The Bullwhip Effect In Barilla's Case
What can be detrimental/harmful to a supply chain that is surrounded by the bullwhip effect is that its demand information is distorted all along the chain.
This distorted demand data/information can result in tremendous inefficiencies.
Due to high demand uncertainties, inventory tends to be stocked at every stage of the supply chain process. The Director of logistics eve mentioned that : “The way we operate now it’s nearly impossible to anticipate demand swings, so we end up having to hold a lot of inventory and do a lot of scrambling in our manufacturing and distributor operations to meet distributor demand.” One problem created by the presence of bullwhip effect upon barilla is possibility of stock out which results directly in loss of sales. So Barilla lacks the material time to be able to respond quickly to a certain type of pasta that has been stock out with their production process. Another problem created by the bullwhip effect is that Barilla as well as its distributors need to carry tremendous amounts of inventory to match/respond to the demand swing, this has showed to be very costly.
One of the main causes ( first ) of the bullwhip effect in barilla’s case is poor forecasting. Their forecasting is based on the historical order of immediate customers since they are not able to see the sales of the pasta at the distribution stage. What they actually do is to deliver and respond according to the orders received.
The GDs (large distributor) and DOs (organized distributor) place their orders on a weekly basis and this tends to fluctuate heavily from week to week.
The reason being is that few distributors have analytical tools or sophisticated forecasting methods for getting the actual order quantities. Thus, this lack of precision put a lot of pressure on Barilla’s manufacturing and logistics operations.
This bad forecasting can also be caused by the fact that the company offers its dry products in 800 different packages SKU’s whereas a typical
This distorted demand data/information can result in tremendous inefficiencies.
Due to high demand uncertainties, inventory tends to be stocked at every stage of the supply chain process. The Director of logistics eve mentioned that : “The way we operate now it’s nearly impossible to anticipate demand swings, so we end up having to hold a lot of inventory and do a lot of scrambling in our manufacturing and distributor operations to meet distributor demand.” One problem created by the presence of bullwhip effect upon barilla is possibility of stock out which results directly in loss of sales. So Barilla lacks the material time to be able to respond quickly to a certain type of pasta that has been stock out with their production process. Another problem created by the bullwhip effect is that Barilla as well as its distributors need to carry tremendous amounts of inventory to match/respond to the demand swing, this has showed to be very costly.
One of the main causes ( first ) of the bullwhip effect in barilla’s case is poor forecasting. Their forecasting is based on the historical order of immediate customers since they are not able to see the sales of the pasta at the distribution stage. What they actually do is to deliver and respond according to the orders received.
The GDs (large distributor) and DOs (organized distributor) place their orders on a weekly basis and this tends to fluctuate heavily from week to week.
The reason being is that few distributors have analytical tools or sophisticated forecasting methods for getting the actual order quantities. Thus, this lack of precision put a lot of pressure on Barilla’s manufacturing and logistics operations.
This bad forecasting can also be caused by the fact that the company offers its dry products in 800 different packages SKU’s whereas a typical