Barilla Spa Questions
1. What is the impact of the fluctuations seen in Exhibit 12? What are the underlying drivers of the fluctuation we see in this exhibit? Your analysis should consider full range of implications to the entire channel, and not just Barilla.
Per exhibit 12 the impact of order fluctuations are as follows:
- Creates a bullwhip effect at Barilla.
- Resource and material planning becomes cumbersome and inefficient.
- Might increase the lead time because of the bullwhip effect.
- Reduces overall operational efficiency.
- Reduces the overall profitability due to reduction in efficiency.
- Reduces the utilization of central distribution center.
- The distributor must build excess capacity to hold goods bought on any type of promotion, including quantity discounts, truckload discounts and canvass period discounts.
Causes of Demand fluctuation are:
- Transportation discounts
- Volume discount
- Promotional activity
- No minimum or maximum order quantities
- Product proliferation
- Long order lead times
- Poor customer service rates
- Poor communication
2. Diagnose the underlying causes of the difficulties that the JITD program was created to solve. What are the benefits and drawbacks of this program?
The main incentive behind the proposal of Just-in-Time Distribution (JITD) program is to correct the fluctuation in demand from Barilla’s immediate distributors. The variation in demand, known as the Bullwhip Effect, makes it hard for Barilla to meet the actual demand of the end consumers. The JITD program would be introduced to predict actual demand so that Barilla could attempt to produce the exact amount of products to meet customer’s demands.
The large fluctuations in demand are due to a number of factors. First, let’s look at the distributor’s role. Distributors place orders to Barilla based on retailers orders and
Per exhibit 12 the impact of order fluctuations are as follows:
- Creates a bullwhip effect at Barilla.
- Resource and material planning becomes cumbersome and inefficient.
- Might increase the lead time because of the bullwhip effect.
- Reduces overall operational efficiency.
- Reduces the overall profitability due to reduction in efficiency.
- Reduces the utilization of central distribution center.
- The distributor must build excess capacity to hold goods bought on any type of promotion, including quantity discounts, truckload discounts and canvass period discounts.
Causes of Demand fluctuation are:
- Transportation discounts
- Volume discount
- Promotional activity
- No minimum or maximum order quantities
- Product proliferation
- Long order lead times
- Poor customer service rates
- Poor communication
2. Diagnose the underlying causes of the difficulties that the JITD program was created to solve. What are the benefits and drawbacks of this program?
The main incentive behind the proposal of Just-in-Time Distribution (JITD) program is to correct the fluctuation in demand from Barilla’s immediate distributors. The variation in demand, known as the Bullwhip Effect, makes it hard for Barilla to meet the actual demand of the end consumers. The JITD program would be introduced to predict actual demand so that Barilla could attempt to produce the exact amount of products to meet customer’s demands.
The large fluctuations in demand are due to a number of factors. First, let’s look at the distributor’s role. Distributors place orders to Barilla based on retailers orders and