JITD program created some conflicts both external (i. e. from the distributor perspective) and internal (i. e. from the sales perspective) which are explained below. JITD- Internal Conflicts JITD created some internal resistance within the organization. Sales and marketing department opposed the plan of JITD. They had many fears related to implementation of JITD. There concerns can be explained in the following ways. 1 Sales representative felt that their responsibilities would be reduced if such a program was implemented. They feared that the new program will decrease the sales because their relationship with distributors would be weakened.
3 Another fear was that if JITD was implemented, in case of increased promotion it will be risky for the organization to adjust the shipments quickly to change in selling pattern. 4. They concerned that most of the distributors were not ready to handle this kind of complex relationship which the new program will create. They feared that if shelf space is freed up in distributor’s warehouse, the inventory of their product will decrease so that place can be filled by competitors and distributor can start selling more product of competitor. Secondly because of fewer inventories, in any emergency case, like in a strike the chances of customer stock out of their product will increase.
6 They also believed that they would not be able to run trade promotions with implementation of JITD because it would be extremely difficult for them increase trade promotion without offering some incentives to distributors. There was uncertainty regarding reduction in cost even after implementation of JITD because they believed that if distributor decreases its stock , then the company will have to keep more inventory due to lack of manufacturing flexibility. JITD –External Conflicts There was resistance from distributors also in implementation of JITD which can be described as given below 1 Unconvinced distributor: When management of company tried to convince distributors about implementation of JITD, they were not interested in talking about it. Not willing to share warehouse data: Distributors were not interested in sharing warehouse data with the company . But for implementation of JITD sharing warehouse data was must.
3 Power transfer to Barilla: Distributors felt that JITD implementation would make them too closely linked with company, which would give the company power to push product into their warehouse ,so the company can decrease its cost. 4 Lack of faith in Barilla inventory management: Distributors believed that they were capable of managing their inventories.
They did not require any support from company. Ans 1 The exhibit 12 represents the fluctuations in demand for orders (minimum 10 quintals to maximum approximately 900 quintals) from Northeast Distribution Center to Central Distribution center. The causes that create such fluctuations are based on the fact that the demand order variabilities in the supply chain are amplified when we move up the supply chain (Bullwhip effect in supply chain, Sloan Management Review/ Spring 1997).
As a result of this phenomenon there is a relatively more fluctuation in the demand in upstream supply chain of a product (ie consumer-retailer-distributor-manufacturer) from a small change in the customer demand. The drivers that cause order pattern to look this way may arise at any stage and are described below. 1 Transportation discounts : The company used to provide transportation incentives of 2% to 3 % for orders in full truck load quantities. So distributor would try to get that discount and as a result of that inventory at his end may not be in proportion of actual demand.
So it might become the cause of demand fluctuation for next time. 2 Promotional activities ( Price fluctuation): The company used to divide each year into 10 to 12 canvass periods each representing to a promotional program. During a canvass period, distributor could buy as much as required to meet current and future needs . Promotional discounts were offered from the range of 1. 4% to 10% . This was also a cause because distributors would definitely stock the products during that season irrespective of demand at their end. Volume discounts:
Barillas volume discounts consisted of carton discounts offered by sales representatives. Sales representative could offer a buyer a 1000/carton discount (4 percent discount) if the buyer purchased a minimum of three truckloads of Barilla egg pasta. The company also used to pay for transportation in case of full truck load quantities. So distributor would definitely try to get the benefits of discount irrespective of demand at his end which can fluctuate the next time demand . 4 Sales representative ncentives: Sales representatives’ incentives were based on achieving their sales target during the canvass period. So they would try to sell the product to distributors as much as possible irrespective of actual demand of product which would certainly impact the demand of the next time.
5 Product proliferations: With the product proliferation , there was diversification in the products. The company offered dry products, and fresh products with different shelf lives. So there was more complexity in the chain and demand forecasting became difficult resulting in so much fluctuation in demand. Lack of forecasting system at distributer end. Only few distributors had forecasting system or sophisticated analytical tools for determining the order quantities. They used simple periodic review inventory review systems and used to order on the basis of that information .
So there was fluctuation in demand. 7 Long order lead times: Since distributor followed order up to level reordering system, so longer lead time implies significantly change in safety stock, reorder level and order quantities. No centralized information: Across the chain, there was not information sharing(related to inventories, sale) among various partners which was also responsible for so much fluctuation in demand pattern. E. g. GD sales force rarely visited warehouse and used to sell their order via fax. 9 Many supermarkets used to place order with distributors daily depending upon the product that need to be replenished . But it is impacted by customer behavior . Distributor takes that demand pattern into account while ordering their demand. So to adjust with that there may be more fluctuation in what a distributor order to manufacturer.
