Barilla SpA is the world's largest pasta producer that distributes dry and fresh pasta products. It uses a make-to-stock production model that leads to fluctuations in inventory levels and the bullwhip effect. The director of logistics, Mr. Maggiali, proposed implementing a Just-in-Time Distribution (JITD) system where Barilla would monitor distributor inventory levels and make replenishment decisions to reduce variability. However, both internal departments and external distributors opposed the change due to fears over loss of control and potential costs. Concerns from all parties prevented a successful implementation of the JITD system.

1. 04/27/2014
UNIVERSITY OF FLORIDA
MAN5501 – Operations Management
Barilla SpA Case Assignment – Executive Summary
I2MBAF14 – Summer 2014
Team 11
Myuran Kanga and Chrystal Cain Shiarla

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COMPANYBACKGROUND
Barilla SpA was found in 1875 as a small pasta and bread shop in Parma, Italy. Over time Barilla evolved into
a largely successful, vertically integrated corporation. The company supported flourmills, pasta plants, and
bakery-product factories located throughout the country. Barilla grew to be the world’s largest pasta
producer, distributing 75% dry pasta and 25% fresh goods. Barilla’s products were sold to consumers
through small independent shops and supermarket retail outlets. Barilla’s distributors and retailers retained
long-life dry product inventory for 18-24 months and medium shelf lifeproduct for 10-12 weeks.
UNDERLYING DIFFICULTIES SOLVEDBYJUST-IN-TIMEDISTRIBUTION
Just-in-Time Distribution Solution: Mr. Giorgio Maggiali, the recently appointed Director of Logistics for
Barilla, recognized the need to address the demand fluctuations that were impacting Barilla’s manufacturing
and distribution system. The previous Director of Logistics, Mr. Brando Vitali, had proposed a Just-in-Time
Distribution (JITD) solution modeled after “Just-in-Time” manufacturing concepts. He proposed that instead
of allowing customers to place traditional orders to be fulfilled by Barilla, the company should analyze
product quantity data from each distributor to make educated estimations of optimal delivery quantities,
both meeting end-user demand and more evenly distributing the load across Barilla’s manufacturing and
distribution systems. Although Barilla has two sizeable product categories, the aim was to apply this concept
to the dry products category as it was the channel in which Barilla was experiencing uncontrolled
fluctuations. Further, the dry products were distributed through multiple distribution channels. Vitali’s
proposal was to focus on the two-thirds of dry products that distributors touched before reaching retailers.
Upon entering his role in 1988, Maggiali began attempting to implement the JITD concept at Barilla
with no success. Instead, Maggiali was met with strong opposition from both internal and external forces.
Maggiali is now reconsidering whether JITD is an appropriate concept to apply at Barilla.
Demand Fluctuation and the Bullwhip Effect: Barilla’s supply chain struggled to quickly match supply with
demand or to compensate for low demand periods. The result caused stock out scenarios or excess safety
stock inventory at Large Distributors (GDs) and Organized Distributors (DOs) that purchased product from
Barilla’s central distribution centers (CDCs). GDs sourced Italy’s small independent shops and DOs sold
Barilla’s products to supermarkets. Though pasta consumption was said to be relatively consistent

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throughout the year when analyzing inventories at retailers, there was extreme variability in demand
experienced by Barilla. The variability can be explained by amplified variability that is compounded
upstream in the supply chain. Making matters worse, Barilla’s distribution centers and distributors could not
accurately predict demand at the retail level and resorted to inappropriate order forecasting processes or
fixed periodic order placements (batches). These problems created a Bullwhip Effect. This phenomenon
occurs when variability in supply chain orders exceeds the variability of actual retail demand. The negative
impact on Barilla caused higher labor costs, stagnant cash flows, storage/carry costs, reduced customer
satisfaction/service, and increased transportation costs to meet demand.
How JITD Addresses the Issues: JITD is a form of Vendor Managed Inventory (VMI) that allows suppliers to
monitor distributors’ and buyers’ inventory level to make logical replenishment decisions in advance. The
information sourced by the supply chain would allow Barilla to establish a prediction system with decision
rules based on real-time demand lower in the supply chain. The shared demand and inventory information
alleviates many negative effects caused by the Bullwhip Effect.
BENEFITS AND DISADVANTAGESOFJITD
Benefits Gained by Moving to a JITD System: Vitali’s approach aimed to address the decreasing margins of
both Barilla and their distributors. The concept was to produce a mutually beneficial relationship throughout
the supply chain. The system would reduce supply/demand uncertainty, variability, and lead time
discrepancies by allowing Barilla to examine real-time distributor shipment data to identify exact product
quantities required. As the manufacturer, Barilla would gain the capability to execute advanced
manufacturing planning - resulting in lower costs, alleviating the need to overproduce or store excessive
product to combat the supply and demand fluctuations, and establish a more prominent role in the supply
chain as coordination and visibility grows. Distributors would be able to receive needed product, minimize
storage and spoilage losses, and provide better service to retailers. End-consumers would also enjoy accurate
product delivery estimates, inventory availability, and greater service without added product costs.
Disadvantages to Implementing a JITD System: Barilla would be faced with managing supply chain power
dominance perceptions. Distributors and retailers may perceive Barilla’s JITD solution as a hostile take-over
attempt to gain control of their own value-added activities. These parties would fear job loss scenarios.

