BarillaSpAanalysisBarillaSpA,whichwasfoundedin1875,wastheworld’slargestpastaproducerin1990.Itoccupied35%inItalyand22%inEuropeinthepastamarket.In1988,BarillatriedtopushtheJITD(Just-in-Timedistribution)project,whiletheoutcomewasfrustrated.Inthisarticle,Iamgoingtoanalyzewhythecompanyneedtochange;whyitintroducedJITD;whytheoutcomewasnotgoodatthebeginningandgivesomesuggestions.Whychange?Inthelate1980s,Barillaisfacingabout6%stock-outratefromdistributorstoretailers.Therearetwomainreasons.Thefirstoneisthatthedemandforpastaisfluctuated.Besidescustomers’favorchanging,manyotheractivitiesofthecompany,whicharelistedbellow,canleadtothevariabilityindemand.IntroducingnewproductsfrequentlyMultiplepackageoptionsinoneproductPromotionactivity.(10-12canvassperiods/year,4-5weeks/canvass)NoorderrestrainforretailersanddistributorsTransportationdiscountandvolumediscountThesecondoneisthatitisexpensivetoholdsufficientfinishedgoodininventoryinthefactory.Theinsufficientinventorymadethestock-outforthedistributorsandretailers.Thepressureofstock-outrateandcostsavinghadmadeBarillatochange.WhyJITD(Just-in-Timedistribution)?Wecantrytofindthesolutioninthemanufacturingprocessfirstly.Theaverageleadtimefromdistributor’sordertodeliveryis10daysandthetimerangedfromeighttofourteendays.Wecantrytofindweatherwecanreducethetime.Unfortunately,thisleadtimeishardtochangeinshorttimebecausethebottleneckofthefour-hourdryingprocess.Thisprocessneedpreciselycontrolintemperatureandhumiditytoassuretheproductquality.Asaresult,weseektheopportunityindistribution.Forthedistribution,thefollowingchartshowsthesituationforthemarket.1PlantCDCCentralDistributionCentersDistributors(7,000-10,000SKUs)Supermarket(4800SKUs)OrderOrderOrderDeliverDeliverDeliverFluctuationincrease(8-14days,Average10days)(24-48hours)Itisobviouslythatifthedistributorsandsupermarketsareallbuilttheirowninventory,thetotalinventorywillbeexaggerated.TheJIDcanreducethefluctuation.UnderJIDsystem,Barillawillbeinchargedofthevolumeforthedistributorsandarrangethetotaldeliveryforthedistributors.Itwilldeliveredtheexactlyvolumeonthecorrecttime.ThesalesdataaresharedbetweenBarillaanddistributor.Intheoldsystem,theorderdatafromsupermarkettodistributorarenotopentoBarilla.Ifthedataisopen,BarillacandothefollowingJIDstepstoreducetheinventory.ReducetheoverlappedinventoryArrangethetruckandmakefullutilizationandreducetransportationcost.Estimatethevolumemoreaccuratelybasedonthecorrectdatareceivedincludingpromotionactivity.Thus,themanufactoryinventoryreduced.Replenishtheretailersinsequencebasedontheemergencypriorityandreducestock-outrate.Attheend,theinventoryreductioncanmakebetterrelationshipwiththedistributorsandretailers.ResistanceTheresistanceoftheJITDprojectcomesfromtwosides.Thefirstoneisthesalesandmarketteam.Theyareafraidthattheirresponsibilitieswouldbediminishedandafraidthatthestock-outratewillincrease,whichwillgivethecompetitorsagoodopportunitytodisplaytheirproductsintheemptyshelfspace.Thesecondoneisthedistributors.TheyfeelthattheylostthecontroloftheinventoryandifBarilladoesabadjobintheinventory,theywilllosemoney.SuggestionsInmyopinion,BarillacandothefollowingthingtocarryouttheJITDproject.2Domoreeducationtotheemployeesanddistributors.Starttheprojectinasmallregion.Forexample,wecantryinoneareainItaly.Ifitcansuccessinsmallregion,wecanuseinotherregions.ReducethepackagingtypeinordertoreducetheinventoryTryhardtoreducetheproductionleadtime,whichcanhelptheJITDproject.Getfullsupportfromtheseniorlevelmanagers.