1. What are the reasons for the increase in variability in Barillas supply chain?

Barilla Spa was facing huge problems with the continuous changes in the demands from its customers as well as its distributors, the inefficiency of the company to cope up with the demands of the customers was causing Barilla Spa to compromise on the efficiency of the Supply Chain. With the demands varying from the distributors every week, the shipments varied from a truckload to small customers upto five truckloads for a large distributor. The lead time averaging 10 days caused the service level to reduce considerably and thus making the supply chain inefficient. Most of the distributors used periodic review policy wherein the distributors placed orders only when the inventory level fell below the reorder level which led to an issue of forecasting as the distributors never had a sophisticated forecasting systems or analytical tools for predicting the future demands of the customers. The company also faced problems with the manufacturing and logistics operations as the demands fluctuated drastically every week. The supply chain also faced problems in changeover of the pasta products from the sequence due to the complexity and intricacy of the production. There was not a better inventory management as the manufacturing and the logistics personnel asked the distributors to carry excess inventory to cope up with the demand fluctuations. Barilla Spa noticed that customers were changing as the company was forcing them to stock more inventory at the same time make room to display their new products. This led to an increased pressure even on the distributors thus affecting the performance of the supply chain. With the current strategy Barilla Spa had a deviation on orders of about 227 quintals and a mean order demand of 300 quintals. Every 2 weeks the sales averaged to about 300-320 quintals facing a stock out of 5.5%, which was unacceptable by the company. These were the reasons for variability in the supply chain of Barilla Spa.

2. How can the firm cope up with increase in variability? The firm needs to carry out the steps given below. 1. Reduce the Bullwhip effect: As it is observed that the company lacks stability in the existing supply chain due to the ever fluctuating demands of the customers often referred to as the Bullwhip phenomenon. This issue needs to be addressed by implementing the Just in Time Distribution (JITD) as suggested by Brando Vitali so that the suppliers would have a better forecast of the incoming demands of the customers there by avoiding holding higher inventory or facing stockouts.

2. Advertising and Promotions: From the information given it is evident that the company is spending a significant amount of time and money on product promotions and also in providing incentives for the customers. With each product having a specific sales promotion and incentives. The company divided each year into particular canvas periods with every period ranging from about four to five weeks corresponding to a promotional program. During any of the canvas period the distributors bought as many of the products to meet the varying customer demands. Incentives were offered to the sales rep for achieving the target of the particular period without giving a thought for unsold inventory which indirectly increased the holding cost. Barilla also offered volume discounts of about 2-3% for a truckload full of orders. An improvement can be made by providing uniform incentives for the orders placed. 3. Implementation of Electronic Data Interchange: Exchange of information electronically would help in quick and efficient transfer of data that enables coordination of systems and strategies. It would help the firm to react faster to the fluctuating demands. It will also help in reducing lead time, improving the forecast and also increase the service level.

4. Reduction in the number of SKUs: Currently the company is having about 800 SKUs this has increased the holding costs and also there is excess inventory at distributors end as well as the retailers outlet. 5. Transparency between different levels in organization: As indicated there is a lot of resistance offered by the sales and marketing division with the upper management the company needs to know the demand data in order to achieve uniform ordering quantity and thus the problem of coping up with fluctuating demand can be met.