Internal Conflicts - Jitd

1. Difficulties

It clearly that because the significantly effects of fluctuating demand, orders for Barilla dry products often swung wildly from week to week. Such extreme demand variability strained Barilla’s manufacturing and logistics operations. There are 3 obvious problems of order fluctuations as follows:

1. From the exhibit 12, it is clear that those uncertain fluctuating demand create a bullwhip effect at Barilla.  Also, it might increase the lead-time because of the bullwhip effect.
2. Because the uncertain orders, Barilla has to do more planning and works on the materials and sources. Therefore, the cumbersome works will have great negative effects on the employees and reduce the overall operational efficiency, also reduce the overall profitability due to reduction in efficiency.
3. Central distribution center cannot be maximum used could be the other problems. Although, each CDC held about a month’s worth of dry product inventory, it is very hard to control inventory and manufacturing due to the dramatically change of the bullwhip effect. Also, the distributors should be able to build excess capacity to hold and keep products, which bought on any type of promotion, including quantity discounts, truckload discounts and canvasses period discounts.

        Those problems are impeding Barilla’s development; therefore, they try to implement JITD strategy. Before going to solve those problems, what are the factors and causes that lead to those problems? Three causes as follows:

1. Excessive promotional activity. Barilla offers transportation          discounts and volume discount to encourage customers to buy more products; also, they do not set a minimum or maximum order quantities limitation. It will lead to the order numbers go through the roof in one period and will remarkably decrease in the future sales.
2. Product proliferation. Although Barilla typically would be the largest in terms of the physical volume of product purchased, from the article we can understand that a typical distributor might distribute 150 of Barilla’s 800 dry-product SKUs. Retailers have not enough inventories to digest overmuch new product.
3. Poor communication and customer service. Barilla focuses too much on the DO distributions; each sales rep spent half a day in a regularly scheduled weekly meeting with the DO distributor’s buyer. By contrast, a very small sales force served the GDs. The GD sales force rarely visited the GD’s warehouses; GDs usually sent their orders to Barilla via fax.

1. Internal conflicts

Internal conflicts are the biggest problems that need to be solved before

Barilla implement JITD. Barilla must first obtain acceptance from the different internal apartment that make up its distribution framework. There are three crucial internal problems that are affecting the JITD strategy using.

        Firstly, the marketing and sales department would be significantly affected by the JITD strategy. Before JITD strategy is implemented, sales representatives are a very important role in the store. They spend an estimated 90% of their time working with distributors to incorporating promotions and discounts into their selling strategies and helping them set weekly orders. Moreover, the sales representatives are most likely obtaining much of their compensation through commission on their sales. Therefore, if JITD system is implemented, most of sales representatives will lose their responsibilities and opportunities to earn compensation. The JITD system not only put a great strain on responsibility and compensation, but also the system may result in job cuts for the sales staff.

Secondly, inability to run trade promotion is another effects from the JITD system. Product discounts and trade promotions are the most important parts to incent distributors to purchase a great quantity of goods. If Barilla utilizes the JITD strategy, the company will control and dictate the product quantities. If so, distributors will not be able to get advantage of trade promotions and volume discounts.

Finally, the JITD strategy would increase competitor self space at distributors. The concern within Barilla is that if there is a situation is a distributor is overstocked with competitors’ goods, the distributor will be engaged in pushing competitors’ product to the markets to diminish their inventory level.

I would like to give the solution start with make internal people more understanding about JITD system by explaining the step of implementation and process. For instance, I would tell representatives that they are still important role in the JITD program and they also able to run promotion and their some responsibility. Moreover, I would provide cross training opportunities for sales and marketing personnel and create a new way of doing sale and promotion to adapt JITD.

b. What conflicts or barriers internal to Barilla does the JITD program create? What causes these conflicts? As Giorgio Maggiali, how would you deal with this? According to the case study, we can summarize the internal resistances as per below: * Sales Representatives feared reduction in responsibilities * Flattened sales levels

* Risk of Inability to adjust shipments quickly to stock-outs * Lack of