What are the reasons for the increase in variability in Barilla’s supply chain?
One of the factors that led to an increase in variability in Barilla’s supply chain was the fact that the company served a diverse distribution network consisting of large and small distributors with diverse order volumes. While large distributors ordered as much as five truckloads of Barilla egg pasta, smaller distributors could order as low as one truckload a week (Simchi-Levi, 1994). This caused an increase in variability in the supply chain.
Secondly, most of the company’s distributors did not have complex systems that could accurately forecast future trends so as to determine order volumes. Thirdly, the company’s strategy of offering incentives to its distributors increased variability in the company since most customers waited for the “canvass” periods to make large purchases. Lastly, the company took a longer than usual time to make deliveries (8-14 days after the order is placed). Being a food product, such a long delivery window led to market uncertainties resulting in variability.
How can Barilla cope with the increase in variability?
The company should inform distributors to implement scheduled ordering policies. This could be done using systems that would accurately make forecasts based on previous sales patterns. Besides, the company can initiate information sharing with all stakeholders in the supply chain and also increase its visibility on the same. This would enable it to collect vital data that would aid it to come up with a trend that would help it to cope up with variability in sales.
What is the impact of transferring demand information across the supply chain?
The immediate impact of this move is that it makes the supply chain more efficient. When the supplier, distributors, and retailers share demand information, the supplier is able to make adequate plans to either increase or reduce production in response to market dynamics. This ensures that there is neither a shortage nor an excess in the market. It must be mentioned that information sharing is of benefit even to the distributors and retailers as it helps them to satisfy their markets.
Can the Vendor Managed Inventory strategy solve the operational problems faced by Barilla?
The Vendor managed inventory strategy would only work if the distributors and retailers are adequately in its planning and implementation. The whole strategy is not helpful without the full cooperation of the named entities since they are the ones that provide quality data on which decisions on the volume of inventory to be sent to a particular distributor is based. Consequently, the Vendor managed inventory strategy can only be effective in solving the operational problems faced by Barilla if both distributors and retailers are involved in its formulation and implementation.
How can the supply chain meet conflicting goals of different partners and facilities?
One of the most challenging tasks in a supply chain is to create a balance between inventory levels and facility size (Simchi-Levi, 1994). To meet conflicting goals of different partners and facilities, a vendor can opt to establish outlets near distributors so that the latter is not forced to make bulk purchases while ensuring that they have adequate stocks at any given time. Besides, the distributor can offer free or subsidized transport services to his clientele so that the distributors do not feel obliged to make bulk purchases in order to cut transport expenses.
References
Simchi-Levi, D. (1994). Designing and Managing the supply chain, Third Edition. NY: Mcgraw Hill.