'Barilla Case Study: The Underlying Factors In Operation Management\r'

'case analysis| MGSM890 trading operations Management| | Thursday 9 AM figure | Term 3, 2012 Deepika Choudhary | 42621186 | | | headway 1. What underlying factors be unprompted the distributers straddle patterns to look the way they do in portray 12, and the DC gross revenue, stock and stock- out(a) levels in Exhibit 13?The underlying factors that are driving the distributors golf-club patterns to look the way they do are origin in ally repayable to extreme select versions where it was calendar week to week variation in distributors ordain patterns due to which kelpwort suffered increasing running(a) inefficiencies and cost penalties.The major reasons that mouth for make fluctuation are â€excessive promotional activities, volume discount, transportation discounts, no limit in edict quantities from distributors or worked out lodge strategies for retailers, increase proliferations, poor customer assistant rates, poor colloquy and lack of modern forecasti ng techniques or analytic tools at distributors end.The mode comprehended to curb this indigence fluctuation was in two ways; 1 with excess FG record to meet distributors demand and cooperate supernumerary bloodline at distributors warehouses. However this method adoption led to impact in †burden manufacturing and logistic operation, poor crossway deli precise, thinning of retailers/distributors margin, increase inventory carrying cost, unanticipated demand, and bull whip subject in the entire give drawstring.Whereas the causes for bullwhip effect was due to inaccuracies in demand forecasting, long tether condemnations, high-sounding orders in high estimated demand scenarios, and, price fluctuation due to promotional activities and order batching (to wither ordination costs, to take advantage of transportation economies such as full truck load, sales incentives and forward purchasing due to promotional activities to get benefit from move price).Thus to cou nteract the bull-whip effect four strategic options became crucial, which are, to: reduce division (every day or year or so low pricing), reduce go on times (information lead times: EDI and order lead times: incubate Docking), reduce uncertainty (POS, sharing and centralizing demand information) and strategic partner institutionalizes ( rapidly response, continuous replenishments and vendor managed inventory (VMI)) The former(a) factors are as follows: Orders lay at once a week †most distributors (GDs and do) mark outed the inventory levels and placed orders with glasswort once per week which was not inlined with the footprint of demand variation * Average lead time ten calendar age †order once placed would be shipped by barilla to the distributor over the course of the week that started eight days after the order was placed and ended xiv days after the order was placed; which was know as a bottleneck for distributors * Usage of sincere achievementic-review inventory organizations †distributors placing orders on a weekly priming coat for those proceedss whose levels fell below a specified reorder level, which make their society schema obsolete * Computer-supported ordering systems †which all of the distributors possessed but lack of sophisticated forecasting systems or analytical tools for determining order quantities for future demand * Holding huge electric current inventory levels †distributors and retailers carrying huge current inventories followed by requests from Barilla (manufacturing and logistics personal) to carry additional inventory (to hold goods bought on any type of promotion, including quantity discounts, truckload discounts and canvas period discounts) to dtype Aen the fluctuation in statistical distribution orders; this incurred additional costs to their operating systems * Retail inventory instancy †retailers realizing quadriceps crunch in their stores and warehouses to carry very large in ventories; limited shelf space in retail outlets; continuous launch of new harvest-tides and draw best shelf display; which reinforced distributors status and felt similar pressure to increase inventory of items they already stocked and to add items they currently did not carry to their product offerings * Lack of good service from distributors to its retailers †Exhibit 13 (in case translate) depicts the huge stockouts that Dos experience in 1989 despite holding a couple of weeks of inventory.This reflects lack of Dos efficient rail line servicing to its retailers * Plant has high product alter over costs because Barilla has either ineffective performance or excess finished goods inventory * Utilization of central distribution is low in terms of workers and equipment’s Question 2. How might they be addressed? Will the proposed JITD system solve the line of work? The underlying factors in the traditional come near of order ful absorbment had a direct impact on manufactures and retailers in the form of thinning margins. Thus, to address these factors an alternative approach of product words was crucial and overly to take costs out of distribution rut without compromising service.This was introduced by Brando Vitali’s JITD (Just-In-Time-Distribution) proposal, which focused solo on dry products to be sold finished distributors. This approach was also judge to radically commute the way in which Barilla’s logistics managed product delivery with JITD bringing in its two make concepts of: replacing sequential optimization with global optimization and eliminating some of the â€Å"false” economies that drive traditional ordering bringes. The major challenges of the traditional and rhetoric logistics and distribution bestow were: * Extreme demand fluctuations †Barillas dry products often swung wildly from week to week creating extreme demand variability in distributors’ order patterns and also for Bar illa’s manufacturing and logistics operations (since 1980s). Distributors sales volumes variation †to manage demand and supply amongst small distributors order and large distributors order by forecasting and keeping a check on what is required and where it is required and when it is required * Pressures to manufacturing in terms of production lead-time and perishability of product * spunky stemma Carrying Cost & manufacturing cost due operational inefficiencies * Unacceptable Cycle Service Levels (CSL)â€inadequate product availability * Distributors’ inability to carry large twist of SKUs The proposed JITD system lead help to, first, determine the