Barilla Spa - Case Study
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Barilla JITD Case Study
Just in time distribution (JITD) was designed to address the fluctuating demand of products that created additional costs in production, scheduling, and transportation. Barilla was to blame for several of these underlying problems. For example, Barilla offered transportation discounts, volume discounts, 10-12 promotions throughout the year, as well as no maximum or minimum constraints on orders. Collectively, these offers influenced how salespeople pushed items and how customers bought items. As demand increased, this flux in ordering caused longer lead times and poor customer service. To make the situation worse, a major communication barrier existed between Barilla and customers, creating a bullwhip effect. As processing occurred at each level of distribution, the demand information became distorted as it traveled upstream (Lee, Padmanabhan, Whang, 1997).
Barilla’s weekly demand for Barilla dry products from Cortese’s Northeast center to the Pedrignana CDC in 1989 shows significant fluctuation in orders from one week to the next (Hammond, 2008). Consequently, Barilla was either operating in excess of demand or inefficiently at all times. Labor and equipment usage spiked on high demand weeks and was wasted in low demand weeks. Because of Barilla’s 800 skus, changeover costs added up quickly and created further inefficiencies as demand fluctuated. Furthermore, transportation expenses soared as some weeks only partial truckloads got delivered. From the distributor’s perspective, customers were encouraged to buy inventory based on promotions and incentives. This buying pattern lead to excess capacity and high holding costs for distributors (Hammond, 2008).
The benefits of JITD addressed most of the issues troubling Barilla. JITD is a concept closely related to Toyota’s Production System. This strategy strives to improve a business’s return on
Barilla JITD Case Study
Just in time distribution (JITD) was designed to address the fluctuating demand of products that created additional costs in production, scheduling, and transportation. Barilla was to blame for several of these underlying problems. For example, Barilla offered transportation discounts, volume discounts, 10-12 promotions throughout the year, as well as no maximum or minimum constraints on orders. Collectively, these offers influenced how salespeople pushed items and how customers bought items. As demand increased, this flux in ordering caused longer lead times and poor customer service. To make the situation worse, a major communication barrier existed between Barilla and customers, creating a bullwhip effect. As processing occurred at each level of distribution, the demand information became distorted as it traveled upstream (Lee, Padmanabhan, Whang, 1997).
Barilla’s weekly demand for Barilla dry products from Cortese’s Northeast center to the Pedrignana CDC in 1989 shows significant fluctuation in orders from one week to the next (Hammond, 2008). Consequently, Barilla was either operating in excess of demand or inefficiently at all times. Labor and equipment usage spiked on high demand weeks and was wasted in low demand weeks. Because of Barilla’s 800 skus, changeover costs added up quickly and created further inefficiencies as demand fluctuated. Furthermore, transportation expenses soared as some weeks only partial truckloads got delivered. From the distributor’s perspective, customers were encouraged to buy inventory based on promotions and incentives. This buying pattern lead to excess capacity and high holding costs for distributors (Hammond, 2008).
The benefits of JITD addressed most of the issues troubling Barilla. JITD is a concept closely related to Toyota’s Production System. This strategy strives to improve a business’s return on
References: Anand, G. G., & Kodali, R. (2010). Analysis of lean manufacturing frameworks. Journal of Advanced Manufacturing Systems, 9(1), 1-30. Belinski, J., Geguzys, R., Reiter, D., Cox, T., & Rudomin, M. (2009). The ups and downs of lean, Six Sigma. Healthcare Purchasing News, 33(11), 12-13. Douglass, B. (2005). A driving need for 'just-in-time ' distribution. Aftermarket Business, Retrieved from www. aftermarketbusiness.com Hammond, J. (2008). Barilla sp(a). Harvard Business School, 9-694-046 Lee, H., Padmanabhan, V., & Whang, S. (1997). The bullwhip effect in supply chains. Sloan Management Review, 38(3), 93-102.