Designing and Managing the Supply Chain (3rd Edition) chapter 5, problem 1dq - a
ID: 328797 • Letter: D
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Designing and Managing the Supply Chain (3rd Edition) chapter 5, problem 1dq - a. Diagnose the underlying causes of the difficulties that the JITD program was created to solve. What are the benefits of this program? b. What conflicts or barriers internal to Barilla does the JITD program create? What causes these conflicts? As Giorgop Maggili. How would you deal with this? c. As one of Barilla’s customers. What would your response to JITD be? Why? d. In the environment in which Barilla operated in 1990. Do you believe JITD would be feasible? Effective? If so, which customers would you target next? How would you convince them that that the JITD program was worth trying? If not, what alternatives would you suggest to combat some of the difficulties that Barrila’s operating system faces? e. Compare the JITD strategy developed by Toyota and others.
CHAPTER 5 The Value of Information Barilla SpA (A) unwilling to give up their authority to place orders as they pleased; some were even reluctant to provide the detailed sales data upon which Barilla could make Giorgio Maggiali was becoming increasingly frus- delivery decisions and improve its demand forecasts. trated. As director of logistics for the world's largest Perhaps more disconcerting was the internal resis- pasta producer, Barilla SpA (Societa per Aziont tance from Barilla's own sales and marketing organi- translates as "Society for Stockholders" and is inter- zations, which saw the concept as infeasible or preted as "Inc."), Maggiali was acutely aware of the dangerous, or both. Perhaps it was time to discard the growing burden that demand fluctuations imposed on idea as simply unworkable. If not, how might the company's manufacturing and distribution sys- Maggiali increase the chances that the idea would be tem. Since his appointment in 1988 as Director of accepted? Logistics, he had been trying to make headway on an innovative idea proposed by Brando Vitali, who had COMPANY BACKGROUND served as Barilla's director of logistics before Maggiali. The idea, which Vitali called just-in-time Barilla was founded in 1875 when Pietro Barilla distribution (JITD), was modeled after the popular opened a small shop in Parma, Italy, on Via Vittorio "just-in-time" manufacturing concept. In essence, Emanuele. Adjoining the shop was the small "labora- Vitali proposed that, rather than follow the traditional tory" Pietro used to make the pasta and bread prod- practice of delivering product to Barilla's distributors ucts he sold in his store. Pietro's son Ricardo led the on the basis of whatever orders those distributors company through a significant period of growth and, placed with the company, Barilla's own logistics in the 1940s, passed the company to his own sons, organization would instead specify the "appropriate" Pietro and Gianni. Over time Barilla evolved from its delivery quantities-those that would more effec- modest beginnings into a large, vertically integrated tively meet the end consumer's needs yet also would corporation with flour mills, pasta plants, and bakery- bute the workload on Barilla's manufacturing and logistics systems more evenly product factories located throughout Italy For two years Maggiali, a strong supporter of Vitali's proposal, had tried to implement the idea, but now, in the spring of 1990, little progress had been College. This case was written by Janice made. It seemed that Barilla's customers were simply Business School. Source: Copyright 0 1994 by the President and Fellows of Harvard H. Hammond of Harvard 143Explanation / Answer
Main reason for the JITD's creation was as follows
a) effects of fluctuating demand which is also called bullwhip effect.
b) issues regarding running out of stock which affected Barilla's manufacturing and logistics operations.
What are the benefits of the program?
Main benefit of this program to implement better Strategies for the company to make better delivery decisions and to improve its overall demand forecast. Properly distribution of the workload ensure effectively meeting the end customers demand and reducing the workload on its manufacturing and logistics system. Overall inventory is involved in the distribution centres could be also reduced.
JITD created high demand variability effect. It was very inaccurate to provide fast respond to the customers, as well as weekly demand fluctuation was the mean reason which was reducing the efficiency of the forecasting. Inventory holding cost also major factor in increasing the overall cost involved in operations. Reduced margins for manufacturer as well as the retailers were also the main issue involved which is created by JITD.
Some of the main concerns which this program created was that the sales department get really concerned about the sales figures reducing due to very less demand. Warehouses were always full of products and inventory holding cost was going really high which is directly affecting the shipment and other aspects of the organisation. Risk of overall stock out was also increasing. Many of the products were not reaching the resellers but staying in the inventory system of the Barilla.
Main cause of this conflict was lack of sufficient flexibility in the overall production and operation. Company was lacking reward structure for the sales representatives as well.
For dealing with the conflicts, implementation of the proposal and proposing this is specific type of approach to the boss would have been very beneficial. Long term strategy corporate strategy build up with help of talking to the distributors should also have been a major part in the specific problem undefined establishment of Aravind structure regarding reduction in the inventory management as well as matching the target but also have been proven to be very beneficial for the company as well.
Is this program work properly implemented it would have provided very effective benefit to the company. It would have directly increase the overall profit gain by the distribution and other distribution systems and reduce the risk of holding the inventory as which was the main problem at the specific company structure. By having an understanding of the lower inventory requirement as well as improve level of service, going with the export of Pasta from the specific location and focusing on creating semolina as well as the fresh pasta overall market capture could have been very widely increased for the company as these two products were in very much demand.
I would have directly convince the customer that our system is Worth trying by properly maintaining the inventory and explaining the best available solutions to the email. My properly showing and telling them about the benefits of the specific system I would have implemented a better structure as well as implementation of a specific 3 for creating a better understanding of the specific program towards the customers as well. Waiting for some time to get a positive result and creating a deadline would also have been beneficial for a company to create understanding between the customers and the service provider.
Reduction of the product varieties would have also benefit in the company as company had a very faster visibility of the product which was totally based. By limiting the product and creating quality in specific product by implementation of different quality standards would have been proven to be very beneficial for the company for the international and export markets as well. It would have directly reduced segmentation of the inventory and need of different type of inventory management systems which would have enabled the company to develop a more intuitive work in platform for its employees in the warehouse or in the Logistic operation system.
Toyota has developed a very effective just in time delivery system in which Toyota focuses on small amount of raw material inventory which is always available in the production unit so the production is started as soon as the customer base for the specific product. Toyota also developed a very accurate forecasting method which benefited to create a more intuitive working environment which benefited toyota in a positive manner and improve its overall market position. Tment of proper and aligned system which is monitor properly Toyota one of the world's most effective JIT system.
Barilla's highly mechanized system failed because it was very complicated to be implemented into the organisation. Our company has a very fast availability of the product 3 inch, maintenance of the specific system was also very high is it hard to handle multiple amount of products. Manufacturing of the JITD program required in extreme effort for retail lining of all the products and methods which also reduces the chances of being more adaptable to word the specific situation.
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