quantities and delivery schedules and assist to remedy the operations for Barilla and its customers. Second, ship products only when they are needed and what products are needed, or else than building enormous stocks in Barillas’ facilities. Third, Barilla bequeath reap an indirect advantage by trim down its own distribution costs, inventory levels, and eventual(prenominal)ly manufacturing costs, by not responding to the volatile demand patterns of the distributors.Fourth, Barilla forget be able to manage the much-needed and important efficacy to achieve â€Å"flexibility” to respond to the demand from end-consumer, which manages the stimulant filter to produce the orders. Fifth, Vendor Managed Inventory Concept. Sixth, apply point-of-sale data from retailers (but this is a limitation of Barillas presumption distribution channel and lack of bar-code scanner and ready reckoner linkage at most grocers in Italy). Seventh, ultimate authority to determine shipments is Barilla SpA. Eight, distributors depart volunteer POS data (current) stock level of all SKUs. Hence, expected benefits for Manufacturer are: * cut manufacturing cost * Reduced inventory cycle Increased supply chain visibility will lead to fracture relationships with distributors * High bargaining po wer over distributors * Increased distributors dependence on Barilla * A planned production cookery is possible * Improvement in manufacturing planning using objective data Expected benefits for distributors are: * High service levelâ€additional work to retailers without incurring extra cost * Improved fill rates to Retail store with a quick response * Reduced inventory carrying cost Question 3. What conflicts and barriers does employation of the JITD system face? The implementation of the JITD system does experience some conflicts/resistance and barriers. The conflicts/resistance experienced are internal and external as follows: indwelling Sales representative feared reduction in responsibilities and flattening of sales levels * Risk of failing to adjust shipments sufficiently readily to changes in shareing patterns or change magnitude promotions * Firms distribution unit not prepared to handle such a sophisticated relationship * Free space in distributor’s warehou ses will give competitors an advantage to acquire more shelf space * Inability to quick shipment or flicker in supply motion may lead to stock-out of product * Inability to run trade promotion * Lack of sophisticated infrastructure to handle JITD * indecision nearly cost reduction External * dubious distributors Distributors were not willing to share their warehouse data * Distributors got impression that they were not handling their inventories well * A strategic move by Barilla to prune their long delivery cycle * Perceived change over of power to Barilla * Lack of faith in Barillas current inventory management * Distributors were skeptical about the effectiveness of the system Question 4. How would you address these? Barilla should focus in external context on implementing the JITD in a staged fashion where it starts to train one of its largest distributors with whom its relishes excellent and elongated relationship. The resistance could frankincense be handled by runnin g experiments at teetotal Product Depots where top management is involved actively to reinforce Barillas strategic vision of the company to adopt JITD as a company wide run and not just as logistics program.By doing so, the qualitative and duodecimal implication of performance improvements can be made public (like, average inventory level declination down, increase in service level to retail stores, drop in stock out rate, brisk warehouse to accommodate the increased requirement and thus saving on substantial investment on expansion) to share with other distributors. In doing so, such experiments will help establish the credibility of JITD system. Also, other benefits highlighted will add substance to the JITD implementation, such as: better demand forecasting using JITD that ensures robust supply chain; insulate from the excessive demand fluctuations that leads to increased average inventory level, poor USL and recurrent stock-outs; centralized information to reduce bull-whip effects and enhance inventory management system; ease to make strategic decisions amongst â€Å"push” or â€Å"pull” based systems; customers to be convinced with the vision of win-win concept.Following which Barilla can character the real results of running such experiments with JITD to other distributors and approach them with confidence. This will buy-in vote of confidence from all of Barillas distributors to implement JITD by adapting to different distributors where Barillas team develops capacity to infer customer’s standards into internal standards. During the implementation process people from all levels (top management to implementation managers) from some(prenominal) parties to get involved along with a deaf(p) party which is trusted by both groups. afterward implementation of the JITD, Barilla team could analyze casual shipment data of the distributors and create a database of its historical demand pattern. In addition, Barilla should stimulate shipments with JITD in place.Following which it can develop a protocol which could be used to communicate with all of Barillas customers. To ease the process of identification, each SKU can be identifies with three product codes †Barillas code, customers code and EAN (European article physiqueing system) barcode. This coding system will facilitate the information reception through any code and will significantly improve data sharing. This will significantly increase Barillas interactivity with all its customers where they are linked by electronically to Barillas plate and can exchange information on a daily basis for: * Customer code number to identify the customer Inventory for each SKU, carried by DC * Previous day’s â€Å"sell through”: all shipments of Barilla’s products out of DC to consumers on the previous day * note outs on previous day, for every Barilla SKU carried by DC * An advance order for any promotions that the customer plans to run in th e future * Preferred cartonful size of the delivery Internal address golf links https://www. google. com. au/search? q=Barilla+case+study&ie=utf-8&oe=utf-8&aq=t&rls=org. mozilla:en-US:official&client=firefox-a&channel=fflb http://www. slideshare. net/himadrisingha/barilla-spa-a-case-on-supply-chain-integration http://www. youtube. com/watch? v=PQgBY5wn0aE\r\n'