BARILLA CASE STUDY

Q1) Summarize the causes of information distortion faced by Barilla.

i) Variability in demand :
1) Reasons
- Transportation discounts
- Volume discounts
- No minimum or maximum order quantities
- Lack of forecasting systems and sophisticated analytical tools at distributors end
- Long order lead times

2) Impact
- Strained manufacturing
- Poor product delivery management
- Increased inventory holding cost

m
er as
- Demand swings cannot be anticipated

co
eH w
ii) Bullwhip effect:

o.
Causes rs e
ou urc
- demand forecast
o

- long lead times

aC s

- order batching
vi y re

- price fluctuations
ed d

- Inflated orders
ar stu
is

QUESTION 2. What conflicts or barriers internal to Barilla does the JITD program create? What
Th

causes these conflicts? As Giorgio Maggiali, how would you deal with these conflicts?
SOLUTION
sh

Conflicts internal to Barilla

 The current method of promotion and discount policy :

This study source was downloaded by 100000832138954 from CourseHero.com on 10-08-2021 05:04:47 GMT -05:00

https://www.coursehero.com/file/13296325/128667018-Barilla-Case-Study-Solution/
 Currently Barilla divides each year into 10 or 12 "canvass" period with each corresponds to
a promotional program. The incentives for the Barilla’s sales representatives lie on
achieving sales goal for each canvass period. Therefore they are actually welcoming
distributors to buy as much as possible. Besides, one of the representatives’ sales tools is
volume discount larger volume orders. This, to some extent, encourages distributor to
order less frequently with larger order quantity every time.

With JITD implementation,

The decrease in Barilla's CDC inventory level at current period, the distributor's inventory
level will increase considerably. And, if distributors are ordering more at a time and less
frequently, it will cause pilling up of inventory if there exist less demand leading to demand

m
er as
fluctuations.

co
eH w
o.

rs e
The sales representatives’ role in the DO system:
ou urc
With the current system, the sales representatives are playing important roles in DOs,
which take about 20% (0.65*0.3) of Barilla’s dry product sale. They coordinate among DOs,
o

CDCs and distributor buyers to solve problems and settle disputes. The sales
aC s
vi y re

representatives will be concerned that their responsibilities would be reduced if JITD is put
in place.
ed d
ar stu
is

As Giorgio Maggiali, solutions that can be thougth of are :

Th

 Instead of giving discount for big order volume, its better to give discount for stable
long-term orders . By doing so, there exists many reliable long-term orders to fill the
sh

market demands, and the fluctuation could be reduced considerably.

 Since each representative carries a portable computer for imputing the distributors’
orders, a system can be installed by which more information at the distributor's
warehouse level could be collected by the sales representative working at the front

This study source was downloaded by 100000832138954 from CourseHero.com on 10-08-2021 05:04:47 GMT -05:00

https://www.coursehero.com/file/13296325/128667018-Barilla-Case-Study-Solution/
 line. By doing so, the sales representative will still play an important role in the new
system, meanwhile saves the distributors’ work in implementing the JITD, and
therefore encourages them to participate in JITD.

QUESTION 3. As one of Barilla’s customers, what would your response to JITD be? Why?
SOLUTION
Barilla’s customer’s concern:

As one of Barilla’s customer, the response to Barilla’s JITD proposal would be a combination of
the following emotions:

m
er as
 Sense of burden. Barilla requires us to report to them our inventory level and sales amount

co
eH w
everyday, which contradicts our periodic/weekly review policy and will add extra burdens

o.
to our staff. Will Barilla pay for the extra cost incurred? We might require Barilla to pay for
rs e
ou urc
the extra staffing cost. Besides, since information is money, Barilla needs to pay for our
regularly provided information.
o
aC s

 Sense of distrust. It seems that Barilla thinks that it can do a better job than us in managing
vi y re

our inventory. Their greatly reduced shipping amount to our company indicates that they
think our predictions in the past are not correct. As a counter action, we might refuse to
ed d

provide past sales data to Barilla so that they will have difficulties in predicting the market
ar stu

demand
is

 Sense of losing control. If it is left for Barilla to decide how much we need and how much
Th

should be shipped to us, we will lose control of our inventory. Besides, Barilla will base its
daily distribution amount to us on the information of our sales amount and inventory level
sh

as well as similar information from our peer distributors. This does not seem to be a robust
approach because their criteria for “quota” distribution is vague and subjective. It is easy to
cause unfair treatment. What if we need to order more due to a sudden market surge?

This study source was downloaded by 100000832138954 from CourseHero.com on 10-08-2021 05:04:47 GMT -05:00

https://www.coursehero.com/file/13296325/128667018-Barilla-Case-Study-Solution/
 Will we be granted more shipment? As a protection, we might intentionally alter sales data
and inventory level reported to Barilla whatever is advantageous to us.

