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In the late 80s and early 90s, Barilla SpA, the world’s largest pasta producing company, faced the growing burden that was imposed by demand fluctuations. To avert the situation, the director of logistics proposed an idea that was dubbed Just-in-Time Distribution (JITD). The proponent of this idea, which was modeled after the just-in-time manufacturing concept, proposed that instead of following the traditional practice of delivering products to the distributors on the basis of distributors’ order, the company would specify the appropriate delivery quantities (Chopra, 2009, p2). The proponent argued that this move would meet the customers’ needs more effectively than the traditional method and distribute the workload on the Company’s manufacturing and logistic systems.
The strengths
There are a number of strengths associated with JITD. In the first place, the program helped to reduce inventory because central warehouses would only deliver the required quantities thereby increasing service levels. The increase in reaction speed and flexibility led to lower inventory. Above and beyond this, the program improved customer relations. Decreased distribution costs, reduced inventory costs, higher service levels and improved fill-rate would lead to better customer relations. Another strength that was associated with the program was an increase in the shelf space for distributors. The improvement of the delivery schedule would lead to a decreased inventory. This would be an opportunity for the sales representatives to persuade the distributors to take more of the Company’s products (Harrison, 2007, p94).
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Weaknesses
As much as the program had some strong holds, it had a number of weaknesses which threatened to cripple the entire Company. The main problem that the Company faced was the fluctuation of demand. In the first place, the empty shelf space caused controversy. Some distributors used the freed space to increase the inventory of the competitors’ pasta products. This led to an unhealthy competition because Barilla was losing its edge (Kannan, 2008, p4). Transport cost increased due to an uneven demand. The Company had to transport more products during the peak season and reduce the rate during the low season. This implies that the Company had to hire more transport facilities as well as staff to facilitate transportation. This resulted in an increase in the transport cost and, subsequently, the price of the product (Kannan, 2008, p3).
Another weakness that is associated with the Company’s program is an increase in labor and maintenance cost as a result of difficulties in scheduling. Scheduling of the company’s factors of production (labor and machinery) was challenging because of variations in demand. This resulted in an upward adjustment in the price of products as the Company cushioned itself from losses. This brought a disharmony in price between companies and, ultimately, a further shift in demand for Barilla’s products. The sales representatives, who were rewarded on the basis of the total sales that they made, sold more products to the distributors during the promotional periods but were on go-slow during non-promotional periods.
Recommendations
The program had strengths as well as weaknesses. After scrutiny on the weaknesses, a number of recommendations have been suggested to help the JITD program proposal do more good than harm.
Apart from predicting demand, the company should also attempt to influence it. It can achieve this by finding out what consumer wants are and tailor the products to fit the consumer needs and expectations. The Company can achieve this by generating a market survey. The Company should administer the survey through various avenues such as the internet as well as physical access to consumers with the help of distributors.
Convincing the staff is crucial as convincing the distributors for the smooth running of the program. In light of this, the logistics director should convince the staff that the program is feasible before approaching the distributors. This will enable the company to have a single front when approaching the distributors.
Lastly, but equally profound, the logistics team should inform the sales representatives that a reduction in cost secondary to implementation of JITD would increase the Company’s profit which would be shared between the company and the employees. This would motivate the sales representative.