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Barilla’s strategic move could become toxic to the supply chain as it can easily introduce distrust between
partners. In addition, acquiring data from retailers and/or distributors may not be the most efficient
approach, as many parties would require fees for the proprietary data. Finally, arranging a seamless data-
sharing infrastructure could be complex and costly if partners within the supply chain do not already
implement formal supply/demand metric measurement practices, especially if these measurements are not
collected through electronic means. Ultimately, information cannot replace inventory or production.
Furthermore, acquiring the required information can be difficult. From the customer perspective, a JITD
system does impose greater expectations on the supply chain. Informed consumers will hold the supply
chain to higher standards, as they will expect their products to arrive within newly quoted deliver windows.
INTERNALCONFLICTS CAUSEDBYJITD
Upon the initial introduction of the JITD System, Barilla’s Sales and Marketing organizations were particularly
vocal in their opposition to the plan. The activities conducted by these groups involved a combination of
advertising and promotions. Consequently, these individuals felt that their responsibilities would be
diminished by such a system. Many legitimate fears were expressed to the effect that sales levels would
flatten, response agility and adaptability to changing demand or increased promotions would be limited,
competitors would gain retail shelf space (previously occupied by inventory) for promotional/advertising
advantages, the company would expose itself to stock out risks should unpredicted disturbances such as
strikes occur within the supply chain, and Barilla would lose the ability to run trade promotion incentives
when leveling prices. Furthermore, the sales and marketing organizations doubted the potential for cost
benefits. They feared that the DOs and GDs could lower their inventory levels so much that Barilla would be
forced to increase their own inventory. This in itself would be costly due to manufacturing process
inflexibility. The marketing department was particularly concerned that distributors and retailers may not be
sophisticated enough to handle data sharing relationships. Overall, the human factors related to a changing
infrastructure troubled internal company representatives.
CUSTOMERRESPONSETOJITD
Retailer and Distributor Perspective: Distributors felt threaten by the proposition to share proprietary
warehouse information or sale figures. They felt that managing stock was their job and Barilla was

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overstepping their role by requesting such data. The potential for allowing Barilla to snatch power within the
supply chain caused some distrust and defensive reactions. Retailers and distributors were highly skeptical
of Barilla’s ability to manage supply/demand better than they could. Human factor attributes played a role in
the reaction by retailers and distributors. Fears related to the idea that Barilla was imposing JITD to reduce
their own costs without considering the effect on other supply chain partners grew. Some distributors even
expressed that the system would give Barilla the power to push product into their warehouses just to reduce
manufacturing inventory. In addition, retailers and distributors blamed Barilla for the Bullwhip Effect by
pointing out their inability to deliver product orders within short periods. Some distributors were so
concerned about the variability and uncertainty that they preferred to avoid becoming too closely linked to
Barilla should operations catastrophically fail. After reviewing the entire proposal, a small number of
distributors hesitantly agreed to offer sales and distribution data for a fee. These additional costs defeated
the purpose of creating an efficient supply chain flow.
Consumer Perspective: Though the case does not specifically describe the consumer perspective to the JITD
proposal, our team has identified some expected reactions that could occur. Initially consumers would
appreciate in-stock inventories at no additional cost and the added information that provides expected
product deliveries. However, many consumers enjoy and even seek promotions when making purchasing
decisions. Flattening prices to a consistent level could urge some consumers to switch to other brands. The
change would prevent entire ‘deal seeking’ market segments from purchasing Barilla products.
FINAL RECOMMENDATIONS AND SUMMARY
Based on the analysis of the case facts, our team recommends pursing a JITD system. The benefits involved
with implementing a JITD system outweigh the potential disadvantages for both Barilla and the supply chain.
Many of the disadvantages that have been identified can be mitigated or reduced by properly executing a plan
to establish the system. A plan for successful deployment would involve several key steps.
Distributor/Retailer Support: Trial runs of the JITD system must be conducted to prove that the system can
be successful and profitable for all parties. We suggest the purchase of Marconi’s sales and transportation
data to establish a baseline for decisions and to conduct the trial run. Positive results will allow Barilla to gain
distributor/retailer confidence. In addition, clearly explaining the cost benefits of reduced inventory and

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improved fill rates will provide a greater impact after a successful trial. It would even be beneficial to conduct
multiple trial runs by offering initial incentives to those who participate. Incentives could involve free
Electronic Data Interchange (EDI) equipment to jumpstart the system and overcome technology barriers.
Process Improvements: Barilla must emphasize the need to eliminate promotions to level pricing. A
uniform pricing model will lead to predictable economic fluctuations to minimize the uncertainty and
variability caused by the Bullwhip Effect. Another important step to creating a JITD system would be to
reduce Barilla’s large product variation quantities. If the company determines that custom offerings
distinguish themselves from competitors, the firm could move product differentiation activities to the end of
the process flow where delays and uncertainty would only affect the supply chain minimally. To implement
EDI, Barilla should encourage Point of Sales (POS) and transportation SKU (Stock Keeping Unit) code or UPC
(Universal Product Code) scanning to manage accurate product flow monitoring at each supply chain step.
Internal Sales, Marketing, and Supply Chain Relationship Changes: Barilla must change the mindset
within the supply chain to a cooperative interaction between partners. Focus must be placed on the interest
in the entire process flow rather than individual partners to build trust. Maggiali must involve more than just
Barilla’s logistics department. He should acquire management support to promote a company-wide cultural
change. When management believes in the system, it will be much easier to gain the support and trust of the
sales and marketing departments. Once Maggiali is able to attain management support, he should encourage
collaborative management communication and decision-making throughout the supply chain to improve
business relationships.
Summary: Information sharing through a JITD system is the best solution to reduce the costs and frustrations
experienced by the Bullwhip Effect within Barilla’s supply chain. Making decisions based on sales and
transportation data will allow the supply chain to optimize a hybrid push/pull inventory management
process. By initiating a trial run of the system, successful cost reduction and avoidance will allow Barilla to
gain internal and external constituent support. To ensure successful deployment, it is essential to acquire
management support to drive and promote JITD implementation. Finally, greater cross-partner management
communication and decision-making coordination is necessary to build supply chain relationships and trust.