Barilla SpA

Case Analysis

Supply Chain Management

 Problem Statement:

A new idea – Just-in-time Distribution (JITD), a vendor managed inventory concept, has been suggested
by Brando Vitali in order to effectively meet consumer’s end needs and also make the production
planning and logistics systems more efficient. Maggiali, Director of logistics, has tried to implement the
idea for two years but it has not worked yet. The challenge is to convince the Sales representatives and
the Distributors to adapt to this model for everyone’s benefit along with dealing with the internal and
external resistance.

Channel Distribution for Dry products (cookies, biscuits, flour, bread sticks, and dry toasts):

35%
Barilla Plants

65%
Barilla CDCs
Northern/Southern 1 months Inventory

90%

10%
Barilla-Run depots
70% 30%
Grande Distribuzione Organizzata (18)
Distribuzione

2 weeks Inventory

2 weeks Inventory
Chain Supermarkets Independent Signora Maria
Supermarkets Shops (small
independent
grocers)
Handling Internal Resistance:
Argument by Sales Representatives
JITD will lead to delay in responding to quick
changes in selling patterns or increased
promotions
Distribution organization is not yet ready to
handle a sophisticated relationship that the
JITD would demand
Risk of giving our competitors more of the
distributor shelf space
JITD will hamper trade promotions by inhibiting
the incentives to distributors to push Barilla’s
product to retailers
Counter Argument
Since JITD will enable to forecast the demand
from the end-user level to the distributor level,
the company can predict the demand levels
more precisely. Also it will help the distributors
to effectively manage their inventories in
instances of trade promotions
Although it will take some time for the entire
distribution chain to align with the JITD, but
once they realize the benefits of JITD in terms
of better inventory management, quick
response to demand, and improved margins,
they would like to continue with JITD
Since Barilla is offering an additional service at
no extra cost, this will improve the relationship
between Barilla and its distributors which will
improve Barilla’s visibility with the trade and
make distributors more dependent on them.
This will enable Barilla to extract more
information regarding the supply at the
distributor’s warehouses that would permit
Barilla to improve their own planning
procedures
Implementing JITD will streamline the entire
distribution channel which will reduce Barilla’s
manufacturing and inventory management
cost, which will enable Barilla to pass the extra
margin to distributors which in turn will
incentivize the distributor to provide trade
promotions to push the product to retailers
Handling External Resistance:
Argument by Distributors
Distributor argued that they can improve their
inventory and service levels on their own in
Barilla delivered the order in short time span
instead of pushing JITD
JITD will give Barilla the power to push its
products into distributor’s warehouses
Advantages/Disadvantages of going ahead with JITD:
Advantages
For Barilla:
Lower strain on manufacturing and
logistics operations
Distributors will be able to stock more
SKUs of Barilla
Barilla can aim for higher margins
They can take costs out of their
distribution channels
Distributors will become more dependent
on Barilla
Improve the planning procedures
JITD will help Barilla minimize the
Bullwhip Effect
For Distributors:
No need to carry additional inventory
Counter Argument
Widely varying demand for Barilla’s dry
product strained their manufacturing and
logistics operation which made it difficult for
them to match unexpectedly high demand.
Additionally, holding high inventory to match
demand fluctuations was extremely expensive
which they had to further pass on to the
distributors which would reduce the
distributor’s margins
JITD will fill the gap between fluctuating
demand and supply which will not only help
Barilla to manage their costs but also lead to
backward streamlining of entire supply chain
giving distributors the advantage of decreasing
their inventories and improving their fill rates
to their stores reducing stock-outs.
Disadvantages
Sales representatives would feel that their
responsibilities would be diminished
It runs the risk of giving the competitors
more shelf space
Disruption in the supply process would
increase the risk of customer stock out
The current trade promotions would
not be applicable with JITD
The manufacturing process might not be
able to handle the JITD mechanism
Distributors might not be comfortable
sharing the ordering process
 Increase margins for the distributors Distribution Organisation may not be able
to handle such a sophisticated relationship
Demand forecasting service will be provided Distributors will be overly dependent on
free of cost Barilla for their orders

Suggestions:
 Modifying the current responsibilities on the sales representatives so that :
 They can be an integral part of JITD and contribute by collecting the data required for forecasting
 They can be motivated and reassured that their responsibilities are not diluted

 Focus on implementing JITD on SKUs coming from a particular plant facility. Advantages of doing this are :
 The distributors need not fully give up on ordering from Barilla and hence their responsibilities are
not threatened
 Gives Barilla a chance to show the distributors the benefits of implementing JITD
 Barilla can better understand how to change their manufacturing procedure to suit JITD
 It will be easier to get the distributors to share information regarding a few SKUs rather than all
the SKUs

 Improving the Sales Compensation Systems to be more in line with JITD

 Prove the credibility of JITD by implementing it with smaller retail shops that is run by Barilla Run Depots.
This will be a good place to start since the distributor is a part of the firm and hence does not need much
convincing
 Include a neutral third party (like a consultant) who will be in a better position to explain to the distributors
the advantages of using JITD