Barilla Spa Case Study

samphire SpA ( glasswort), is an Italian largest alimentary paste manufacturing business in the world manufacturer that look ats pasta to retail merchants largely through third-party electrical allocators. samphire has been facing huge variability in pray which is straining the manufacturing and distribution mesh of the attach to. This hesitation in adopt, are forcing the CDCs to retain a heightser level of gunstock. The proposed mod establishment, Just-In-Time distribution (JITD), is the solution call forthed to resolve the sub weapons platform up fluctuation issues and decline exists.This new action would move forecasting and shipment parcelling responsibilities to kelpwort rather than allowing each distributor/retailer place the say amounts separately. This appeal has twain internal and orthogonal complications as there is much tube from both(prenominal) in spite of appearance the family and from the suppliers and distributors. Implementing the JI TD is a honest idea for a arrive of reasons.This leave behind streamline the information flow, reduce mis great(p) in subscribe , reduce the track d birth time, and decrease both finished and bare material armory, therefrom making the system efficacious and lessen the general equal. A good plan would be for samphire to start by racetrack a pilot test within its own depot then with 1 or 2 distributors anduse the results of the test regarding the cost savings and remediatement in offer chain efficiency to convince new(prenominal) distributors approximately how beneficiary leave be to all by implementing JITD.ISSUE IDENTIFICATIONImmediate issueThe master(prenominal) issue in this case is the fluctuate demand imposed on saltworts manufacturing and distribution system. Once this is brought nether control, many other problems will be solved. These following are a couple of(prenominal) of the causes of this fluctuate demand that must be turn to Demand fluctuations (Bullwhip effect)Cost of having to hold high account in night club to meet distributors allege Transportation cost saltworts deals strategy relied heavily on the use of promotions Long Lead time guest value.Higher boilers suit storage storage warehouse and protrude-migration costsSales Representatives Incentives based on the amount of the products that they sold to the distributorsISSUE IDENTIFICATION & bloodline CAUSE Demand fluctuations (Bullwhip effect)As the 1980s progressed, samphire has been facing huge variability in demand essentially affecting teetotal products, such(prenominal) extreme demand fluctuation strained the manufacturing and distribution network of the company (see gift 12) Cost of having to hold high strainThis fluctuation in demand and the hindrance of the manufacturing process to deal with fast-track orders are forcing the CDCs to keep an eye on a higher level of inventory in order to meet distributors order. A distributor warehouse held a tw o- week supply of barilla dry products in inventory. (see Exhibit 13) thin the number of SkusTransportation costThe greater number of trucks that it required in stoppages of high demand increased its Transportation costs. saltworts sales strategy relied heavily on the use of promotions In the form of price, dit and volume discountsLong Lead timeBarilla supplied its distributors between 8 and 14 days after it authorized their orders, the average lead-time being 10 days. Customer service Barilla has no profile when it comes to plan and forecast in order to meet the customer demand. Higher boilers suit warehouse and transportation costsThe fluctuation demand whitethorn lead to overtime shifts in order to meet the demand, higher inventory of raw materials and frequent capacity adjustments, as well as higher transportation costs which all increase the overall cost of the product. Sales Representatives Incentives based on the amount of the products that they sold to the distribut ors. This was cavictimization problems as the sales reps would try and push more than products during the promotional period to get a bonus and were not able to sell as much during non-promotional periods.ALTERNATIVES AND OPTIONThe proposed new system, Just-In-Time Distribution (JITD), is one solution I suggest to resolve the demand fluctuation issues and lower costs. PROS1- Resolve the demand fluctuation that a good deal lead to the bullwhip effect. 2- Offer additional service to the customer at no bare cost 3- Increase supply chain visibility and there by less stock outs 4- Reduce forecasting errors5- set down cost of capital tied up in inventory 6- Improve customer service 7- Improve the information flow, 8- Reduce the lead time 9- Decrease both finished and raw material inventory, thus making the system efficient and reducing the overall cost. CONS1- Heavy Investment in information technology in order to implement the JITD program 2- The internal resistance to the JITD sys tem, comes from the employment, sales and marketing divisions and the top precaution. The production division is relate close to(predicate) the drop of a sophisticated forecasting system in order to properly use the data received from the distributors in an efficient way. The sales representatives are concerned to the highest degree their pay, they will lose their incentives, because the sale will be predictable or monotonous and their responsibilities will be minimized chthonian the new mode of operation.The top management will be concerned about the added responsibility of predicting demand on Barilla without any guarantee of cost reduction. 3- The impertinent resistance comes from the distributors and retailers. They will be concerned about the loss of control in deciding their inventory levels. The JITD system gives more power to Barilla which may be looked on with doubt by some distributors who are not sure about the hanker term intentions of Barilla.These distributo rs expressed concerns about becoming too tight to Barilla and fearful of losing control by giving Barilla the power to push products into their warehouse just so they Barilla crumb reduce its costs. 4- Difficulty to run alternate promotions with JITD which may push the customer to sell to another brand. 5- Customer need to ameliorate their equipment ( computer, bar-code, scanner..) 6- Customer will have to share their sales data with Barilla on a daily basis in order to insure replenishment 7- deviation of control in deciding their inventory levelsRECOMMENDATIONS1- Eliminate or reduce the promotional discounts to customers because it leads to demand accumulation and a throw out during the promotion period. 2- Volume discounts to distributors should be reduce or eliminated for the same reasons highlighted above. 3- Barilla should overly move to a new compensation for sales representatives, they should be rewarded on company performance not on their own. Their responsibilitie s and kinships should be closer to distributors and retailer in order to improve and insure Barillas customers satisfaction. 4- The distributors will have to be offered collaborationism incentives in order to keep them on board 5- Keep the assessment period the same but stagger the eat up dates for these periods over sales representatives to smooth out demand fluctuations.IMPLEMENTATIONHow to effectively implement JITD at Barilla? And When?1- Start by running a test pilot within its own depot then with few distributors and use the results to convince the internal and external resistance on how the new program will reduce dramatically their cost. and improve supply chain efficiency. 1- Collaborative proviso Barilla and the distributors can work as a team and plan on different issues. 2- Manage the demand Barilla should not only forecast demand but to a fault should try to establish and influence it by marketing using surveys to determine the needs and expectations of the consume rs and designing products to play them.3- Gather information from point of sale This model has been successfully implemented in Wal-Marts distribution system. However Barilla will have to improve its relationship with retailer and that will involve a costly investment as the retailer doesnt have the computer to relegate the information to Barilla.MONITOR AND CONTROLThe JITD system has the potential to tangible reduce costs if it is implemented correctly. In order to do so Barilla should begin implementing JITD within its own Depots and dramatise with pilot projects with the Distributors. Therefore mentioned analysis discussed a variety of methods by which to make such implementation more viable than it was in the past. However, such a list is in no way conclusive. Ideas such as reducing the number of SKUs and rearranging distribution impart should also be explored in the long term as they can also result in substantial cost savings. Barilla should be able to monitor and control the partnership with its distributors by beat their performance, these are the following list of inclusions that may be used for this purpose