Barilla Spa Case Summary

Barilla Spa (A) Introduction:
Barilla Spa was born in Italy in 1875 as a small shop. It became the worlds largest Pasta maker in 1980. It had 35% market share in Italy and 22% in EU In addition to the pastas, it produces bread, cookies and biscuits etc. Two kinds of product categories were produced Dry and Fresh. Dry products had long(18 to 24 months) to medium(10-12 weeks) shelf lives while Fresh products had short (21day) shelf lives. It distributed its products through its CDCs to small independent stores and both chain and independent supermarkets.
What is JITD :
Vendor managed Inventory concept. Treats distribution data as an input. Distributors will have to give the POS data to Barilla The shipment size would be decided by Barilla based on internal forecasting
1. Key Issues that JITD could solve:

Barillas current lead time of 8-14 days would be reduced to 3 days if JITD is in place. With the ability to observe orders directly from the distributors barilla can effectively remove one of the inter firm barriers and delivery time can be reduced. Barilla hold high inventory due to its regular promotions Price, volume and transportation discount. This resulted in more variable demand and inventory at distribution centers. With JITD this level of inventory was expected to reduce. There was no proper forecasting model in place and were using traditional replenishment ordering. There were miscalculations of ROP and Safety stock, order batching and no minimum and maximum quantities from distributors. This resulted in stock outs and back orders. With JITD these issues could be minimized. The traditional Supply chain caused the bull whip effect and hence it was experiencing lower profit. JITD could minimize the bullwhip effect and thereby increasing the profit level. Barilla will have higher bargaining power over distributors as they will be managing their inventories. This will also decrease the inventory cycle and production planning will be easier. From Distributors point they would be able to supply to retailers efficiently with a better service level and inventory carrying cost would be reduced.
2. Conflicts in Barilla due to JITD:

Internal
Job loss: JITD would not require as many sales rep to market/promote products since a portion of their current system involves inventory management and order processing for Barillas Customer. This issue would have to be addressed strategically within the organization as it is big concern. Incentives based pay changes: The sales group feared that they would loss control over their compensation methods because the system would be operated based on pull based supply chain. To solve this problem the current incentive program for sales team would have to be revised to better accommodate the changes in supply of product. Lack of belief: Information was not enough that could support the benefit of the new proposed system. Sales team believed that JITD was complex and promotions could not be run with JITD.
External Distributors were not convinced about the system as there was lack of trust. Distributors were having full control of their orders and hence were unwilling to transfer bargaining power to Barilla
3. Response to Barilla as Distributor:

Yes to JITD on trial initially. The trust would have to be built between both the parties as it is a strategic move. The performance would be closely monitored by both parties and based on that the future plans would be decided. Distribution Centre Inventory management details will have to be shared in detail by Barilla to the respective team from the Distribution centre. Barilla will have to work as stakeholder with DCs and share all information and exchange ideas on different topics to make the business sustainable.
4. Will JYTD feasible in 1980

Yes. JYTD addressed a large part of the major issues in the current supply chain. It could impact on the inventory levels, stock outs and demand fluctuations The saving from the system would make Barilla to compete in the price sensitive market of Pasta efficiently
Alternatives: There could not be better alternatives except to convince the customers with the benefits. The barilla can adapt to the process slowly by taking small contracts for a timeline and then show the benefits to their customers as well as the employees. Sales team would have to be trained to do different jobs and make them feel that Barilla would have better plan for them.

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Barilla Spa (A) Introduction:

1. Key Issues that JITD could solve:

2. Conflicts in Barilla due to JITD:

3. Response to Barilla as Distributor:

4. Will JYTD feasible in 1980

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