Bullwhip Efect Barilla Spa
The Bullwhip Effect and Barilla SpA
The Bullwhip Effect is an observed phenomenon in forecast-driven distribution channels where there is variability up the supply chain.
Some of its causes are:
Dependent demand processing
Forecast Errors
Adjustment of inventory control parameters with each demand observation
Lead Time Variability (forecast error during replenishment lead time)
Lot-sizing/order synchronization
Trade promotion and forward buying
Anticipation of shortages
One way to achieve this is to establish a demand-driven supply chain which reacts to actual customer orders. The result is near-perfect visibility of customer demand and inventory movement throughout the supply chain. Better information leads to better inventory positioning and lower costs throughout the supply chain.
Methods intended to reduce uncertainty, variability, and lead time:
• Vendor Managed Inventory (VMI)
• Just In Time replenishment (JIT)
• Strategic partnership
• Information sharing
• Smooth the flow of products o coordinate with retailers to spread deliveries evenly o reduce minimum batch sizes o smaller and more frequent replenishments
Barilla
Causes of the JITD program
The JITD was designed to mitigate the effects of fluctuating demand that strained Barilla’s manufacturing and logistics operations. This meant a reduction of finished good inventories translating into cost reductions. This would also reduce distribution costs, inventory level, and manufacturing costs.
Benefits JITD
• Cost savings
• Flexibility within production
Drawbacks of JITD
• Inner resistance from Barilla’s employees especially sales assistants
• Resistance from distributors
• Grocers in Italy did not have the technology required for the JITD program to be efficient.
Inner barriers and problems
The main problem is the resistance form the company’s employees and distributors. There is a lack of communication between the management its employees and distributors.
The Bullwhip Effect is an observed phenomenon in forecast-driven distribution channels where there is variability up the supply chain.
Some of its causes are:
Dependent demand processing
Forecast Errors
Adjustment of inventory control parameters with each demand observation
Lead Time Variability (forecast error during replenishment lead time)
Lot-sizing/order synchronization
Trade promotion and forward buying
Anticipation of shortages
One way to achieve this is to establish a demand-driven supply chain which reacts to actual customer orders. The result is near-perfect visibility of customer demand and inventory movement throughout the supply chain. Better information leads to better inventory positioning and lower costs throughout the supply chain.
Methods intended to reduce uncertainty, variability, and lead time:
• Vendor Managed Inventory (VMI)
• Just In Time replenishment (JIT)
• Strategic partnership
• Information sharing
• Smooth the flow of products o coordinate with retailers to spread deliveries evenly o reduce minimum batch sizes o smaller and more frequent replenishments
Barilla
Causes of the JITD program
The JITD was designed to mitigate the effects of fluctuating demand that strained Barilla’s manufacturing and logistics operations. This meant a reduction of finished good inventories translating into cost reductions. This would also reduce distribution costs, inventory level, and manufacturing costs.
Benefits JITD
• Cost savings
• Flexibility within production
Drawbacks of JITD
• Inner resistance from Barilla’s employees especially sales assistants
• Resistance from distributors
• Grocers in Italy did not have the technology required for the JITD program to be efficient.
Inner barriers and problems
The main problem is the resistance form the company’s employees and distributors. There is a lack of communication between the management its employees and distributors.