Executive Summary

My decision is to immediately perform a process analysis of our entire procurement process. To this extent I will perform an analysis of the current roles and responsibilities of each person involved in the procurement process from “Need Recognition” through to “Payment”. This will involve defining and changing the roles and responsibilities of some departments and personnel. It will also involve tightening our inventory control practices. I will also be initiating the hiring requisition form to arrange for a new parts driver to perform pick-ups and deliveries.

Key assumptions

• The problems that we are currently experiencing will continue unless clear definition of roles and responsibilities are given.
• There are currently no clear guidelines and procedures for the procurement process including a current process map.
• There will be resistance to making the changes from various personnel regarding the change of roles and responsibilities. There may also be resistance from various personnel regarding the tightening of inventory control that will be implemented as his may be construed as a lack of trust.
• Our expeditor is unable to carry out his duties of inventory control as effectively as possible due to much of his time being spent doing deliveries and pick-ups for parts.
• Unless full control of Purchase Orders are undertaken by designated personnel we will continue to have problems with the 3 way matching process on accounts payable of PO, receiving document and invoice.

Statement of Issues

The issues that we are encountering include a lack of inventory control within our facility. The instance of the 2 micrometers going “missing” would not have happened had there been correct inventory control processes in place and these processes followed.
Expeditor doing pick-ups and deliveries
Poor Accounts payable record include discounts missed
Expeditor doing PO’s and in some case pick-ups without any PO.
Managers not approving Purchase orders
Technical training required for Supply Department

Criteria

In this case, a good decision will result in Blozis Supply Management team, working in conjunction with the engineering and production teams, implementing and enforcing a new set of policies and procedures in regards to the full procurement process. By following these procedures we will attempt to completely negate the instances of late supplier payments resulting in additional costs due to missing out on discounts. We will also be able to more accurately track our inventory and not have any more instances of “missing” inventory.

Analysis

Currently we are not maximizing some aspects of our market. This is due to a few issues that we can address by implementing the JITD initiative. Carrying an unnecessarily high level of stock at our manufacturing plants is currently impeding our cash flow. This cash could be freed up to allow improvement to our manufacturing facilities as either improved equipment or building improvement/enlargement to increase output. The high levels of stock at any given point are taking up large amounts of space that could also be better utilized to improve processes and increase output.
Due to unacceptably high incidences of stock-outs we are not maximizing our sales potential and are possibly restricting our available market share. By ensuring that the

Analysis cont’d DO’s have the necessary stock levels at all times we could reduce the incidences of these stock-outs dramatically. This would increase our sales levels and possibly our market share. It would also reduce the possibility of the end-consumers possibly purchasing our competitors products during these stock-out periods and maybe even switching to our competitor brands in the future.
Our transportation costs are higher than they should be due to the necessity of having to ship on demand rather than having the logistics managed by Barilla SpA. By implementing the JITD initiative we would be able to forecast the DO’s requirements more accurately and plan our transportation requirements in advance rather than having to react to order levels as and when we receive them.
We can implement various different initiative schemes for both the Barilla SpA employees and the DO’s to improve the morale of the persons involved and affected by the change over to the JITD initiative. Barilla SpA could reward all employees with a new bonus structure scheme based on the effect of the improvements to our increased profits. The sales staff would also see an increase in their commission due to the reduction in stock outs and an additional increase would come from the market share increase due to our Supply Chain improvements. For the DO’s firstly the incentive would be to reduce the inventory they carry, reducing the storage requirements for our products, also by reducing the incidence of stock-outs which will in turn lead to increased sales. In addition to this we can continue to give quantity discounts to the DO’s which will mean they have an incentive to push our products to the retailers. We will continue with our marketing and advertising policies as they are at the moment, for example giving free pasta sauce with the purchase of certain product lines. We will also look at implementing a loyalty program for the end-users, encouraging them to purchase our products, which, in turn, will also increase sales.
Therefore it would be in the best interests of both Barilla SpA and the DO’s to review the current Supply Chain model and investigate and implement the JITD initiative. Once we have proved the value in the JITD process we will have happier staff at Barilla SpA and also will improve our relations with the DO’s once they see the additional sales and profits that it will produce.

Plan of Action

We require to do a detailed analysis with one of the smaller, less traditional/newer DO’s (they would be more open to changing the current process and any cost savings and increases in sales would be more visible). This review would be on the current procurement process they follow versus the JITD initiative to show the benefits of implementing the JITD initiative. To show the benefits of the JITD initiative, we would need to obtain access to the DO’s previous 24 months transactional records. This would show where the improvements could have helped. We would also use this information to start to help analyze the demand levels and implement a trend analysis to improve our level of service to the DO on all product lines. We would also need to work closely with

Plan of Action cont’d

them to analyze their data over the next 6 months and put together a simulation with the DO’s input to show how the JITD initiative would have improved the various aspects of their business. This will show the benefits of having regular stock deliveries, thereby negating the effect of our lead times. It will also show the reduction in the average stock levels at the DO’s, the increase in sales due to the dramatic drop in stock-outs and the improved margins due to the cost reductions at Barilla SpA that will be passed on to the DO’s. Once we had proved in theory what the benefits to both the DO and Barilla SpA were, we would move forward with the implementation of the JITD initiative in practice. The trend analysis we have done to this point will be utilized to implement the JITD initiative. We will work with the DO’s buyers to set-up the order levels based on this trend analysis and ensure our manufacturing plants follow the required timeframe to ensure correct on-time deliveries.
We will establish an EDI link with the DO to ensure the information transfer is as up to date as possible without having the requirement for a staff member to send us the information.
In addition to the above plans we will still carry a reduced safety stock of our products, especially of our larger volume products, to ensure we can adjust to any changes in the market forces and any increases to sales.
Once we have proved at the initial DO that the JITD initiative does indeed work and benefits both Barilla SpA and the DO, we will move forward with rolling out the JITD initiative to other DO’s. We expect this process of implementing the JITD initiative to all the DO’s to take 1-2 years to as we still expect to face some negative responses from the more traditional/established DO’s which will need to be addressed on a case by case basis. However, we will be in a strong position to show and prove the benefits of the JITD system by this point. If other DO’s are able to pass on the savings made by implementing the JITD system to the retailer then the other DO’s will need to follow suit to ensure that they are competitive. The improvements of the JITD process will prove in a short period of time what the benefits to each DO are.