Essay About Cost Implication And Specific Temperature

The North West Company
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[pic 1][pic 2][pic 3][pic 4]Table of ContentsExecutive Summary                                                3Issue Identification                                                4Alternatives and Options                                        7Recommendations                                                9Implementation                                                11Monitor and Control                                                13Exhibits                                                        14Executive SummaryBlah blah blah in our opinion Barilla should do this blah blah blah.Issue Identification The company currently is experiencing a “push” strategy with the category managers at headquarters analyzing trends, placing orders and allocating products to stores. It brings a lot issues.The inventory management issue –– the inventory turns has been never over 2.2 times range for the past of six years. OPERATING ENVIRONMENTHighly competitive pasta environment and continual growth of the pasta market internationally. Italian government intervenes by capping retail pasta prices and also restricts issuing of operating license to supermarket to protect small shops.Highly controlled manufacturing process to achieve high pasta quality. Specific temperature and humidity for specific sizes and shapes.Operate an extensive network of plants with state of the art research and development facilities. Different pasta sizes necessitate having multiple facilities because of the different sizes of equipment needed.Product destined for supermarket chain are distributed through the chain’s own distribution network and this accounts for 70% of products meant for supermarkets.ROOT CAUSE ANALYSISThe drive for Just-In-Time Delivery was to address inventory problems Barilla was facing. A SWOT Analysis (Strengths, Weaknesses, Opportunities and Threats) is done below to further analyze the root cause:StrengthsHigh investment in advertisement to create a niche and a name for Barilla as high quality pasta producing company.Use of highly superior raw material for production.Provision of trade promotion as incentive to boost sales.Sales representatives serving Organized Distributors (DO) were consistently present at store level to help in the sale of products, data gathering and problem resolution.Consistent lead time for delivery.Utilization of 18 Barilla owned depot to service all small store owners.WeaknessesNo visibility of sales data from all nodes in the supply chain.Tight production specification for high quality pasta manufacturing.Lack of persistent Sales Representative presence at Grande Distribuzione’s level.Length of lead time for delivery.Too many SKUs of the same product.Sales Representatives and Distributors resistance to Just-In-Time Delivery.OpportunitiesPresence of Sales Representatives at store level can bring about increase in sales.Reduction in lead time reduces inventory holding period.Minimum order quantity can be introduced which can serve as a baseline for amount of inventory held at all times.Introduction of postponement strategy in production will allow more inventory to be held in work in progress rather than having all inventory has finished material.ThreatsFluctuating demand could lead to huge loss and increase debt for both Barilla and distributors.Lack of information flow in the entire supply chain can lead to the collapse of the chain.Trade promotions which push reduction in price but not followed by high demand of product due to lack of inventory will cause financial strain.Persistent stock out will lead to loss in brand loyalty by customers.Competitors will be able to push their product through to customers in the absence of Barilla products.Government could decide to further modify laws to strengthen Signora Maria Shops.Alternatives and OptionsJust in time delivery test run at Barilla owned depot. Increased participation of Barilla owned depot to distribute will allow the implementation of just in time delivery (See Exhibit 3). Barilla owned depot will have sales data and order pattern of stores it serves. The depots can be set up to have electronic data interchange with corporate office to facilitate flow of information and assist in accurate forecastingEliminated independent distributors and chain distributors. Have more Barilla owned depot serving has distributors to ease implementation of Just-In-Time Delivery. (See Exhibit 4)Immediate implementation of Sales and Operation meeting to get the buy in Sales department. Use of sales representative serving DO for vendor managed inventory strategy. Bar codes and other tools can be introduced at these stores and managed by Barilla’s sales representatives to send point of sale information to assist in the implementation of just in time delivery.Collaborative Planning, Forecasting and Replenishment. Strategic analysis of which distributor can be used as sole distributor. The strategic relationship will implement data sharing and create visibility to combat swings in demand. Economic reorder point can be introduced to the distributor which will always trigger when to place replenishment orders to avoid stock out. Also the use of minimum order quantity will help in inventory control. Have an incentive program included in relationship contract (example profit sharing, end of year rebate).PROS AND CONSOPTIONSPROSCONSALTERNATIVEJust-In-Time Delivery in Barilla Run DepotDirect flow of information and visibility to corporate level for planning, forecasting and replenishmentInvestment in technology to facilitate the Electronic Data Interchange in all 18 DepotsTest run at the Barilla Run Depot with the highest inventory turnElimination of GD and DOsDirect real time flow of information from Barilla Run Depot to CDC then to PlantCumbersome for Barilla to service all retailers. Cost implication in construction and setting up of more DepotLeave current distribution set up as it is and put in place minimum order quantity to assist in inventory turnVendor Managed Inventory Installation of bar codes in stores will aid flow of point of sale information to BarillaStores might resist giving up management of their stores. Cost implication of the installation and cost of holding inventoryHave a transactional relationship with Stores’ management in acquiring bar code technology.Collaborative Planning Forecasting and ReplenishmentImproved supply chain efficiency. Very difficult to establish trust between all parties.