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The main incentive behind the proposal of Just-in-Time Distribution (JITD) program is to
correct the fluctuation in demand from Barilla¶s immediate distributors. The variation in demand,
known as the Bullwhip Effect, makes it hard for Barilla to meet the actual demand of the end-
consumers, resulted in higher inventory levels and carrying costs. In addition, limited demand
visibility within the supply chain meant that any significant demand fluctuations could result in
stock outs. The purpose of the JITD program was to predict actual demand so that Barilla could
attempt to match its supply of products to meet customer¶s demands.

a) Barilla and its distributors suffer a high cost in distribution channels caused also by the
lack of forecasting and poor inventory management. ˜   
       
  
   
 
 
   
  

      
  
 
   

    
      
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 The unawareness of the real demand causes
distributors to sometimes run out of products or overstock their inventory, and that raises the cost
of distribution.  
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The matter is further complicated by the long
lead times that it takes for Barilla to fulfill an order from the distributor, which was usually
between 8 and 14 days from when the order is received. Poor communication and cooperation
amongst the supply chain participants also contributed to the limited visibility of demand within
the supply chain. Because the supply chain participants were not actively sharing information
with other members of the supply chain, the participants were unable to react quickly to peaks in
demand. As a result, higher levels of safety stock were maintained by all parties in the supply
chain to avoid potential stock-outs.

b) The fluctuations in demand are also caused by the vast amount of stock keeping units
(SKU¶s), which leads to a much more complex system than just trying to gauge how much one
type of pasta is sold. Being able to anticipate the demand for all of Barilla¶s 800 different ³dry´
good SKU¶s is absolutely impossible without a robust forecasting system.


 Due to the nature of the tunnel kiln in the pasta-making process, it is impossible for
Barilla to change the order of the pasta production to quickly fill an order of sold out pasta.
products were produced in precise conditions (temperature and humidity) to ensure the quality of
the product. The manufacturing process used by Barilla focused on producing large quantities of
individual products since adjusting the manufacturing conditions to suite a new product was a
time-consuming process. Because Barilla¶s manufacturing operations could not switch quickly
between products, Barilla was forced to maintain overall higher inventory.

 Last but not least, heavy use of promotions and discounts contributed to the variability of
demand. As a result of promotions, was not stable throughout the year, peaking when
promotions were offered and dropping significantly when the promotions expired. The central
distributors expected frequent trade promotions and stocked up on inventory during the
promotional periods to benefit from the favorable pricing. As a result, higher inventory levels
were maintained both by Barilla and the distributors as the distributors purchased sufficient pasta
to meet both current and future needs.
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Just-In-Time-Distribution program (JITD) would be an efficient forecasting tool to


predict the real demand of the end-consumer. In order to increase visibility downstream, Barilla
has developed a program that pulls relevant shipping information from their downstream partners
to anticipate future demand, arrange production schedule and make replenishment decisions for
each distributor. O  
   
       

    JITD will also minimize the lead-time as manufacturing would be
only one step behind the end-customer¶s demand. In addition, distributors would not stock their
inventory with Barilla products that exceed the real demand, thus reducing distribution costs.
Due to the benefits that Barilla extracts from the JITD program, Barilla may be able to reduce the
average price of their product or offer an incentive to adopt the JITD program. The project also
might help improve Barilla¶s relationship with its partners, as Barilla won¶t exert pressure on
distributors to hold more finished products than necessary.

On the other hand, the JITD program will not be implemented without costs to Barilla.
It might not be possible for some retailers to report daily sales because their stores are not
equipped with point-of-sale technology that captures sales data Barilla would be responsible to
provide its distributers with the technology needed to report daily sales. Moreover, Barilla also
needs to convince non-technology-savvy individuals to adopt this program. Also, distributors
might need to hire new employees to be able to prepare sales reports. Barilla also needs to
reassure distributors that it is not the intent of Barilla to bypass them in the supply chain, and
needs to establish trust between itself and the retailer/distributor. It needs to prove that the
implementation of JITD will lessen the current problems that have resulted in high costs of
carrying inventory and lost sales, which are shared by all members (Barilla, distributor, and
retailer) of the supply chain.

