Barilla supply chain Case Study
Nat are the reasons for the increase in variability in Burial’s supply chain? Barilla gave volume reductions for the merchants ordering capacity fully loaded quantities, in turn causing merchants to place more supply orders than necessary leaving their inventory levels high. This meant that the retailers did not have to order as often due to high inventory rates on hand. There is also a weekly change in customer demand for the pasta produce.
The lack of information to customer demand data in the supply chain forced each supply chain participant in the supply chain to make their win demand forecast and place their own orders, causing an increase in inventory levels at both facilities at Barilla. This cause and effect is known as the Bull-Whip effect.
The retailers were hesitant to communicate customer demand because they feared that Barilla would lower its inventory and sales. Each level in the supply chain kept its own inventory level and placed their order with Barilla weekly.
Most of the distributors used a recurrent inventory model to handle their inventory and placed orders when the supply levels were below the ordering point. This type of model Norms well for smaller manufacturing companies but not for larger companies such as Barilla. The model tracked the number of merchandise sold, but it did not track the kind of items that were sold. Barilla also failed to use forecasting methods to analyze customer demand.
How can the firm cope with the increase in variability?
Creating a strong strategic alliance with the suppliers and buyers can help to produce a positive change in the performance of the supply chain. Using Vendor Management Inventory will help the supplier understand the demand in every level f the supply chain, and will help to produce the necessary amount of products, in turn lower inventory levels and help reduce the likely hood of being left out of stock on a product. A key factor of using the VIM work is the risk shared impact.
Even if a product is not sold by the retailer the product does not sit with them anymore. The supplier can now repurchase the products, which is positive benefit for large companies such as Barilla. Barilla manufacturers products based on the demand from its Cad’s.
In order to be more effective Barilla should utilize the centralized actual demand data of the customer from the merchant. This will help reduce the ‘arability in the whole supply chain. This will also help Barilla know what the real demand for the product is and meet the supply demand as needed.
This can be done by using cross docking where goods are directly shipped to stores without sitting in the warehouses thereby giving customers quicker access to goods which help drive down the cost and save consumers more money. Distributors should use the periodic inventory policy instead of using the true demand causing large ‘arability in the order pattern.
By controlling order lead time, and information lead time Barilla can reduce the time to produce and ship products by having a better supply chain. What is the impact of transferring the demand information across the supply chain?
By transferring the demand information across the supply chain, the supply chain can effectively plan, produce and deliver the appropriate number of order quantities to the customer. This will help reduce the inventory and it’s holding costs of the whole supply chain greatly. Uncertainties of supply demand can be handled wit n the use to estate stock. Buy using snaring demand ATA the amount to safety stock can be reduced, thereby reducing holding costs and increasing profit, Inch also will decrease the number of products which can expire over a period of time while sitting in the warehouse.
Distributors will no longer need to maintain excess capacity.
There will be a reduction in lead time and a reduction of waste. Iris will also help to reinforce closer working strategic partnerships among all levels n the supply chain and help to increase performance. This will also help to eliminate bulk ordering, reduce transportation costs and help to improve customer attestation. Forecasting will be much easier, which helps to increase sales. The bullwhip effect will be reduced due to effective demand information being shared across the board, causing an increase in production efficiency.
Can the VIM strategy solve the operational problems faced by Barilla? VIM can help to solve the operational problems face by Barilla because with VIM the inventory at all levels stays with the supplier Barilla.
The company then has information about their products and knows the real customer demand for various products. With this information Barilla can significantly improve the demand forecast of products. By using information for real time customer demand Barilla can increase it planning and production efficiency, increase customer service levels.
Using VIM integrates production, planning, manufacturing, sales and marketing departments helping to improve communication and stronger strategic relationships which help increase productivity and performance in the whole supply chain process. VIM helps to eliminate unpredicted problems in supply and demand thereby keeping safety stock levels low with no increase in inventory.
VIM also allows for risk sharing meaning that if the stock is not sold by the retailer it gets sent back to the supplier, helping to increase trust between the buyer and the supplier.
How can the supply chain meet the conflicting goals of different partners and facilities? With improved information sharing the supply chain can meet the conflicting goals of different partners and facilities. Introit information sharing each level in the supply chain would have its own estimates for the demand of the products and place orders as desired increasing inventory levels to over capacity. Each level would also end up looking for their own costs and schedules rather than using a globalizes supply chain.
Because retailers did not what to share demand data Barilla showed disturbances in downstream and suffered from Bull-whip.
By using a globalizes supply chain Barilla can drive all networks to focus towards reaching a common goal to improve the entire supply Chain and help increase customer satisfaction levels. Strategic partners at each facility need to communicate with each other to help formulate solutions to correct existing problems and better manage the entire supply chain process.