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Barilla Spa

Prof. R.C.Natrajan By: Shaurya Sharma

Problem Definition: A decision has to be taken that whether Just in time distribution needs to be implemented or not. If yes how?

Solution 1: The distribution is managed in the traditional way. Solution 2:The new JIT.D is used so as to reduce inventories and cost Recommendation: The company should follow JITD in their internally owned warehouses which cater to independent groceries and they have two weeks of inventories To avoid conflict with sales force GD should be where JITD should be used.

Scenario analysis
Present Scenario
Delivery of products depends on distributors orders There is lot of stress on production due to high fluctuation in demand mean 300 quintals and St. dev.200

JITD scenario
Barilla specify the quantity to be given to distributors using forecasting methods Better management of production would be possible

Distribution system
Two product lines Dry and Fresh Plants to CDC(northern and southern) Dry product inventory remained for one month Fresh Product inventory remained for three days Fresh products-agents- warehouses(three day inventory) 2/3 Dry products-CDC-distributors -two week inventory (JITD)-24 to 48 hours for order replenishment to super markets 1/3 dry products-depot-small grocers two weeks of inventory Retail outlets: independent grocers, super market chains and independent super markets

Distribution system
Sales force wee highly involved with DO(independent super market 30%) while low involvement with GD (super market chain 70%) Orders once per week by GO and GD Lead time 8-14 days, average 10 days Most distributors used simple periodic review inventory systems Almost all had computers but very few forecasting softwares

Solution 1
Fluctuation led to strained logistics and production Holding sufficient inventory was expensive Higher inventory for distributors also not acceptable This system is not efficient and all the parties seem to be incurring losses as inventories are high and even stock out condition are high 6% approx.

Solution 2
We can use JITD for our own depots (35% dry products) first which are carrying again two weeks of inventory. Once the benefits of JITD are established other distributors can be convinced about the usefulness of the JITD To avoid conflict with the sales force JITD should only be implemented in GD only and GO should be done at a later stage since in GO there is high involvement of sales force.