASE STUDY

Causes that led to the JITD idea:

• Fluctuating demands from the retailers and the burden it caused on the company’s manufacturing and distribution system. The problem with the fluctuating demand is during the period of high demand the manufacturer should have the capability to increase the supplies else the backlog will increase. On the other hand when the demand decreases it will be expensive to store the excess inventory. A problem at one point in the supply chain will be translated to other points as well leading to bull whip effect.
• Longer delivery times - took about 8 – 14 days to deliver the products.
• Longer transportation time – transport only full truck load.
• Orders were placed only once a week – fluctuations were more pronounced.

Benefits of JITD program:

• Predict the demands better with proper forecasting.
• Easier to deliver the goods and in time by properly forecasting the demand beforehand.
• Reduces the cost of storing excess inventory.
• Reduces the product backlog during the time of increasing demand.
• Can efficiently manage transportation cost.
• Co-ordinates the entire supply chain.

Drawbacks of JITD program:

• No system is currently existent to properly forecast the demand. It will be expensive to setup the system.
• Sales promotion goes out of picture. Barilla’s sales force focused on forward buying which will not be applicable with JITD.
• Takes the purchase power away from the retailers.

Internal barriers for executing JITD:

Sales force had problem with executing JITD program for following reasons:

• Fear of job security among sales force.
• Distrust
• Loss of power

External barriers for executing JITD (As one of Barilla's customers, what would your response to JITD be? Why?):

Distributors were worried about the JITD program for the following reasons:

• Excess inventories can be pushed by Barilla. Since the purchasing power was not with them anymore.
• Distributors thought it would be one sided. Too much power with the manufacturers.
• Data sharing problem. Barilla needed the purchase data for forecasting the demand and the distributors and retailers do not have the incentive to do that.
• Collaboration between the players in the supply chain was not available to properly execute the JITD program.

How to overcome internal and external barriers:

Provide incentives to the sales force to sell the JITD idea to the distributors.