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Before Barilla can implement JITD it must first garner acceptance from the different
internal bodies that make up its distribution framework. There are several internal departments
that are affected by switching to JITD. First and foremost, Barilla¶s sales and marketing
department would be greatly affected by the move. Barilla¶s sales representatives spend
significant amounts of time working with distributors and helping them place weekly orders and
incorporating promotions and discounts into their selling strategies. Sales representatives argue
that the JITD system would eliminate most of the sales representatives¶ responsibilities. Also, the
sales representatives are most likely receiving much of their compensation through commission
on their sales. The JITD system would put a great strain on commission because the sales
representatives will but unable to push Barilla¶s products to the distributors. Not only does the
sales staff have to worry about diminished responsibility and compensation, but a JITD system
may result in job cuts for the sales staff.
The marketing of promotions is also part of Barilla that would be affected by this new
process. Much of Barilla¶s sales come as a result of trade promotions and discounts given to
distributors as an incentive to purchase larger amounts of Barilla¶s products. If the JITD system
is implemented, distributors will no longer be able to take advantage of volume discounts and
other promotions because Barilla will dictate the amount of product purchased by the
distributors.
Another concern within Barilla was that a JITD system would leave empty space at
distributors¶ warehouses that could be filled with products from Barilla¶s competitors. Within
Barilla there are worries that if a distributor is overstocked with a competitor¶s product, then the
distributor will push the competition¶s product to markets and supermarkets in order to alleviate
its inventory.
The sheer number of SKU¶s that Barilla deals with is also a contributing factor. With
800 dry-product SKU¶s, it¶s a very complicated adjustment to change the distribution protocol.
However, it can also be argued that Barilla is the only company that could correctly and
accountably be able to create a robust forecasting system that would include it¶s wide variety of
SKU¶s and pasta.
One of the managers of Barilla¶s largest distributor stated in retaliation to the JITD
system that Barilla could get their orders out to the distributors faster ± within 3 days. Currently
it takes 8-14 days for Barilla to complete an order. The internal distribution process is extremely
time consuming as it is and adding the JITD system might only prolong the process with little to
show to the distributors.

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From an independent supermarket¶s perspective, the JITD proposal offers both


advantages and disadvantages. First off, the primary challenge being faced by independent
supermarkets is the over and/or under stocking of Barilla Products during any given period. With
a JITD program in place more frequent deliveries from the distributer are possible, resulting in
an overall store inventory reduction. Instead of keeping a two-week supply of pasta products
retailers could reduce their inventory overhead quite significantly; thus, reducing their own costs.
Another advantage that JITD provides is the management of product promotions. Under
the current system, independent supermarkets are forced to carry more inventory of promotional
products. Ideally, with JITD in place, Barilla would determine how much promotional products
the independent supermarkets would carry, thus alleviating the stress of being overstocked.
The last advantage that JITD provides for independent supermarkets is based on
inventory tracking. Most independents do not use any tracking such as RFID1 and rely on hand
counting of inventory and shelf space. Using JITD will help these retailers understand their
selling patterns as it offloads some of the demand estimation up the supply chain, which will
eliminate the need for tedious forecasting.
As a customer of Barilla, one of the biggest concerns would be allowing Barilla to control
all forecasting and supplying of its products. All of Barilla¶s customers would need to disregard
all previous forecasting measures and blindly put faith in Barilla¶s ability to keep the stores
stocked at a proper level. This may obviously lead to certain problems, including being over-
stocked or under-stocked at times. While being overstocked is merely a question of the cost of
unnecessary storage, a retailer being under-stocked can lead to losing customers to its
competition. Couple this perfectly normal concern with Italy¶s pension for labor strikes and the
JITD system could come crashing down, bringing its retailers with it.
Overall, the advantages outweigh the disadvantages for an independent supermarket,
because more frequent deliveries from their distributor outweigh the risk of being under-stocked.
For Barilla¶s JITD system to be implemented, independent supermarkets must make the decision
to trust Barilla and Barilla¶s new distribution structure. If independent supermarkets can get over
the fact that this new system will inherently mitigate their responsibilities, then JITD could be
advantageous for both Barilla and its independent supermarket customers.