Barilla Case Report
Upon analysis of Barilla’s proposed implementation of the Just-In-Time Distribution (JITD) model, it appears that the JITD proposal is attempting to minimize the bullwhip effect phenomenon on the pasta manufacturer’s supply chain. The bullwhip effect is seen as one moves upstream in the supply chain from the retailer to the distributor to Barilla’s central distribution centers (CDC) to Barilla’s plants – the farther one moves upstream, the greater the volatility in demand. This demand fluctuation can be attributed to a number of factors.
One of the main factors that affected the demand volatility is Barilla’s trade promotion strategy, which includes price, transportation, and volume discounts. Barilla would divide the year into 10 to 12 canvass periods to where certain promotional items would be sold at a discount. Barilla would also pay for the transportation costs to its distributors and would offer incentives for distributors to order in full truck-load quantities. Since Barilla did not have any minimum or maximum order quantities in place for its distributors, this made it much more difficult for the company to predict how much pasta to produce. Also, sales representatives were incentivized to achieve canvass period sales targets, which meant that promotional products would have a higher demand during the canvass period as sales reps would promote them more than other products.
Another factor that caused demand fluctuation was Barilla’s product proliferation. The company offered over 470 different packaged SKUs. Due to the fact the production and shelf life varied from product to product, the specific sequence of the company’s pasta production process created difficulties in quickly producing product that had been sold out for the retailer. With Barilla having an average lead time of 10 days (as they ship products to distributors between 8 and 14 days), the long lead time amplified the bullwhip effect.
A final factor that contributed to the inconsistent
One of the main factors that affected the demand volatility is Barilla’s trade promotion strategy, which includes price, transportation, and volume discounts. Barilla would divide the year into 10 to 12 canvass periods to where certain promotional items would be sold at a discount. Barilla would also pay for the transportation costs to its distributors and would offer incentives for distributors to order in full truck-load quantities. Since Barilla did not have any minimum or maximum order quantities in place for its distributors, this made it much more difficult for the company to predict how much pasta to produce. Also, sales representatives were incentivized to achieve canvass period sales targets, which meant that promotional products would have a higher demand during the canvass period as sales reps would promote them more than other products.
Another factor that caused demand fluctuation was Barilla’s product proliferation. The company offered over 470 different packaged SKUs. Due to the fact the production and shelf life varied from product to product, the specific sequence of the company’s pasta production process created difficulties in quickly producing product that had been sold out for the retailer. With Barilla having an average lead time of 10 days (as they ship products to distributors between 8 and 14 days), the long lead time amplified the bullwhip effect.
A final factor that contributed to the inconsistent