SUPPLY CHAIN MANAGEMENT

CASE STUDY ANALYSIS

INDIVIDUAL ASSIGNMENT

Submitted to:
Prof. Anurag Garg

Prepared by:
Sahil Chavan (N124)
SAP ID: 80012200064
Q1) What are the problems being faced by Barilla SpA? Enumerate the suitable
analysis.

Barilla had a good brand image in the market, they were the largest pasta-
producing company in Italy, but there were a few internal and external issues that
they faced in operations. These are the following issues that Barilla faced during
operating in the market:
Growing Burden on Manufacturing and distribution due to Demand
Fluctuations
There were a lot of reasons for the continuous demand fluctuations that were
happening in the case of Barilla, the fluctuations in the demand were due to the
seasonal buying behavior of the customers, an increase in demand for certain SKUs
which lead to sudden stock-outs, excessive trade promotions, sales compensation,
and poor communication with the distributors. These demand fluctuations caused:
Bullwhip effect

The fluctuations in customer and distributor levels went on to rise and cause issues
in the manufacturing and operating of production.
Increased Inventory costs
In order to tackle the fluctuations, Barilla started to keep extra inventory at the
CDCs and also with the distributors, which automatically resulted in an increase in
inventory costs.
Difficulties in Product Delivery
As the demand forecasting was not appropriate, few SKUs were overproduced and
were made to store in the inventory, due to fluctuations and improper forecasting
few SKUs were also delayed in production, which caused late delivery of that
product in the market.
Resistance of buyers in implementing JITD
The buyers were resistant as they were not ready to share the data and access the
warehouse to check records. They also offered to improve the inventory and
 service levels by themselves in order to deliver the orders quickly. The buyers were
concerned about the close relationship that Barilla was trying to set up with them
to reduce its costs.
• Resistance of internal departments in implementing JITD
The Sales and Marketing team were resistant to implementing the JITD, they were
worried about their Sales Levels as the compensation of this department was based
on the sales incentives, and they were not ready to compromise this aspect. Apart
from this, they also had an opinion that If space is freed up in the distributors’
warehouses, the distributors would then push the competitors’ products more.
They also didn’t have a clear idea of the distributor's incentives and remuneration.

Q2) What are the loopholes and gaps in the current distribution chain of Barilla
SpA? Present with analysis.
The distribution chain of Barilla focused on 2 CDCs, one in the north in Pedrignano
and another in the south on the outskirts of Naples. They had a different
distribution network for both dry and fresh products. The fresh products were
moved quickly, with only three days' worth of inventory typically held in each of
the CDCs. Whereas the dry products inventory was held for one month. The
distribution flow was as follows:

Flow of
Information
The loopholes in the Distribution Chain:

• Lead time:
The inventory levels were monitored and the orders were placed once a week, the
product was then shipped to the distributor after 8 days and within 14 days of
placing the order. The inventory review system used was also periodic i.e., weekly
which led to issues in accurate demand forecasting.
Apart from that, the distribution chain revolved around the DOs and GDs majorly
for Independent Markets and Supermarkets respectively, this resulted in inaccurate
demand forecasting due to delays in the flow of information from the consumer's
end. The JITD will help in reducing these issues by reducing the lead time.

• High Inventory Levels:

The products were divided into 2 categories Dry and Fresh. The dry product
category had about 800 packaged SKUs, out of which pasta was sold in 200
different shapes and sizes in over 470 packaged SKUs. This led to an increase in
inventory costs, production costs, and packaging costs. Apart from the costs, this
also made it difficult for Barilla to manage the rising inventory levels, the
distributors used to carry from 7000 to 10000 SKUs in total. They used to distribute
these SKUs strategically but it was tough to manage such a high number of SKUs.

• Lack of Demand Forecasting Indicators

This was the major issue in the distribution chain, in order to get accurate market
insights and demand forecasts, the distribution chain was lacking it. Barilla’s
products were all push products and the distributors were using a computer-
supported ordering system with no sophisticated forecasting system.
Q3) As an advisor what would you recommend to Maggialli and what is the best
solution to solve this problem? Present your plan with suitable analysis and
justification.

There are a lot of problems that we discussed earlier in the implementation of JITD.
A few of them were from the buyer's end, a few of them were from the sales and
marketing department, and the rest were due to the need of implementing JITD
due to the problems that were raised after recognizing the bullwhip effect from the
initial demand fluctuations. Hence to understand How this approach can:
1. Streamline their operations,
2. Reduce carrying costs,
3. Minimize stockouts,
4. Reduce the rising inventory levels,
5. Improve overall efficiency,
6. Reduce Lead time,
7. Improve demand forecasting techniques
it is very important to implement JITD in the best possible way. As an advisor, this is
the best possible solution that can be recommended to Maggialli:

Ensure Trust set example offer Tackle Long term Provide Direct
/ provide Customizati internal vision of awareness distribution
demo on resistance adopting support
JITD

Convincing the existing distributors by ensuring trust and leveraging

the good brand image in the market.
Barilla has a very good brand image in the market, they have positioned
itself as the largest pasta-producing company with a market share of 32% in
the market. They can leverage this brand equity and ensure a sense of trust
among the existing distributors to adopt the JITD. They can ensure the
distributors that the privacy of the data will be maintained and will be only
used for accurate demand forecasting to create a win-win scenario for both
the distributors as well as for Barilla.
 Provide a properly organized demo to the distributors by
implementing JITD on the Barilla depots.
As we know, Barilla operates 1/3rd of its distribution directly through its 18
depots, if they want to convert the existing distributors and set up a
standard for other distributors as well, then Barilla will have to demonstrate
the JITD model and erase its misconceptions by minimizing the loopholes
pointed out by the distributors. Hence, they can use this distribution
network to show the distributors that JITD can work without any
interruptions.

Offering Customizations as per Distributors.

Recognize that each distributor will have a different appetite to maintain the
inventory and different sizes of business networks under them. Work with them
individually to tailor the JITD strategy to their specific requirements and operations.
This level of personalization can help Eliminate their concerns about switching to a
new system.

Tackling Internal resistance.

The major concern of the sales and marketing department was that the distributors
might push the competitor's products, hence Barilla can offer incentives or rewards
to distributors who successfully adopt JITD and demonstrate improved
performance. This could include discounts, performance bonuses, or access to
exclusive products. Apart from that, barilla should introduce a market re-tapping
campaign for the sales representatives so that they will maintain their sales levels
even if JITD is adopted.

Make it a Long-term Vision:

Convey the long-term vision and benefits of adopting JITD by not just keeping this
within the logistics department but by taking this to the top management of the
company. Also by assuring the distributors that this shift is not just a short-term fad
but a strategic decision that will lead to sustained growth and competitiveness in
the market which will be further carried on in the industry as a revolutionary
change.
 JITD Awareness Support:
Provide continuing assistance and direction to distributors during the
changeover period. This could involve further Kanban training,
troubleshooting aid, and regular performance evaluations. This would
create awareness amongst them.

Directly asking the small shops to adopt JITD through direct

distribution.
Persuade small businesses to use JITD rather than huge DOs and GDs. They
are more inclined to accept modest orders to minimize inventory since they
have a higher inventory level - more than two weeks, which is longer than
supermarkets. They also lack the resources and power to manage their
inventory. This can help in gaining the end-user data directly, without the
influence of other distributors, Barilla could obtain end-user information
directly. JITD is easier to implement in small shops for the reasons stated
above. Barilla can also use it to urge other distributors to join the JITD
initiative.