Barilla Spa

Barilla SpA is an Italian pasta manufacturer comprised of 7 divisions: 3 pasta, bakery, bread, catering, and international. By 1990, Barilla had become the largest pasta manufacturer in the world.

The company ships its pasta to one of two central distribution centers (CDC) where it is bought by individual supermarket distributors called "grande distribuzione" (GD for larger supermarkets) and "distribuzione organizzata" (DO for smaller, independent supermarkets). During the late 1980s, the distributors often put Barilla in a bind with fluctuating demand patterns. As director of logistics, Giorgio Maggiali was acutely aware of the growing burden from demand fluctuations. He was contemplating the implementation of a Just-in-Time Distribution (JITD) program, which would shift the responsibility of determining shipment quantities from the distributors to Barilla.

Inventory can be blamed for many of the causes of demand fluctuation. The supermarkets and distributors tended to not have much space to hold inventory. This left the door open to events like stock outs where the distributor would run out of the product. Depending on a distributor's inventory level, the orders back to Barilla would wildly vary. The distributors would also make orders to Barilla only once per week. Again, this set the stage for demand fluctuation since inventory levels were not constantly monitored. Another reason for demand fluctuation is the limited use of forecasting. The current method of ordering pasta is essentially to replenish was has been sold. This is backward-looking and it leaves Barilla trying to play catch-up.

The fluctuations in demand have several negative impacts to the pasta business. As previously mentioned, neither the distributors nor Barilla had the ability to precisely predict future demand. This caused 3 problems. For Barilla and its distributors, holding inventory is a costly event. Without proper demand information the distributors did not know how much stock to hold and Barilla did not know how much pasta should be produced. The culmination of the inventory trouble is when a stock out occurs because it is felt on both ends. A second impact relates to the manufacturing limitations of the pasta. Each type of pasta had different temperature and humidity requirements. The lack of demand information coupled with the different specifications left it difficult to respond quickly to changes in demand. Finally, the lack of information changed the effect of Barilla's incentives to distributors. The distributors were offered volume discounts for making a full truck-load or multiple truck-load order. The lack of forecasting meant Barilla was offering a reward for the distributors' inability to predict demand.

If Giorgio were to implement JITD to curb the demand fluctuations he would face several issues. Internally, Barilla's own sales and marketing organizations saw the concept as infeasible, dangerous, or both. The sales