Barilla Spa (a) Case

Executive Summary:

My decision is to promote the Just-in-Time Distribution (JITD) initiative for Barilla. The JITD will reduce inventory throughout the supply chain and improve forecasting demand. Barilla, relies on forecasting from our distributors to determine production scheduling rather than the end consumer. The demand forecast should always be determined by the end consumer so that inventory levels can be controlled. This will allow Barilla to minimize the strain on our production system and improve the supply chain.

Statement of Issues:

Barilla’s absence of a proper forecast is causing strain on our logistic operations and manufacturing system. Barilla is relying heavily on our distributors to tell us what we should manufacture rather than the end user, the consumer. Without the input from the end user we are unable to keep up with the fluctuating demand. The demand fluctuation is a result of some seasonal demand of certain pastas and our high number of stock-keeping units (sku). Therefore, with our ten day lead time and weekly orders we are unable to prevent stock outs and maintain adequate safety stock.

A second issue is that we are maintaining high inventory throughout our supply chain with added cost because Barilla is forced to hold more raw materials in inventory to keep up with the demand of the distributor. At the same time sales and marketing team are providing price and volume discounts such as multiple full truck load shipments to the distributor. As a result, the distributor is than forced to take in more inventory than what is required so that they can take advantage of these discounts regardless of the demand. This, in turn, pushes more inventories to the distributor that may not be consumed fast enough to potentially avoid spoilage (i.e. Shelf life 21 days’ fresh products or long shelf life of 18 – 24 months for the dry products). The outcome puts undue strain on production to meet the demands of the distributor and not the...