 Sense of defense. How could Barilla demand sales data from us which are considered
confidential? Does Barilla have the authority to do this? Are they intending to monopoly
the supply chain? If we release our sales data to Barilla, will this information go to our
competitors? These doubts will result in defensive actions such as procrastination in
responding to Barilla’s request or refuse to cooperate.

m
er as
co
Question 4. What would be the role of a salesperson, a logistics person, a top manager, and a

eH w
distributor. In the environment in which Barilla operated in 1990, do you believe JITD (or a

o.
similar kind of program) would be feasible? Effective? If so, which customer would you target
rs e
next? How would you convince them that the JITD program was worth trying? If not, what
ou urc
alternatives would you suggest to combat some of the difficulties that Barilla’s operating system
faces?
o
aC s

SOLUTION
vi y re

Sales Person: With the current system, the sales representatives are playing important roles in
DOs, which take about 20% (0.65*0.3) of Barilla’s dry product sale. They coordinate among DOs,
ed d

CDCs and distributor buyers to solve problems and settle disputes.

ar stu

Logistic Person: the management of the flow of goods, information and other resources,
including energy and people, between the point of origin and the point of consumption in order
is

to meet the requirements of consumers.

Th

Top Manager: Controlling the departments of manufacturing, logistics and sales.

sh

Distributer : rather than Barilla delivers products to barilla distributors on basis of whatever
orders those with the barilla, barilla’s logistics and manufacturing team provides order quantities
those that would meet customers requirement and as well as distribute work load within logistics
and manufacturing.

This study source was downloaded by 100000832138954 from CourseHero.com on 10-08-2021 05:04:47 GMT -05:00

https://www.coursehero.com/file/13296325/128667018-Barilla-Case-Study-Solution/
 Improvements of current JITD Program
 The current proposed JITD program at Barilla is not feasible because the crux of problems
lies in its slow delivery speed and rigid production process which are commonly seen within
a traditional functional organization. A fundamental reform need to be taken to improve
the relationships between the sales, advertising and logistics departments through redesign
the performance measurement system.
 To motivate the distributors to actively participate in the JITD initiative, a consortium of both
suppliers and the distributors on a supply chain should be formed to discuss the present
problems and come up with solutions. It is always easier to roll out something within the

m
er as
willing participants than throw something to them arbitrarily.

co
 The latest development in information technology makes Vendor Managed Inventory (VMI)

eH w
possible for data sharing and synchronizing.

o.
rs e
ou urc
It will have following advantages :
 Decrease the Total Inventory in the Whole Supply Chain: JITD helps to reduce inventory
o

held at the distributors. Theoretically, it eliminates the needs for each distributor to hold it
aC s

own “Safety Buffer. Therefore, it benefits the distributors through releasing their
vi y re

inventories space and cost

 Better Customer Fill Rate both in Barilla and the Distributors: JITD emphases quick response.
Since the inventory data and delivery pattern are controlled by Barilla, their central factory
ed d
ar stu

and CDCs are therefore easier to schedule their production and deliveries to meet the
customer demand. For the distributors, since their flexibility and reaction speed have all
is

been increased due to the lowered inventory level, they surely could have better customer
Th

fill rate and less stockouts rate than before.

 Further Distribution and Manufacturing Cost Reduction based on Scheduled Production :
The less interruption, the more cost-efficient. But this is only true for bottleneck machines.
sh

This is also true for distribution cost. In contrast to the fluctuating due to unknown
situations in the past, a better delivery schedule could be built by using complete data
obtained from the end-users.

This study source was downloaded by 100000832138954 from CourseHero.com on 10-08-2021 05:04:47 GMT -05:00

https://www.coursehero.com/file/13296325/128667018-Barilla-Case-Study-Solution/
 New Targets:

a) Small shops

 The Italian government supports the small shop rather than big supermarket. Small shops
have better growth rate than supermarket, and Barilla didn’t get that much market share in
this area.
 They are more likely to accept the small quantities of order to reduce their inventory since
they have worse inventory level – more than two weeks, longer than supermarket. And
they don not have much resource and power to manage their inventory.
 They are shipped directly through Barilla’s own regional houses. Barrila could get the end-

m
user demand information directly without dealing with outside distributors. There is “no

er as
privacy” issue here.

co
eH w
 Based on the above reasons, it is easier to implement JITD in small shops. And we can use it

o.
as good examples to persuade other distributors to join the JITD program.
rs e
ou urc
b) New customers
 Because it is easier to get their cooperation during contract negotiation and reinforce the
o

agreement in the contract.

aC s
vi y re

Convince the customers with our win-win concept

We will convince them that JITD is worth trying because it is a win-win process for all stake-
ed d

holders by reducing the inventory and accelerating the delivery process through synchronization
ar stu

and transparency.
is
Th
sh

This study source was downloaded by 100000832138954 from CourseHero.com on 10-08-2021 05:04:47 GMT -05:00

https://www.coursehero.com/file/13296325/128667018-Barilla-Case-Study-Solution/
Powered by TCPDF (www.tcpdf.org)