1. How was it that Barilla was simultaneously experiencing stock outs and excess stocks?

Barilla offered Volume discounts. It offered around 2% incentives to distributors for orders in full load
quantities. They also offered discounts to distributors during 4 to 5 weeks in length (Canvass period).

Towards 1980s, Barilla felt the effects of Increasing demand fluctuations. Dry product orders swung
wildly from week to week which strained their logistics and manufacturing operations. Also the holding
of finished goods to meet distributors order requirements was expensive when weekly demand
fluctuated and was difficult to forecast. As per to Barilla logistics manager, the customers demand were
changing continuously .Distributors also faced he similar problem both to increase items inventory and
add items that are not included in their product offerings. Apart from this, the distributors lacked proper
forecasting to meet customer demands. Moreover, they did not use proper forecasting models and
went for order batching with no minimum and maximum quantities. This resulted in stock outs and
backorder.

2. What would you suggest to solve this problem?

In Order to meet the dynamic customer requirements and stock outs, Barilla can opt for Just in time
distribution system. It is a form of logistic postponement, which increases the flexibility of the
distribution system. The end customer is considered as input and based on that Barilla would
decide how much to ship. The distributor would share data on the shipment and current stocks
levels for each Barilla SKU. Based on the inputs, Barilla Logistic would forecast and deliver the
appropriate quantities at specific times. Barilla would be able to reduce the number of SKUs in an
effort to maximize the effectiveness of advertising and reduce production complexities. This would
also allow both CDCs and DCs to reduce their inventory levels of their various products. JITD would
also reduce number of stocks because of improved forecasting techniques. Few benefits to
manufacturers and distributors are listed down.
Decrease Inventory and Carrying costs.
High bargaining power over distributors
Quick Response to orders
Increase supply chain visibility

3. What difficulties do you foresee in implementing your suggestions?

Implementation of JITD requires high level of technological sophistication in order to provide proper
information to the producers. Traditional business owners would meet this new technology with
resistance. In addition, it requires trainings on very large scale to acquaint existing stakeholders with the
new implementation.