Barilla SPA, a leading pasta and bread manufacturer, faces challenges in its distribution system due to a weekly ordering process based on inventory levels rather than actual demand, leading to inefficiencies and the bullwhip effect. This results in inflated orders and unnecessary production, increasing costs across the supply chain. The proposal seeks to streamline the order process to enhance customer service while reducing excess expenses.

1. Barilla SpA Case Analysis
Just In Time Distribution Systems
Background
Barilla SpA is one of the world’s largest
pasta and bread products
manufacturers. They ship to small
“mom and pop” stores, large
independent super markets and large
chain supermarkets. These customers
all purchase their products through a
broker or an intermediary warehouse
and then the distributors (also known
as

2. “Grande Distribuzione” and
“Distribuzione Organizzata”) deal with
Barilla’s sales and distribution centers
for Barilla’s product line is composed
of “fresh” and “dry” products. Fresh
pasta products have a 21-day shelf life
while fresh bread has a one-day shelf
life. Dry products, represent 75% of

3. Barilla’s sales and have shelf lives
ranging from 10 weeks to 24 months.
It should be noted that, in total,
Barilla’s dry products are offered in
800 different packaged stock keeping
units (SKUs). Although Barilla offered
many pasta products in multiple

4. package types, most retailers would
only carry the product in one (at two)
packaging options. Currently, Barilla’s
distributors check their orders and
place their orders once a week.
Average lead time in the current
scenario is ten calendar days. While
the demand for pasta is relatively flat,
the variability resulting from
distributors’ sales volume and demand
triggered the need to find a way to
“take costs out of the distribution
channel without compromising
customer service.”

5. Proposal
Organizational Changes
Barilla’s dilemma revolves around how
product is ordered by its distributors
based on a weekly ordering system.
Instead of using forecasted or actual
demand data, distributors used a
simple periodic-review inventory
system and place orders for products
whose levels fall below a targeted
reorder level. This system causes an

6. “emotional” knee jerk reaction issue
when an end customer is out of
product. Many times the end grocer
will order more product than is
necessary, as may the distributor,
causing the plant to go into
production for a specific product that
is hugely inflated. After the customer
receives the order they realize they do
not need the large amount of
inventory and discontinue future
orders. This sinusoidal ordering effect
is called the “bullwhip effect” (Graph I).
As can be observed, the
inventory/order levels are amplified

7. from the downstream to the upstream
channels (i.e., retailers to distributors
to manufacturer) within the supply
chain. This “artificial inflation” results in
increased costs to the manufacturing
plant, distributors and end customers
because of the lack of planning,
excessive overtime and inventory costs
in the form of floor space and
potential spoiling.