Mohammed talha,atul bharti,santosh kalidasan,loren,Ramkumar

Question 1
Q1. Diagnose the underlying causes of difficulties that the JITD program was designed
to solve. What are the benefits and drawbacks of this program?
Just in Time Distribution program
which was proposed was to rectify the issues with respect to fluctuation of demand
from Barillas distributors. JITD will help the Barilla to predict the exact demand. Barilla
is facing difficult time because of the variations in the demand caused by the Bullwhip
Effect.
Reason for fluctuations:
External
Distributors

They place order based on the demand from the retailers and space
available for the storage

This resulted in over or under stocking of the inventory due to

inaccurate prediction of demand

This increases the cost of the distribution channel because of poor

inventory management

Both the distributors and retailers do not had any forecasting system
on their hand

Even though forecasting may not give accurate result, it will at least
help us to find the trend
Internal
D

SKU

Because of the high number of SKUs, it is difficult to build the forecasting

system to predict the demand for different types
Barilla has around 800 different dry goods SKUs which added the complexity
to the system

Lead Time

Fluctuation in demand is also created by the long lead times which was
around ten to fourteen days from the day of receiving order
It is difficult to change the order in the production system because of the
tunnel kiln making process

Sales Structure

Huge spending in discounts and promotions which wraps the demand curve
causeswill
highhelp
fluctuation
demand
JTID program
Barilla in
in the
following
ways,

Help Barilla to be more efficient in their operation and its service

Forecasting tool to predict the accurate demand
Collecting data on a daily basis from its distributors which helps
Barilla to predict future demand and production schedule
Minimize the lead time since the manufacturing will be one step
behind the customer
Minimizing the cost involved in the distribution channel since the
distributors will not over or under stock he product
It may also improve Barillas relationship with its partners since
there wont be any pressure exerted on distributors by Barilla

Q2. What conflicts or barriers internal to Barilla does the JITD program
create? What causes these conflicts and how can they be handled?

Internal conflicts arise from sales and marketing team:

The causes can be attributed to:
Perceived loss of power and influence.
Fear of job losses.
Risk aversion-distrust of change
The human factor
External conflicts arise from Distributors (procurement teams)
The causes can be attributed to:
The manual errors
The fear of job losses.
Perceived loss of power and influence.
Risk aversion-distrust of change

Q3. As one of Barilla's customers, what would be your response? Why?

The concept of JITD primarily involves taking the control out of the
hands of the distributorship and giving it to the manufacturer. When
the control of the inventory is lost, response to fluctuation in demand
from the individual stores in reduced. The JITD concept reduces
inventory at the distributor end, thus effectively curtailing the response
to fluctuation at the customer end. Hence as a customer I would reject
the JITD system.

Q4. In the environment detailed in the case, is JITD feasible? If yes,

which customers would you target next? How would you convince them
that it is worth trying?

The current environment showcases the inefficiencies associated

without a JITD system with rising inventories and frequent stock-outs.
Distributors are the primary customers for a JITD system but convincing
them to join requires hard evidence, hard-work, cost-sharing and
frequent feedback.
A Just-in-time distribution program is not only feasible in the
environment that Barilla operates in, one could argue that it will
become critical for the continued success of its current operations. Of
course, this is not to say that it can be easily accomplished or that
doing so will reap immediate benefits. Rather, if we look at our
distribution currently works, we can see just why it might be feasible
and also necessary. In order to properly execute a JITD, Barilla needs to
have distributor shipping data that includes how much they shipped
out on a previous day, the distributors current stock data, and Barilla
itself needs to have mechanisms to make sense of that data in order to
make forecasts that are accurate and dependable. In the current
environment, retailers often do not have sophisticated tracking tools to
provide Barilla with the data at the beginning of the operation, data
which would be very helpful to get the information at the source. Thus,
getting data from distributors, who often have more systems in place
to track shipping information, is a reasonable second option. If we look
at Exhibit 8 and notice that only 65% of distribution involves central
distribution centers that eventually are transferred in truckload
quantities, one can notice that there is quite a bit of capacity that could
be transferred more efficiently. Perhaps the most revealing example of
the necessity of a JITD program is seen in Exhibits 12 and 13. Here we
notice that weekly demand from a distribution center can vary widely
from week to week and as a result, stock-outs and inventory control
challenges arise regularly. One of the key benefits of the JITD program
would be to avoid large fluctuations in inventory based on changing
sales since ideally forecasting data would have predicted increases
sales in a given month to provide ample inventory and avoid under
stocking.
Furthermore, in the current environment where retailers and
distributors are finding it difficult to maintain enough space for
inventory, a JITD program is not only feasible, it provides the
advantage of cutting down or ramping up production based on relevant
shelf space for distributors and retailers. Significant cost savings and
order-to-delivery time reduction could be achieved by optimizing
truckload deliveries based on a dependable forecasting data at the
manufacturing level.

