Plant

Barilla run
CDC
depots

• CDC =Central Distribution Center DO’s GD’s customers

• GD = Grand Distribution
• DO = Organized Distribution
Small independent
Supermarkets
shops

Customers Customers
 SALES AND MARKETING STRAREGY

Sales Trade
representatives Promotions Advertising
• Frequent trade promotions • Heavily advertised
• Take notes on competitors price
• 10 – 12 promotional periods per year • Branded as the highest quality pasta
• Setup in store promotions
• Engaged with famous athletes and
• Have frequent meetings at the (buy anytime, as much as possible)
• Volume discount given celebrities
stores
• Discount for full-loaded truck • Focus on strengthening the concept
• Ordering strategies with store
of “family”
managers
 QUESTIONS

1.What are the problems Barilla’s operating system faces?

2. What conflicts or barriers to Barilla does the JITD program create? What causes these conflicts? As
Giorgio Maggiali would you deal with this?

3. Diagnose the underlying causes of the difficulties that JITD program was created to solve. What are
the benefits of this program?

4. Compare the JITD strategy proposed by Barilla to the JIT strategy develop by Toyota and others?

5. How would you convince that the JITD program was worth trying? If not, what alternatives would
you suggest to combat some of the difficulties that Barilla’s operating system faces?
 Discussion question
1.What are the problems Barilla’s operating system faces?

Answer : Barilla suffered increasing operation inefficiencies and cost penalties that
resulted from large week-to-week fluctuations in distributors’ order patterns.
Operating system Problem
Extensive
Inventory
High cost

Stock - Out

Frequency Stock-out

Poor Communication

Limited Demand Visibility

Reliance on Promotional Activities

Extreme Peak during Promotion

 Bullwhip effect problem
The magnitude of variations in demand increases moving up the Supply
Chain. Small fluctuations in the end customer results in amplified
demand variation in Barilla’s plants.
Proposed solution

To counteract the issue, in 1987, Barilla’s

logistic director Brando Vitali proposed to
implement the so called JUST IN TIME
DISTRIBITION (JITD) model.

• JITD is a logistical system that supplies goods

when and where they are needed
• It is originated from the JIT model invented
by Toyota
 JITD, key concepts

• The demand from the end customer is the input, not the order placed by
the distributors

• It aims at managing the input filter that produces the orders

• Barilla is responsible to determine the quantities and delivery schedules to

their distributors. The vendor (Barilla) manages the inventory of the buyer.

• Analyze distributors sales data to retailers to make better forecast

2. What conflicts or barriers to Barilla does the JITD program create? As Giorgio
Maggiali would you deal with this?
INTERNAL
Sales Representatives
Reduction on responsibilities
Lack of Infrastructure
Infrastructure to handle JITD
Risk of inability to
adjust when Stock-out
Infrastructure to handle JITD
EXTERNAL
How to Deal with it?
Distributors
Unconvinced Distributors 1. Convincing Upper Management
about JITD’s benefit.
2. Gain trust from Distributors,
Data Sharing 3. Show Distributors the benefit of
using JITD by running
DC unwilling to share their
experimental projects.
data
4. Engage distributors by sending
Perceive Power upper Management to convince
Shifting of power to Barilla if JITD program,
sharing Data. 5. Establish good Communication
6. Prepare decent infrastructure to
empower JITD Program.
DC’s Faith
Lack of Faith towards Barilla’s
inventory Management.
 Discussion question
3. Diagnose the underlying causes of the difficulties that JITD program was created to solve ?

Possible underlying causes of the variability in demand:

Price fluctuation
• Discounts based on transportation and volumes ordered
• Promotional activities and frequent discount offered

No minimum and maximum order set by Barilla

No integrated system to forecast the demand

Frequent introduction of new products (more than 800 products)

 Discussion question

3. What are the benefits of the program (JITD) ?

Issues Before JITD Benefits of JITD

• High manufacturing cost • Reduce inventory provision

• High inventory provision • Accurate & effective
• Limited visibility of supply forecasting tool
chain • Optimize lead time
• Low bargaining position • Meet the retail market
over distributors needs
• Poor service levels • Cost efficient
 Discussion question
4. Compare the JITD strategy proposed by Barilla to the JIT strategy developed by Toyota and others.
There are several significant differences between Barilla’s and Toyota’s JIT strategy. Barilla’s Just In Time Distribution strategy is based on
details derived from the customer’s inventory records:
- Barilla’s Just In Time Distribution strategy is based on details derived from the customer’s
inventory records. JITD requests customer inventory information and proceeds to make
production decisions based on these figures. The customer therefore receives a supply of
inventory equivalent to the predictions made by the company.
- This is different from Barilla’s production process since no information is sought from the
customer as is done by Barilla and supply decisions are entirely dependent on the number
of orders received
- Toyota’s JIT production on the other hand makes supply decisions based on the demand at
that particular time. For instance, the supply of automobiles and parts by Toyota is done on an
order basis. The entire production process will therefore be focused on the particular orders
received from the customers. Goods are produced according to the orders made by the
customer.
- The Kanban concept as applied by Toyota ensures that there are no excesses in the
manufacturing process. Preceding processes can only transfer their finished products to the
next process to avoid inventory backlog. The JITD process on the other hand does not focus on
the individual processes of production but rather ensures that the entire production process is
geared toward producing a certain level of goods. There are therefore no arrangements to
monitor individual processes since the goods introduced in the first process represent the exact
forecasted amount that customers are likely to demand during the particular period.
 Discussion question
5.How would you convince that the JITD program was worth trying? If not, what alternatives would you suggest to combat
some of the difficulties that Barilla’s operating system faces ?
In order to convince the stakeholders about the value of JITD, it would be useful to demonstrate that JITD
benefits the distributors (lowering inventory, improving theirservice levels, and increasing their returns on
assets) by running experiment at one or more of Barillas 18 depots. If customers will not agree to JITD, they
may at least agree to collaborative forecasting or increased supply chain visibility

Alternatives suggested:

1.Reduce the varieties of products provided to the

customers, the easiest way is to drop the least value-
added products. This will reduce the needs to have so
many different inventories and SKU for both Barilla
and customers.

2. Instead of JITD approach, try JIT (lean production)

approach for its manufacturing that Barilla has control
and can be done within the company.