Barilla Spa

1. What are the greatest sources of economic benefit that the JITD program is
intended to provide?

The Just-in-Time Distribution was created to solve many difficulties that Barilla and
their customers were facing. If implemented properly, The JITD system has the
potential to substantially reduce costs. To get the things placed correctly, Barilla
should implement JITD within its own Depots first and then expand with pilot projects
with its the Distributors.
Below is the analysis about the methods by which implementation become more
viable than what it was in the past. Ideas such as reducing the number of SKUs and
rearranging distribution channels should also be explored in the long term as they
could also be helpful in reducing costs.
Benefits to the JITD program include delivering only what was needed to the
distributors to avoid large inventories, limiting the variation in order swings from week
to week for dry products, and improving operations to determine quantities and
delivery schedules. If Barilla didnt have to respond to volatile demand patterns from
their distributors, they could reduce distribution costs, inventory levels, and ultimately
manufacturing costs. They could respond to the ultimate demand (from the end -
consumer), by using the consumers input to produce orders. Barillas replenishment
decisions would be based on forecasts created from actual daily demand from each
distributor. In the end, the distributors cost would be lowered because they would not
need to carry as much inventory. They would only receive what they needed to
supply their retailers from the manufacturers) and Barillas strain on their logistics
and manufacturing processes would decrease. The JITD program would also allow
distributors and retailers to carry more variety with fewer inventories.
The JITD program would limit Barillas ability to run frequent, and expected,
trade promotions to push products into their grocery distribution network. They would
no longer be able to run traditional "canvass" periods (times when distributors could
buy as much product as desired to meet current and future needs) and would need
to eliminate volume discounts. Elimination of the periods would discourage sales
representatives who used these periods to sell more products to distributors to
achieve sales targets. The volume discounts that were offered to the distributors for
truck load quantities and multiple truck load purchases of pasta would also cease to
exist with the JITD program. The entire relationship between the sales
representatives and distributors appears to weaken with the JITD program, as the
sales representatives lose their traditional areas of influence and the ability for
distributors to control their inventory is taken away.
The JITD program is a short-sighted view of a model based on point-of-sale demand
(i.e. from the end consumer). In other words, even though the end-customer demand
would be used to generate production quantities, the demand would not be pulled
from the downstream process, i.e. the distribution centers.
The program would completely cut-out the distributers needs and the majority of
the distributors and supermarkets did not have the infrastructure to realize Barillas
vision. Most grocers in Italy were not equipped with the necessary bar
code scanners and computer linkages to provide actual retail sell through data to
Barilla. On the other hand, Barilla was not prepared to invest in their vision to the
degree they needed to in order to succeed with the JITD program. An overwhelming
opposition between Barilla and its distributors continued for over two years.

2. Which distributors should barilla target for the JITD program and why?

Three alternatives for an initial distributor implementation exist-
1. The Grande Distribution (GD),
2. Distribution Organization (DO) and
3. Barilla run depots.
The JITD program eventually should be implemented throughout the entire
distribution system. However to make implementation process smother, it is
important to target smaller sections of the distribution channel at the first step.
Since GDs are the largest part of the supply chain and they use more
standardised processes within the company, it is beneficial to use them. Initial
use of GDs should be restricted to one or two due to implementation difficulty due
to its large size.
About Dos it will be more difficult to implement as they serve independent
supermarkets. Therefore they use less sophisticated or less standardised
inventory management procedures. Hence they are more vulnerable to the
pressure from other supplier.
Depots would make the most sense as information would be more available If the
GDs do not immediately sign on running a pilot project with the 18 Barilla Run.
However as it is an internal part of the distribution chain, its success may be less
convincing to sceptical distributors.
Finally my suggestion would be that the JITD should target the Depots first, the
GDs second and the DOs last.

3. What were the strengths and weaknesses of barillas approach to continuous
replenishment? How could Barillas JITD program be improved?

Strengths of implementing JITD:

By using more sophisticated techniques, barilla forecasted the demand more
accurately than its distributors. Costs associated with inventories stored at central
distribution centers and productions cost could be reduced drastically due to better
forecast of production and shipping requirements.

Implementing JITD led to reduction in stock outs greatly. One of the Barillas
organized distributor, Cortese was in the stock out range of less than 1% which was
earlier 2%.

Bull whip effect was greatly reduced due to by obtaining information from
distributors. Bull whip effect is an phenomenon that happens in a supply chain where
orders submitted to the vendors have greater variability than hat is received by the
customer. The distributor could also see the Barillas inventory and placed orders for
products whose level fell below a specified level, thereby fluctuating the demand.

Productions schedule was well decided due to the data obtained from centralization.
This helped barilla to reduce its inventory and benefit complete supply chain. Hence
reducing the costs for same. When JIT was implemented in the Florence warehouse,
lead time from the time of order to delivery was reduced from 10 days to 3 days.

This improves customers to build more trust on Barilla and hence improved
relationships. This also improved supply chain transparency.

Weaknesses of JITD for Barilla:

Due to the introduction of JITD Barilla sales jobs were reduced.These jobs were
more of demand as they were giving incentives for getting more sales at the first
place. So this caused a threat of losing out trustworthy people and loss of staff in a
way.
Unclear information to get the actual benefits from the JITD was more prevalent.
More training to get hand on the system was required. Set up would cost Barilla and
will need in line technological people to handle the new challenge.

Finally strengths overweigh the weaknesses for Barilla and hence it should go ahead
with implementing JITD system to get the market niche.