1. Describe the solution proposed by Brando Vitali. Why do you think this would help alleviate the problem?
Brando Vitali proposed his “Just-in-Time Distribution” (JITD) theory as his company Barilla Spa was facing great variations in demand. For instance, orders for dry products fluctuated considerably each week. Such kind of business pattern was quite complex to forecast and was making must stress on the company`s manufacturing and logistics operations. The company faced delivery of the dry commodities stakeouts more frequently. Moreover, it was too expensive to hold more inventories with the aim of dealing with the demand variation. Hence, Vitali embarked upon implementing his JITD plan for the company`s distribution system.
Regardless of the fact that the weekly fluctuation in demand created the need for modification internally of the Barilla distribution network, the JITD proposal as Vitali proposed, suggested that the root cause lies at the arbitrary organization levels of the distributors. There was a need of significant forecasting in which the distributors would simply assess inventory levels once a week and tender orders when the commodities dropped to a certain reorder level. However, no forecasting systems were engaged in ordering which provided little assurance to the logistics unit at Barilla. Vitali believed that if the company could evaluate carefully the consumer demands for its goods then it would be able to evaluate the “appropriate” delivery consignments. As a result of the complex nature the situation, the company would require the data from its distributors.
Thus, the fundamental issue Barilla faced was the need of information. As well, the need of any significant supplier forecasting, Barilla experienced various complex situations. In Barilla`s chain hierarchy, the company had to face lead time length and also the lead time variation. Also, the products were perishable. Such complex issues significantly affected the company`s productivity.
There were however 4 options for Barilla to deal with the complex issues namely 1) Reduce vagueness, 2) Reduce variation, 3) Reduce lead-time, and 4) Strategic partnerships.
If Barilla centralized her database within the supply chain, for the proposed JITD plan, the company could control the huge variations in the demands.
2. What conflicts or barriers internal to Barilla does the JITD program create? What causes these conflicts? How should Giorgio Maggiali deal with these internal conflicts?
Barilla faced many internal conflicts and obstacles concerning JITD distribution, the majority of which were related to the category of “trust.” From the supplier`s perspective, the distribution network of the company was ill-prepared for the type of supply chain relationship JITD necessitated. The managers of the company felt insulted. They believed that they did not need to be told about their job requirements. As well, other parties in the chain doubted if they would get any benefits, or the increased profits are restricted to Barilla. Finally, there was an apprehension as whether or not the company has the capability to appropriately execute the JITD program.
The aforementioned issues were worsened as a result of stiff internal resistance of the sales force. The sales force was much apprehensive that their incentives would be removed since order levels would be fixed. Moreover, in view of the fact that the sales force was in direct communication with the suppliers, the sales team persuaded the suppliers not to adopt the new program. The clear lack of cohesion lessened the capability to gain the trust vital for implementation of JITD program.
Accordingly, both internal and external endorsements were necessary for JITD`s success. Beginning internally, Maggiali, the director of the logistic of Barilla needs to make this program a company-wide success by getting the approval of top management, in addition to incorporate more motivations for JITD implementation. The sales workforce company should recognize that while their jobs might be permanent, they would not be made redundant. Similarly, the suppliers would also require having some kinds of incentives for endorsing the new program. As a result of discounts and motivations, suppliers should be aware of the real advantages of the JITD program. Thus, the new role of the sales force was to educate the suppliers on how centralized database would bring about superior service levels, reduced inventory and lead to a better return on assets (ROA). The suppliers should understand that whilst it might seem that Barilla was promoting inventory into their storehouses, it was in fact a system founded on concrete demands. The consequence was a global optimization, rather than creating “uneven” demand optimizations at discrete levels.
3. How do you think a typical Barilla customer would respond to JITD? Why? How would you convince the customer that the JITD program was worth trying? If you are not able to sway the customer, what alternatives would you suggest to combat some of the difficulties that Barilla`s operating system faces?
Indeed, the trust may an important issue for the implementation of the JITD program. As such, the Barilla Company should be prepared to execute a pilot program in her various outlets with the aim of demonstrating data to her customers. As the customers trust they bear other additional expenditures or risks, the company would also need to share with them the additional advantages of the program.
If the pilot study generates affirmative data and the suitable motivators are provided by the company, the customers would endorse the JITD program. There might be likely hesitations as customers are opposed to change and acceptance of the new program. Generally, there may be some opponents of the proposed program. However, in case the customers get discounts and success, these customers would be compelled to join the program.
As the JITD program incorporates both demand data and decision making, for reducing the costs, it could be a success. The requirement is that JITD program must be a total obligation between Barilla and its customers. Hence, the optimal practices must be present amongst all the customers. The JITD program has also caused in the lowering of the lead time. In view of the fact that the data are networked, the demand data takes less time to send from the consumer to Barilla.
All these options are founded on the idea of decreasing the volatility. First, Barilla could reduce the number of product options by removing the less popular product varieties. This entails the risks of losing market share and the visibility on the grocery shelf. Secondly, Barilla could decrease the cost motivations and persuade retailers to use an “everyday-low-pricing,” strategy. By removing price incentives, Barilla could reduce many of the demand fluctuations that happen, thus creating steadier consumer demand patterns. The plan reduces the efficiency of one of the primary methods for gaining market shares, pricing. Hence, JITD continues to be the best choice for Barilla.
Hammond, Janice H. (2006). “Barilla SpA (D): JITD Problem Resolution.” Harvard Business School Supplement 695-066, July.
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