Diagnose the underlying cause of the difficulties that the JITD program was created to solve.

What are
the benefits and drawbacks of this program?

Demand-fluctuations imposed problems on manufacturing and distribution system. Orders from Barilla’s
dry product varied from week to week, for instance, weekly demand for Barilla Dry Products from
Cortese’s Northeast Distribution Center to the Pedrignano CDC in 1989 had standard deviation of 227
(mean = 300) quintals. It was, therefore, very difficult to predict the demand.

To dampen the fluctuation, distributors and retailers were asked to carry additional inventory. But, at
their current inventory levels, service levels of distributors (despite holding a couple of weeks inventory)
to retailers were unacceptable. Also, most retailers didn’t have the shelf space to carry increasing
number of SKUs.

All this lead to diminishing margins for both – manufacturers and retailers.

BENEFITS

With Just in Time Distribution, Barilla will be able to meet the customer’s need more effectively and
distribution of workload will even. It’ll enable Barilla to improve its visibility among its trade partners.
The control will become more centralized as it’ll manage orders for all the distributors under it. This will
reduce the volatile demand pattern and reduce the distribution cost, service level and ultimately reduce
the manufacturing costs. Further, the data collected can also be used to improve its own planning
system. With better planning and forecasting, inventories can be reduced and improve the fill rate for
both customers and Barilla.

DRAWBACKS

JITD need more effort of examining the data, analyzing it and preparing an order schedule. This system
relies on data from distributors (and not retailers) that may not be accurate to determine the actual
consumption pattern. JITD relies heavily on IT infrastructure for data collection, transfer and forecasting.
Also, requires huge initial investment to setup this IT infrastructure. JITD doesn’t work well when there
is a disruption in demand pattern and leads to opportunity cost. Further, the distributors as well as the
sales and marketing team were reluctant as they saw JITD system infeasible. Empty shelf spaces might
be a disadvantage for the company as the competitors may capitalize this to push their products.

Provide additional service to customers without any additional cost

 Improve their visibility with the trade

 More control in Barilla’s hands in terms of distribution
 With the data collected, planning procedures could be improved
 Reduction in volatile demand patterns would reduce the distribution costs, service level and
ultimately reduce manufacturing costs.
 Decreased inventories and improved fill rate for both – customers and themselves.

 Needs more effort
 It relies on data from distributor and not on the basis of actual consumption pattern from retail
store’s data
 Reluctance from distributors and sales & marketing team as they saw the JITD concept as
infeasible
 Opportunity cost associated with unexpected demand
 JITD relies heavily on IT infrastructure for data collection and forecasting and hence the
company required huge initial investments on IT infrastructure.
 Empty shelf spaces might be a disadvantage for the company as the competitors might
capitalize on this opportunity to push their product.