We should keep in mind that consumers are the end-users of our

products. The ideal way to organize a value chain is to schedule it
around consumption demand. However, this requires input from
retailers who may not be ready to join the system. At this point, DOs
should be our primary target to implement the system. DOs act as
centralized buying organizations for a large number of independent
supermarkets. The retailers source products from only a single DO.
Each DO can bring regional retail demand to us. Currently, about 22.5%
of our dry products are sold to independent supermarket through DOs.
As DOs handle a group of independent supermarkets, they face bigger
challenges to forecast total demand as these supermarkets make
decisions according to their own customers. Exhibit 12 shows a classic
example of a DOs order fluctuation throughout the year. The lowest
orders fall below 100 Quintales and the highest ones reach 900
Quintales. Cortest constantly experiences stock-out levels at above
4.5%. We also observe a much higher fluctuation of orders from Cortest
than that of their sales. This is a good indicator of their inability to
forecast demand and supply in a timely matter. This is precisely where
we can step in to offer forecasting support.
The other benefit is that we could aggregate regional and national
demand data and feed DOs with consumption trends and predicted
future demand. This will offer DOs a much broader perspective that
they currently dont have when ordering for supermarket chains. On
the other hand, 90% of our sales forces operate at store level for
independent supermarkets. We will be able to collect daily demand
from our sales representative and reconcile it with the daily order data
we get from DOs. By getting input from the individual store level and
all the DOs, we will be able to draw a clear picture in terms of a given
DOs order and sales pattern. Our forecasting can greatly improve
depending on the quality of data we receive.
Our second step is to approach GDs. We do not think GDs are our
primary client because they are the destined distribution centers for
supermarket chains. Supermarket chains will worry trade information is
being leaked to competitors. They are also more sophisticated in terms
of sales forecast and inventory control. We believe the better way to
approach it is to have a track record with DOs first.
Barilla and their distributors must come together to build a forecasting
model that can take into account for various types of inventory models
and levels specifically including perishable inventory and its demand

fluctuations. Barilla also needs to take into account customer request

and feedback systems to know what the customers needs and match
that with the demand patterns found during demand planning in order
to better manage inventory levels. Once Barilla has this in place, there
are some additional things Barilla should consider doing.
Barilla might also consider implementing the program to distributors in
areas with more advanced technological system that can support SKU
tracking in order to be able to analyze supply-chain bottlenecks and
system complexities. By starting a program at a location equipped with
both the technology and the personnel to succeed, such a program
could serve as a model for other distributors to see and gain
confidence in the system.
Finally, to convince distributors to sign-up, Barilla needs to share the
costs and risk that distributors must face if they do sign-up. JITD
systems require long term committed relationships based on mutual
trust. Barillas stance towards the overall inventory problems and costs
should be based on decreasing the costs of every single party to a
minimum. Now that Barilla has bought the past distribution data, they
should analyze the data and display how much each party is losing
because of the inefficiency of keeping a large amount of inventories.
Barilla should launch a campaign explaining in detail how much each
party is losing from keeping high levels of inventory with the focus
being on transparency. Barilla should also consider making long-term
contracts with the distributors. They should layout in detail all the costs
associated with delivering the product from the factory to the markets
and highlight that all parties should share these costs and risks. Barilla
should layout the necessary organizational structure involving the
distributors and supermarkets from end to end to decrease the level of
inventories to a minimum.
All parts of the distribution network should be linked either through
a computer system or as a matter of process. If this is not possible, the
network nodes should update Barilla frequently enough to prevent a
stock-out. The downside of this method would be a distributors
unwillingness to cooperate in such a program exclusively for Barilla.
They are distributing a lot of other products to the supermarkets along
with Barilla products and other vendors are may not be requesting JITD
in the distribution so they may see it as just an added hassle. The
success of this method lies in the compliance of distributors. The
advantage is that this is the most efficient way to deal with the
distribution problem for all parties and if successful, could be
significantly reduced costs for all parties involved.