Barilla SpA Case

OPIM 5110

Evaluation of JITD Proposal

• Why should this work?• What are the underlying

economics?• Who will Benefit?

Coordination Concept:

Sequential, Myopic optimization

Supplier Customer

Joint Optimization

Supplier Customer

Amplification of Orders Placed on Suppliers

ConsumerRetailerDistributorBarilla DC

BarillaPlant

Causes and Cost of Demand Fluctuation

Causes of Fluctuation• Poor Communication• Promotions• Volume Discounts• Lead Times• Number of SKUs• Sales Compensation• Stockouts• No volume Constraints

Cost of Fluctuation• Production Inefficient• Finished Goods Inventory• Distribution Inefficiency

– Workers

– Equipment

– Trucks

• Complexity• Distributor Inventory

JITD Implementation problems

External

Internal

Causes Action Perspective

Perspective

Distributor’s Barilla’s

Who should have decision rights?•Type of Information to be transferred•Size•Capability•Geography

Causes of Problems

• Transportation discounts

• Volume discounts

• Promotional activities

• No minimum or maximum order quantities

• Product proliferation

• Long lead time

• Poor customer service rates

• Sales compensation system