Giorgio Maggiali was becoming increasingly frustrated. As director of logistics for the world's largest pasta producer. Barilla SpA (Societe per Aziont translates as "Society for Stockholders" and is inter-preted as "Inc."), Maggiali was acutely aware of the growing burden that demand fluctuations imposed on the company's manufacturing and distribution sys-tem. Since his appointment in 1988 as Director of Logistics. he had been trying to make headway on an innovative idea proposed by Brando Vitali. who had served as Barilla's director of logistics before Maggiali. The idea, which Vitali called just-in-time distribution (JITD), was modeled after the popular "just-in-time" manufacturing concept. In essence, Vitali proposed that. rather than follow the traditional practice of delivering product to Barilla's distributors on the basis of whatever orders those distributors placed with the company, Barilla's own logistics organization would instead specify the "appropriate" delivery quantities—those that would more effec-tively meet the end consumer's needs yet also would distribute the workload on Barilla's manufacturing and logistics systems more evenly.

For two years Maggiali, a strong supporter of Vitali's proposal, had tried to implement the idea, but now, in the spring of 1990, little progress had been made. It seemed that Barilla's customers were simply unwilling to give up thcir authority to place orders as they pleased; some were even reluctant to provide the detailed sales data upon which Barilla could make delivery decisions and improve its demand forecasts. Perhaps more disconcerting was the internal resis-tance from Barilla's own sales and marketing organi-zations, which saw the concept as infeasible or dangerous, or both. Perhaps it was time to discard the idea as simply unworkable. If not, how might Maggiali increase the chances that the idea would be accepted?

COMPANY BACKGROUND

Barilla was founded in 1875 when Pietro Barilla opened a small shop in Parma. Italy. on Via Vittorio Emanuele. Adjoining the shop was the small "laboratory" Pietro used to make the pasta and bread products he sold in his store. Pietro's son Ricardo led the company through a significant period of growth and. in the 1940s. passed the company to his own sons. Pietro and Gianni. Over time Barilla evolved from its modest beginnings into a large. vertically integrated corporation with flour mills. pasta plants, and bakery-product factories located throughout Italy.

1. What is the bullwhip effect?

2. What problems does the bullwhip effect cause for manufacturers like Barilla?

3. What contributes to the effect in the Barilla example?

4. What does the JITD proposal entail and how will it help reduce the effect?

5. What other techniques would help to reduce the effect?

Answer rating: 100% (QA)

1 This situation occurs when a company takes a decision to cut or add inventories without a proper planning An unmanaged supply chain is not in a stable position and the slightest change in the demand ... View the full answer