Barilla Spa (a)

Problems that Just-in-Time Distribution (JITD) needs to solve

• A need for Barilla to find a solution to the demand fluctuations imposed on the company’s manufacturing and distribution system.

• High Inventory, manufacturing and transportation cost due to distribution inefficiencies

• Stock Out issues

Factors causing the Problems

• Discounts and Promotional activity- Barilla uses discounts and promotional activity on price, transportation and volume; promotion discount ranges from 1.4 to 10 percent depending on the product. This kind of promotional and discount activity places huge uncertainty in the demand. When the promotion is in place distributor and retailer buys huge amount which shows as an increase in demand but when promotions stops, orders decreases as distributors try to sell the products from the promotional period.

• Large number of SKUs (Stock Keeping Unit) - Barilla offers its dry products, which is the focus of JITD, in 800 different variations of SKUs. This variation of products adds complication in predicting demand.

• Long order lead times- Barilla supplies its distributors 10-14 days after the order with an average lead time of 10 days. This long lead time can cause inflexibility to demand changes.

• Sales representatives- Sales representatives are being rewarded based on their sales. During the promotional period they push products to get bonus but during the non- promotional period they are unable to sell much. This variation makes forecasting even more difficult.

• Distributor’s inability to forecast- Distributors does not have forecasting system or proper analytical tool to accurately predict demand.

• Lack of Communication- Barilla’s Customers does not share data or demand which would allow Barilla to predict demand more accurately. This lack of communication leads to an effect called a Bullwhip effect. If there is an increase in demand, each stages of the supply chain will order little more than actual demand to provide a...