Instruction:

The Barilla SpA case is given in the Simchi-Levi textbook.

Following teams will have to submit reports for the Barilla Case:

Section A: A01-A05

Section B: B01-B05.

Prepare your case report by answering the following questions and submit the same
electronically to in the link created in courseweb before 10 AM on July 5th, 2017.

Name the file according to your Section and Group number. Ex. If you are group 2 in section A,
your file name should be SecAGroup2_Barilla Report.docx

Only one person from each group should submit the groups report, there should not be multiple
submissions for any group.

Late submissions will be penalized.

Questions:

1. What are the reasons for the increase in variability in Barillas supply chain?

2. What is the impact of the highly variable order pattern?

Variable order pattern had a direct impact on Barillas operational costs & efficiency:

Production Costs: As the order variability increased, production costs increased

drastically. Barilla had either inefficient production or excess finished goods inventory.
The production costs rose as product changeover was costly. It also leads to increased
inventory carrying costs.
 Utilization of central distribution is inefficient: It was difficult for Barilla to

schedule its resources and facilities like Workers, Machinery and Trucks due to order
variations. This was resulting in increased costs of Labor and maintenance.

Transportation Costs: Because of uneven orders, Barilla had to transport more

products to its distributors in periods of high demand in lesser time than when compared
to periods of low demand. The greater number of trucks required in periods of high
demand increased its Transportation costs.

3. Can the JITD strategy solve the operational problems faced by Barilla?

The problems that JITD intends to solve:

Demand fluctuation and low customer fill rate: As the Fig 5-3 showed, the demand
variability is huge. On the other hand, the production line of Barilla cannot afford frequent changes
in order amount due to the long setup process. It comes out that if the forecast is unreliable, they will
either need to build up huge inventory or lose the customer fill rate, none of them is favorable. Also,
the Barilla customers will face stockout due to the low fill rate of Barilla.
High Inventory at distributors and No Space or further investment available: As Fig 5-4
shows, the distributors have huge inventory and stock outs rate, which indicates that new product
keeps coming out while old products keep their spaces.
JITD can also help tackle operational problems faced by Barilla apart from the mentioned above:
Delivery lead times of an average of 10 days from Barilla to the distributors.
Product proliferation, which makes forecasting more difficult
Sequential decision-making process in the supply chain, i.e., no collaboration

Operational advantages of implementing JITD strategy:

 Decrease the Total Inventory in the Whole Supply Chain: JITD helps to reduce inventory held at the
distributors since it builds inventories at the central warehouses and then delivers only the quantities
required by the end-users through more frequent checking inventory at the distributors. Theoretically,
it eliminates the needs for each distributor to hold it own Safety Buffer & benefits them through
releasing their inventories space and cost.

Distribution and Manufacturing Cost Reduction based on Scheduled: As mentioned before, the
production costs rose as product changeover was costly. The less interruption, the more cost-efficient.
But this is only true for bottleneck machines. This is also true for distribution cost as a better delivery
schedule would bring down distribution costs.

Better Customer Fill Rate both in Barilla and the Distributors: JITD emphases quick response. Since
the inventory data and delivery pattern are controlled by Barilla, their central factory and CDCs are
therefore easier to schedule their production and deliveries to meet the customer demand. For the
distributors, since their flexibility and reaction speed have all been increased due to the lowered
inventory level, they surely could have better customer fill rate and less stock outs rate than before.

The JITD strategy therefore transfers decision-making authority for determining Barilla-
distributor shipments from the distributor to Barilla. Barilla would monitor the flow of its
product through the distributors warehouse rather than simply filling orders specified by the
distributor. Then they can decide what to ship to the distributor and when to ship it. This strategy
enables Barilla to make manufacturing and logistics decisions that benefit the entire system.

4. Discuss the implementation issues of the JITD strategy.