1. Diagnose the underlying causes of the difficulties that the JITD program was created to solve. What are the benefits and drawbacks of this program? In your answers, consider the Barilla and distributors points of view (400-500 words).
Late in the 80’s of the 20th century, Barilla SpA, faced increased difficulties caused by the variability of its distributors demand, these difficulties translated into augmented inefficiencies and rising costs of production and distribution of finished products. Barilla’s management noted that this high variability was in spite of the relatively stable consumers demands. A clear manifestation of the bullwhip effect.
From Reading the posted Case we can identify many factors that contribute to the amplification of the bullwhip effect, exposed in what follows.
Barilla had a typical multi layered distribution system with finished products having to be moved from the factory to Central distribution centers then to distributors to reach the shelves of supermarkets where actual demand is exerted, supply chain members at every tier had to make their own forecasting, which accentuated variability from one tier to the next up the supply chain structure. Variability was accentuated further by the fact that distributors (GDs & DOs) are independent third parties who use their own forecasting system based on “second hand” info already distorted by retailers’ forecasts, and the multiplicative effect travels further up the chain.
The multi layered system also meant longer lead time; a lead time of 10 to 14 existed between the Distributors and the Barilla CDCs, comparable delay periods should have existed between supermarkets & distributors, between the CDCs & the factories & also between the factories & their suppliers, And since Lead time is a primary constituent of a typical forecasting system, higher lead times meant higher variability