Introduction

Barilla suffers from bullwhip-effect problems:

1. High inventory levels at every level

2. Frequent stockout situation with the distributors
3. Lack of forecasting information
4. Increasing variability

The impact of the fluctuations causes their products to be insufficient or in excess. This means
that Barilla has stock outs or is holding excess inventory. Due to fluctuations, the production
and transportation (logistics) operations are put under tremendous pressure. This will force
the distributors expand their capacity in order to hold Barilla’s excess production.

In order to overcome the bullwhip-effect, Just-In-Time approach much be implemented.

Communication and cooperation are crucial for any successful supply chain. Only if there is
cooperation and correct communication can all departments in the supply chain benefit.
The incentive for cooperation is a clear win for all parties involved. We know that there are
two aspects that are important to distributors:

1. Inventory

2. Fulfilling the role of an independent distributor

Recommendations
Short term: -
1. Involve top level management and look for their buy-in that the high inventory and
demand fluctuation is not an operational issue but a company and even distribution
chain-wide problem.
2. Focus on First Level issues in distribution. i.e., involve sales team in inventory /
distribution management.
3. Currently a very accurate and up-to-date market analysis flow from stores by Barilla
sales representatives into CDCs exists but is not integrated into inventory and
production management. This should be done.
4. To create awareness on the inventory and distribution chain issues in organizations,
organize workshops (maybe on an academic level) and invite other departments like
sales, marketing, finance to participate.
Mid-term: -
1. Look at ways to speed up delivery. If the lead-time can be shortened, and the orders
fulfilled quicker, distributors will start keeping less inventory and probably start
ordering more often.
2. Change sales practices which cause demand fluctuations. Move away from large,
batch orders at discounted prices, and introduce periodic orders at agreed prices.
3. Run JITD experiment with one of the Barilla owned depots.

Long term: -
1. The ultimate goal of Barilla to realize JITD should be leaning towards Vendor
Managed Inventory for all channels, as much as possible.
2. Create a Third Level[1], (Distribution Chain Level) information network to better
focus and analyse the demand.
3. If the DOs or GDs do not want to share data, offer a closely working Barilla
representative to be present at DO or GD premises who monitors the inventory and
sales figures and advises on the ordering (similar practice is currently performed in
supermarkets).
4. For really skeptical distributors on information sharing, develop and roll out a “Barilla
Demand Forecasting System” where DOs and GDs can order based on the outcomes
of the forecasts. However this will still not fulfill all the required information for
Barilla to flatten the demand, both Barilla and the distributor will benefit from better
forecasted orders and decreased inventory.