Barilla’s manufacturing and logistics team is challenged by the high variability of the various distributors’ orders. This variability of demand led to growing inefficiencies at Barilla and increasing costs. This was reflected by an increase of stock-outs from one hand, and an increase in the inventory holding period on the other hand.
In order to solve this problem and try to have some control over the variable demand, a new approach called Just-In-Time-Delivery (JITD), was suggested by Giorgio Maggialli, the Director of Barilla’s Logistics.
We will discuss the following:
1. Reasons for the increase in variability in Barilla’s supply chain:
▪ Variability caused by the complicated distribution network, which involves middlemen.
▪ use of inproper forecasting models, rather depend on distributors who mainly used a refill or restock strategy.
▪ Large SKUs in each product line led to an increase in production costs and labor costs.
▪ Frequent use of promotions which may lead to an increase in demand at lower prices, which is accompanied by a larger increase in production and labor costs.
▪ Variability caused by sales representatives, since 90% of barilla CDC’s were shipped to Grand Distributions “GD” and Distribution Organizations “DO”. Barilla sales representative serving DOs spent 90% of their time at the store level. However, very small sales force served the GDs since they are rarely visited GD warehouses and obtain orders via fax. These will cause a lack and variety of sales information, which will then cause the feeling of demand fluctuation as shown in figure below:
▪ Manufacturing and operational barriers, the specific sequence of pasta production necessitated by the tight heat and humidity specifications made it difficult to quickly produce a product with unexpected high demand. Moreover, to hold the sufficient finished goods for unexpected demand was extremely expensive.
* This Fluctuation refers to the...