Barilla:Just In Time Distribution, Just in Time

Facilitated by Team 7

Manuel Atanacio

Melissa Debach

Cosmo Kapoor

Wayne Leonard

Molly Neznanski

Allen Sajedi

Problems at Barilla: Illustrated

Problems at Barilla: Business

• High stock out rates

• Long lead times

• Inappropriate Incentives– Bulk orders– Purchasing not sales

• Multiple Pasta Varieties

• Cumbersome Machinery

• Inaccurate Forecasting

• Fluctuating Demand

Problems at Barilla: Production

Key Issues

Manufacturing & Production Process- Equipment limitations

- Production delays

- Costly, time consuming and inefficient

Forecasting- Low volume production

- Seasonal demand

- Low margins

- High real estate costs

- Requires quick turns, minimal inventory

Alternatives

1) Maintain status quo

2) Production changes to

drying process

3) Implement JITD with existing network

4) Obtain new network of distributors - implement JITD

Alternatives cont’d

1) Maintain Status Quo

- stock out levels remain high

- demand forecasting inaccurate - long lead times

- costly & inefficient

2) Production Changes

- alter drying process

- variety agility

- costly & slow to implement- maintain automation- maintenance friendly

Alternatives

3) Implement JITD: Existing Network

- focus on education

- relationship improvement- quick implementation

- established network

4) Implement JITD: New Network

- “blank slate”

- trust & commitment

- costly

- slow distributor acquisition

Recommendation:

= Success- greater knowledge of customers

- more targeted promotions

- reduced stock out rates

- lead time and cost reduction

Alternatives 3 & 4

Existing Network + New Network - existing relationship - “blank slate”

- system education - ground up

- build trust - system leaders

Action Plan: Phase 1

- Executive commitments- Barilla

- Sales and Marketing Discussions- JITD as a sales tool

- Distributor recruitment

- Relationship management

Action Plan: Phase 2

Sales and Marketing:

Educate Existing Distributors:1) Cultivate relationships2) Benefits of JITD3) Reducing the Bullwhip

Effect4) Triple-A Supply Chain5) CPFR Model

Recruit New Distributors1) Embrace JITD

methods2) System leaders3) Triple-A Supply Chain5) CPFR Model

Key Success Factor 1

Commitment to: Triple-A Supply Chain

- Agility of Information Sharing

- Adapt to address customer needs

- Alignment of common interests/values- risk mitigation- cost reduction- optimized customer

satisfaction

Collaborative Planning, Forecasting and Replenishment Process Model

-Establish Partnership Parameters- timing goals- performance metrics- procedures

- Joint Business Plan (Policies/Guidelines) - strategic decisions - information sharing

- Create joint forecast model- exceptions- forecasting rules- order quantities

Key Success Factor 2Common Parameters

- Requires collaboration

- Information sharing

- Joint forecasting

- Common performance metrics

- Address customer needs

- Proactive decision making

Restructure Incentives

Action Plan: Phase 3

Current Incentive

Volume Discount

Promotional Pricing

New Incentive

Accurate Orders

Sell out Bonus

Milk-run Delivery

Uniform Wholesale Pricing

Buy back clauses

Negative Behaviors

Frequent Stock Outs

Unpredictable Demand

Positive Behaviors

Information Sharing

Varied Shipments

Frequent Ordering

Order by forecasts

Order by forecasts

Action Plan: Phase 4

Eliminate the Bullwhip Effect:

- Greater information sharing

- Price stabilization

- Gaming elimination

- Echelon inventory

Conclusion

- Commitments

- Education

- Incentive alignment

- Relationship building

- Implementation of JITD

Questions?