BARILLA SpA (A)

by
Fransiskus Allan Gunawan & Indra Tangkas P. Sinaga

1. Background
Giorgio Maggiali as director of logistics for the world’s largest pasta producer, Barilla SpA
(Societa per Aziont) was acutely aware of the growing burden that demand fluctuation imposed on
the company’s manufacturing and distribution system. The idea that proposed to use just-in-time
distribution (JITD) that for two years had tried to implement face the contradiction. Barilla’s
costume unwilling to give up their authority to place orders as they pleased and the rest are reluctant
to provide the date of detailed sales. Moreover, Barilla’s sales and marketing organization feel
disconcerting to implement the methods due to the fact that they felt it is infeasible or dangerous.
Now, how might the Maggiali increase the chance that idea would be accepted to boost efficiencies
in the manufacturing and distribution system?

2. Problem Analysis
There are two main problems that Maggiali faced that is (a) the risk of the variability of
supply in each chain and (b) rejection of the Barilla’s employee and consumer chain to use the
method just in time. The variability supply in each chain for Barilla’s case is contributed by several
factors. The factors included (1) demand forecasting where the organization tends to use a periodic
review policy where the inventory is characterized by a single parameter (base-stock level). The
chains always have the motive to request stock from a specific inventory level based on demand or
based on accumulated safety stock. It tended to lead bias between real demand and real inventory
level that caused increasing in cost. Therefore, the cost in Barilla’s product is not merely inventory
cost but added obsolete cost refers to product life. In the end, the organization tends to discount its
product near its consumption life to reduce adding cost.
Then batch ordering where each or specific chain order for large quantities (2). It often
occurs when there is a discount if the order in specific quantities or quantities policy appointed by
the seller. Hence, several chains (especially wholesalers or retailers) will observe large order then
followed by several periods of no order. Price fluctuation (3) lead to the variability that occasionally
caused by promotion and discount offers at a specific period of time. Inflated orders (4) are common
when retailers and distributors suspect that a product will be in short supply. Therefore, to anticipate
the condition, they tend to order more supply than standard orders.
Barilla faced extremely high fluctuations in demand, the orders fluctuated wildly from
week to week thus creating a high variance in demand which was resulting in high pressure on
manufacturing patterns and distribution plans. The demand for dry products was not constant and
it kept varying every week, this extreme variability in demand strained Barilla’s manufacturing and
logistics operations. Holding sufficient finished goods inventories to meet distributors' order
requirements was extremely expensive because of the fluctuating demand every week.
Deal with customer and market division with high-quality communication for anticipating
the future and the current condition about variability, each chain must make pooling information.
The pooling information technically is about sharing information about the real customer demand
and real inventory level. The usage of sharing information can lead to reducing the variability of
uncertainty demand and can improve decision making. Better visibility and more timely data
sharing enabled by B2B connectivity and data flows allow companies to collaborate more
effectively around processing transactions and resolving problems. Visibility also helps them
manage orders, shipments, and inventory, as well as plan and manage transportation. The risk of
 transparency information between each chain is the previous chain or even the chain actor will
know demand trend in specific areas and it will be a chance for them to get market share in other
retailers or distributors.
Moreover for deal with sales and marketing rejection about applying just in time method,
previously there are two main questions usually appear behind them. First, “How does this affect
me?”, then “How will it change the way I work?”. For sales and marketing division, it is about the
future opportunity they will lost with the new system, whereas they frighten unfit with new work
methods lead to resign and no job. Function Maggiali becomes bridge to get them comfortable with
the methods, to get them using it, and to help them understand how it makes their lives better. High-
quality communications and training would be critical to communicate the way sales and marketing
laying out in the future and provide explanations about how new ways improve the business. With
the new system, it will reduce sales and marketing time to communicate with the customers, and
the biggest opportunity to sell more and sell others to extent customers.

3. Recommendation
a. To convince the sales and marketing and customer (distribution chain) to use just in time
system, Maggiali needs high-quality communication and training. It would be critical to
communicate the way sales and marketing laying out in the future and provide explanations
about how new technology would improve the business. Using just in time method that
integrated with internet refer to change management whereas the staff will launch the question
“How does it affect me?” and “How will it change the way I work”. Then use new reward and
incentives systems, for example, the employee who generated the most internet traffic from a
single piece of online content gets rewards or the most creative employee who can generate
more added sales for new or other products online or telesales will provide incentives.
b. To overcome the customer to accept just in time method, in the early stages of the launch, focus
on getting a network of champions on the new methods. In the future, they can coach and show
the benefit. We want people who are able to work horizontally across the system and who have
good communication and networking skills. Generally, Barilla should pick several or specific
customer in the chains that meet the criteria with a gimmick that give them benefit (example
several month discount transportation costs, etc). The customers then will be an influencer to
the others, but it will succeed if Barilla implements high-quality communication and proper
training on how the system works.
c. To overcome the bullwhip effect, Maggiali can implement electronic logistic whereas one of
them is cloud computing. Cloud computing has definition the on-demand availability of
computer system resources, especially data storage and computing power, without direct active
management by the user. The principal generally to describe data centers available to many
users over the Internet. Clouds may be limited to a single organization (enterprise clouds), or
be available to many organizations (public cloud). Cloud computing relies on sharing of
resources to achieve coherence and economies of scale. If the Barilla uses the cloud computing
system, each warehouse, distributor, and retailer can align its real demand and inventory
capacity. The integrated system in every chain can be set and forecast automatically the
quantities that have to supply for every chain based on real inventory level and real consumer
demand. Moreover, flexibility to change the delivery route and use other stock (crowdsourcing)
to supply other chains will reduce lead time and prompt decision making.