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The main incentive behind the proposal of Just-in-Time Distribution (JITD) program is to
correct the fluctuation in demand from Barilla¶s immediate distributors. The variation in demand,
known as the Bullwhip Effect, makes it hard for Barilla to meet the actual demand of the end-
consumers. The JITD program would be introduced to predict actual demand so that Barilla
could attempt to produce the exact amount of products to meet customer¶s demands.
The large fluctuations in demand are due to a number of factors. First, let¶s look at the
distributors role. Distributors place orders to Barilla based on retailer¶s orders and the space
available to stock inventory. As a result, distributors might sometimes run out of products or
might overstock their inventory due to the lack of anticipation or real demand. Also, Barilla and
its distributors suffer a high cost in distribution channels caused also by the lack of forecasting
and poor inventory management. The unawareness of the real demand causes distributors to
overstock their inventory and that raises the cost of distribution. The distributors, nor the
retailers, have any forecasting system in place to give them a glimpse at demand. While
forecasting is not 100%, it would, at least, show when a certain pasta is extremely popular due to
a holiday or highlight if demand varies or generally remains steady.
The fluctuations in demand are also caused by Barilla¶s own internal functions. First of
all, the sheer amount of SKU¶s lead to a much more complex system than just trying to gauge
how much one type of pasta is sold. Being able to anticipate the demand for all of Barilla¶s 800
different ³dry´ good SKU¶s is absolutely impossible without a robust forecasting system. The
matter is further complicated by the long lead times that it takes for Barilla to fulfill an order
from the distributor, which was usually between 8 and 14 days from when the order is received.
Due to the nature of the tunnel kiln in the pasta-making process, it is impossible for Barilla to
change the order of the pasta production to quickly fill an order of sold out pasta. Last but not
least, Barilla¶s own sales structure is also to blame for the large fluctuations in demand, due to
their heavy use of promotions and discounts which warps the demand curve.
The JITD program is designed to help Barilla be more efficient in executing its
operations and better serve its customers. JITD would be an efficient forecasting tool to predict
the real demand of the end-consumer. Barilla will require its distributers to provide daily sales
data so Barilla could utilize the data to anticipate future demand and arrange production schedule
accordingly. JITD will also minimize the lead-time as manufacturing would be only one step
behind the end-customer¶s demand and Barilla would be able to steadily make the pasta
necessary to fulfill orders, ³no more, no less.´ In addition, JITD will help reduce the costs
associated with distribution channels. Distributors would not stock their inventory with Barilla
products that exceed the real demand. Thus, the JITD program would help Barilla¶s partners
reduce distribution costs and allow them to be more efficient. The project also might help
improve Barilla¶s relationship with its partners, as Barilla won¶t exert pressure on distributors to
hold more finished products than necessary. The implementation of the program will eventually
improve the planning procedures for Barilla and enable the company to provide exceptional
service to its customers at low costs.
On the other hand, the JITD program will not be implemented without costs to Barilla.
Although it is expected to highly benefit Barilla, JITD program would be costly to implement.
Barilla would be responsible to provide its distributers with the technology needed to report daily
sales. Moreover, it might not be possible for some retailers to report daily sales because their
stores are not equipped with point-of-sale technology that captures sales data
Also, distributors
might need to hire new employees in order to be able to prepare sales reports. In addition,
implementing JITD means that Barilla would do the work for its distributors. This might cause a
conflict with some partners as some distributors would not accept others to intervene with their
internal processes.





 





 




 


Before Barilla can implement JITD it must first garner acceptance from the different
internal bodies that make up its distribution framework. There are several internal departments
that are affected by switching to JITD. First and foremost, Barilla¶s sales and marketing
department would be greatly affected by the move. Barilla¶s sales representatives spend
significant amounts of time working with distributors and helping them place weekly orders and
incorporating promotions and discounts into their selling strategies. Sales representatives argue
that the JITD system would eliminate most of the sales representatives¶ responsibilities. Also, the
sales representatives are most likely receiving much of their compensation through commission
on their sales. The JITD system would put a great strain on commission because the sales
representatives will but unable to push Barilla¶s products to the distributors. Not only does the
sales staff have to worry about diminished responsibility and compensation, but a JITD system
may result in job cuts for the sales staff.
The marketing of promotions is also part of Barilla that would be affected by this new
process. Much of Barilla¶s sales come as a result of trade promotions and discounts given to
distributors as an incentive to purchase larger amounts of Barilla¶s products. If the JITD system
is implemented, distributors will no longer be able to take advantage of volume discounts and
other promotions because Barilla will dictate the amount of product purchased by the
distributors.
Another concern within Barilla was that a JITD system would leave empty space at
distributors¶ warehouses that could be filled with products from Barilla¶s competitors. Within
Barilla there are worries that if a distributor is overstocked with a competitor¶s product, then the
distributor will push the competition¶s product to markets and supermarkets in order to alleviate
its inventory.
The sheer number of SKU¶s that Barilla deals with is also a contributing factor. With
800 dry-product SKU¶s, it¶s a very complicated adjustment to change the distribution protocol.
However, it can also be argued that Barilla is the only company that could correctly and
accountably be able to create a robust forecasting system that would include it¶s wide variety of
SKU¶s and pasta.
One of the managers of Barilla¶s largest distributor stated in retaliation to the JITD
system that Barilla could get their orders out to the distributors faster ± within 3 days. Currently
it takes 8-14 days for Barilla to complete an order. The internal distribution process is extremely
time consuming as it is and adding the JITD system might only prolong the process with little to
show to the distributors.

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From an independent supermarket¶s perspective, the JITD proposal offers both

advantages and disadvantages. First off, the primary challenge being faced by independent
supermarkets is the over and/or under stocking of Barilla Products during any given period. With
a JITD program in place more frequent deliveries from the distributer are possible, resulting in
an overall store inventory reduction. Instead of keeping a two-week supply of pasta products
retailers could reduce their inventory overhead quite significantly; thus, reducing their own costs.
Another advantage that JITD provides is the management of product promotions. Under
the current system, independent supermarkets are forced to carry more inventory of promotional
products. Ideally, with JITD in place, Barilla would determine how much promotional products
the independent supermarkets would carry, thus alleviating the stress of being overstocked.
The last advantage that JITD provides for independent supermarkets is based on
inventory tracking. Most independents do not use any tracking such as RFID1 and rely on hand
counting of inventory and shelf space. Using JITD will help these retailers understand their
selling patterns as it offloads some of the demand estimation up the supply chain, which will
eliminate the need for tedious forecasting.
As a customer of Barilla, one of the biggest concerns would be allowing Barilla to control
all forecasting and supplying of its products. All of Barilla¶s customers would need to disregard
all previous forecasting measures and blindly put faith in Barilla¶s ability to keep the stores
stocked at a proper level. This may obviously lead to certain problems, including being over-
stocked or under-stocked at times. While being overstocked is merely a question of the cost of
unnecessary storage, a retailer being under-stocked can lead to losing customers to its
competition. Couple this perfectly normal concern with Italy¶s pension for labor strikes and the
JITD system could come crashing down, bringing its retailers with it.
Overall, the advantages outweigh the disadvantages for an independent supermarket,
because more frequent deliveries from their distributor outweigh the risk of being under-stocked.
For Barilla¶s JITD system to be implemented, independent supermarkets must make the decision
to trust Barilla and Barilla¶s new distribution structure. If independent supermarkets can get over
the fact that this new system will inherently mitigate their responsibilities, then JITD could be
advantageous for both Barilla and its independent supermarket customers.

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Radio Frequency Identification