The main issue in this case is the fluctuating demand imposed on Barilla's manufacturing and distribution system. Once this is brought under control, many other problems will be solved. These following are some of the causes of this fluctuating demand that must be addressed:.
• Demand fluctuations (Bullwhip effect) .
• Cost of having to hold high inventory in order to meet distributor's order.
• Transportation cost.
• Barilla's sales strategy relied heavily on the use of promotions.
• Long Lead time.
• Customer service.
• Higher overall warehouse and transportation costs.
• Sales Representatives Incentives based on the amount of the products that they sold to the distributors.
Issue Identification and Root Cause .
• Demand fluctuations (Bullwhip effect) .
As the 1980's progressed, Barilla has been facing huge variability in demand essentially affecting dry products, such extreme demand fluctuation strained the manufacturing and distribution network of the company (see Exhibit 12).
• Cost of having to hold high inventory .
This fluctuation in demand and the difficulty of the manufacturing process to deal with fast-track orders are forcing the CDCs to maintain a higher level of inventory in order to meet distributor's order. " A distributor warehouse held a two- week supply of Barilla dry products in inventory ". (see Exhibit 13).
• Reduce the number of Skus.
• Transportation cost.
The greater number of trucks that it required in periods of high demand increased its Transportation costs. .
• Barilla's sales strategy relied heavily on the use of promotions.
In the form of price, transportation and volume discounts.
• Long Lead time.
Barilla supplied its distributors between 8 and 14 days after it received their orders, the average lead-time being 10 days.
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