Barilla’s competitive advantage is based on quality and sophistication of their brand. Their product portfolio

is divided into dry products (long shelf life) and fresh products (short shelf life).Drivers of the supply chain

for Barilla. Supply Chain Strategy: The Company is vertical integrated. They have a responsive supply

chain for fresh products and an efficient one for dry products. Facilities: They have the state of art

manufacturing plants, the best in their industry. Nevertheless, the inherent process design of making pasta

makes it difficult for them to be more flexible to customer demands. Utilization of some equipment such

as kilns need careful planning to avoid increased set up costs. Inventory: One of the key issues is their

product proliferation. They have excessive amounts of SKUs, increasing the complexity of the inventory.

They have high safety stock throughout the dry products supply chain in response to the high variation of

demand. Information: There are no information systems implemented to communicate between plants and

distributors or no point of sales information systems that capture consumer consumption patterns. Pricing:

Barilla concentrates its efforts on volume discounts and in special periods or Canvasses of 10 to 12 4 week

periods to push sales. Their sales force is close to end customers in the Independent Supermarket channel.

The distributor’s order pattern. This pattern is driven by the Bullwhip Effect which refers to the variation

of demand that increases upstream the supply chain because the lack of information from downstream. In

Barilla’s case the Bullwhip Effect is generated by problems with the demand forecasting. The different

parts of the supply chain do not have a specific method to make their own forecast. Each player in the chain

makes his own forecast based on the order history from its immediate customers. But, the problems arise

as distributors do not have the correct tools and methods for forecasting. As a result of which they have

high inventories levels with frequent stock outs. The effect of this wrong forecast is felt further upstream at

the manufacturing location as Barilla schedules the production cycle in their plants and distribution in

accordance with the demand generated downstream. Second, the price fluctuation also contributes to

demand fluctuation. The discounts, offered by Barilla during their canvas periods, add to this fluctuation.

Therefore distributors are pushed to order in accordance with the products that are offered at discount during

each canvas. Moreover, there is no limit on the quantities to buy at discount which leads to inventory pile

up. This implies that distributors’ orders to Barilla are not the real representation of customer’s demand

pattern. These orders only reflect the aim of distributors to take advantage of discounts. Another factor that

adds to the fluctuation is , the way sales reps are measured contribute to the demand variation because they

are motivated to push orders at the end of each period as their bonuses are in accordance to the sales targets

they achieve at each canvas.

The impact of the fluctuation of demand. Each of the links in this supply chain is affected with the pattern

observed. First, Barilla as a manufacturer has to incur in increased set-up and operation cost. In order to

fulfil these abrupt changes in demand they need to re-schedule lines. Sometimes they cannot make this in

an optimal way so more set ups are needed and so increased operation costs. Also, extra capacity and

overtime are required to satisfy the peaks of demand incurring higher costs. Besides, for manufacturers and

distributors safety stocks are accumulated to respond to demand variation increasing holding cost. Increased

inventory causes write-offs and shrinkage which further compound losses of product and increasing

inventories costs. Moreover, for manufacturers and distributors stock-outs harm their reputation and results

in missed sales. Their service level takes a beating as well. Customers are also affected because they do not

receive the products in the quantity and at the time they need them, so they could switch to other products

on the market even though sometimes at higher prices.

JITD Proposal. The JITD proposal displays a good intent to decrease the bullwhip effect. The goal of

Barilla is to obtain a clear picture of the real demand of its customers to be able to develop an aggregate

forecast of demand. One of the probable way is to ask for information from distributors. Moreover, they

want to be involved in the distributor’s supply chain management. In short this is similar to the vendor

managed inventory model where the manufacturer forecasts and decides the replenishment quantity over

the entire supply chain. The problem with this approach is that the entire system needs to be based on trust.

Moreover, it is necessary that each party realize the benefits of sharing information. If Barilla is not able to

convince distributors how they can benefit from this project they will not collaborate. Another issue is that

Barilla does not work directly with all end customers to know their patterns of demand. Indeed 90% of its

sales reps already work closely with the independent supermarkets. Sales reps can be divided to attend to

chain supermarkets also. Also, it is important for Barilla to invest in technology because without the proper

systems in place, capturing data in real time will be a challenge.

Customers’ resistance to the JITD project: the resistance to JITD is both internal and external. Internally,

the sales reps and the marketing team display resistance because of the fear of loss of control. The sales

team works closely with a segment of end customers; the data that they collect is mostly not recorded and

is not accessible to other parts of the supply chain. Hence currently they are an irreplaceable part of the

supply chain. Introduction of JITD would change this. If the current scheme of canvas changes and salesmen

are not measured anymore in accordance with their sales volumes they feel they might lose a big part of

their income. Externally, distributors do not perceive the real benefit of this project. Barilla has not been

able to exhibit and explain how the bullwhip effect works against each link of the chain. For this reason

distributors feel that Barilla wants to intervene more than collaborate.

Possible Solutions: For Barilla to successfully implement this project, it has to have concrete proof that

the system works. So it must begin by first working with its 18 own depots. The positive results will then

justify their claims and would enable them to have a buy-in from the distributors. Another aspect to solve

the internal resistance is to have a different sales incentive system aligned with a new sales performance

targets.

In conclusion, Barilla is a company that faces a problem of excessive variation of demand. They do not

counter that with clear information about the real pattern of customer’s demand. This situation makes it

difficult for them to develop an accurate demand forecast and it is leads to cost increases. Manufacturing,

inventory and distribution costs are affected. To address these lacunas in their supply chain they want to

implement JITD but they have not sold the project properly to all the stakeholders. They need to manage

the relationship not only with distributors but also they need to involve supermarkets. They also need to

involve and gain the confidence of their sales force. All the links of the supply chain need to understand the

valuable benefits of sharing information.