SUPPLY CHAIN

CASE  ALEX MILLER 19380120

NANCY VU     17514134
CATHY LUO    40189145

NOVEMBER 6TH 2018 

1. What are similarities and differences between the Beer Game and Barilla?
Similarities

● Both faced the challenge of demand fluctuations imposed on the manufacturing and
distribution system due to inaccurate forecasting
● The downstream of both supply chains did not provide detailed sales data to the factory
● Both systems suffered from the presence of the Bullwhip Effect: Just as how the standard
deviation increased dramatically in the Beer Game, Barilla experienced a large amount of
variability
● Both utilized a push model: whereby inventory was accumulated and stored, which costed
money for the companies

Differences

● Barilla has two distribution channels with different holding time in the distribution system
while the beer factory only has one (pg. 4)
● The information flow in the supply chain of Barilla is faster than the beer game. Supermarkets
placed orders with distributors daily (pg. 5) while the normal interval between the orders for
the beer game is one week.
● There was no financial/market information in the Beer Game
● The beer game was linear, whereas the barilla distribution pattern was an ​on demand​​ set up-
multiple cdcs, shops, supermarkets etc. / an array of networks
● Barillas staff were given promotional incentives i.e- discounted batch orders (pg. 6)
promotions can influence the variability even more

2. What are the problems that Barilla is experiencing that the JITD program is intended to solve?
Problems Causes

Demand fluctuation which ● Bullwhip effect where the variance of orders is greater
strained their logistics system than that of sales
● 24-48 hour order processing timelines which exagsporate
the communication breakdowns
● Information is not transparent across all levels of the
chain
● Long lead time which required sufficient notice (pg. 10)
● There are no minimum or maximum order quantities
● Excessive promotional activities and volume discount of
2%-3% (pg. 6)
● When price discounts are offered, firms may engage in
“forward buying” if they predict that there will soon be an
increase in demand

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 ● They weren’t able to be flexible in their orders because
the pasta had to be at a certain humidity and temperature
● Most distributors used simple periodic-review inventory
systems. For example, they might review Barilla products
every Tuesday and order more stock only when it fell
below a certain level.
● Inaccurate analytical tools to best support the entire
system (Pg. 7)

The high cost of holding ● Operation inefficiency

inventory and thinning margins ● No effective forecasting models to accurately convey the
associated with those costs demand from customers and so they had to rely on their
distributors but distributors had volume discounts and
promotions so they weren’t accurate
● Expensive to hold sufficient finished good inventories to
meet distributor’s order requirements

Company Culture and overall ● The company culture was damaged by Vitali’s negative
reputation public reflection on the distributors who have developed
close relationships with the sales team: “Even the
distributors dont seem to do such a great job servicing
their retailers” (pg. 8)
● Increasing levels of Stock outs over the course of 1989
(Exhibit 13)

JITD would also help ease the industry wide issue of minimal inventory capacity. Companies are
continuously introducing new products but both retailers and warehouses do not have enough room to
carry large inventories.

3. How is JITD supposed to solve Barilla’s problems?

1. Open sharing of demand information throughout the supply chain will allow for an accurate
forecasting system, improving transparency and increasing timeliness of shipments to
downstream firms. Overall, the increased visibility of the supply chain as a whole would grant
the company more control over the process so that they would be able to maximize efficiency.
Barilla would have more control and say in the “quantities and delivery schedules (pg. 8), and a
better understanding of their current stock level at each SKU. The company as a whole would be
able to divert their energy into new sales or innovations if less was spent grappling with order
and delivery processes.
2. With a more accurate forecasting system they would be able to predict consumer demand,
which reduces inventory turnover and allows them to be less reliant on the volatile distributor
orders allowing them to precisely manage input directly from the end consumer. Costs would be

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 reduced from the manufacturers, distributors, and company wide for the inventory storage as
safety stocks would no longer be necessary to manage overall ordering volatility. There would
be less reliance on forward buying to encourage truckload discounts which can confuse the
calculation of demand levels.
3. This new system would allow them to seem more reliable to their distributors (pg. 9) which is
intended to improve overall company culture and minimize stock outs with more accurate
information instead of solely increasing capacity thus improving overall reputation.

4. Why is Giorgio Maggiali having such a hard time “selling” JITD

Internal

● The company culture is resistant to change due to several levels of mistrust (pg. 8)
● Sales representatives felt that their responsibilities would be diminished by JITD as JITD
would make trade promotion unnecessary (pg. 9)
● Sales department does not agree as they think if distributors carry less their inventory, it
will demotivate distributor to push the products to warehouse/retailers. The distributors
will instead focus more on selling other products that they have more inventory of
● Runs the risk of a consumer Stock-out if there is a slight disruption in the supply chain. In
addition, they would run the risk of not being able to adjust shipments sufficiently quickly
to increased promotions
● If they can’t follow through with these promotions it will potentially hurt their current
positioning and competitive advantage
● Fear that large orders could exceed the infrastructure capacity to produce, leading to
adverse outcomes when there is not enough inventory to fill an order

External

● Distributors did not trust the idea or management and not willing to share their data
○ Managers of distributor firms felt like it was their job to manage stock and that
the manufacturers should focus on reducing delivery time, despite upper
management's comments
● Most businesses in Italy don’t have the necessary technology for full comsumer feedback
data - I.E “necessary barcode scanners and computer linkages” (Pg. 8)

5. How do you suggest that Giorgio Maggiali should change his strategy for “selling” JITD?

Strategy A: Gain external trust and credibility - run small experiment with Barilla’s warehouse and small
scale grocers instead of large scale supermarkets
● He can convince the internal people and have top management involved
● Run experiment with Barilla’s own warehouses/depots and track the stockout rate to compare
the before and after result

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 ● Run a trial in a low risk scenario to map out the benefits in a more direct fashion for the
distributors
● It should be noted that since the inventory for small shops is minimal, it could be a challenge to
fully measure the results of JITD

Strategy B: Gain internal trust and support - shift focus of sales department from sales to business
development
● Gain trust of the sales and marketing department by ensuring them that their jobs will not be
obsolete. To do so, Barilla could change their distribution pattern so that a percentage of
shipments would be focused on promotional products
● Instead of having 90% (Pg. 6) of their job be in-store with promotions and set ups, it could focus
to a more business development ideology encouraging them to focus on the external advertising
and acquiring new partners. Therefore, their roles would not be rendered obsolete and rather
would take a slightly different form

Strategy C: Emphasize financial gains from this system

● Since the company would generate higher returns and stabilize their prices, they could
emphasize how they will leverage the incoming funds to enhance the reach of different
departments in order to reassure the sales team that they would still add value to the company

6. Do you believe that JITD would work?

JITD is a well proven response which effectively minimizes several causes of the bullwhip effect which
has negatively impacted the Barilla organization. It would allow them to ensure that information has
more direct and relevant channels across the company, sharing it a long the entirety of the supply chain.
Overall, this method has shown to improve supply chain relationships as well, which have been strained
due to the company’s culture as a whole. This would ideally create a snowball effect, whereby greater
support could be harnessed as the JITD project was expanded. Responding to “sell through (Pg. 8)”
information, although one step behind retailers, would allow the forecasts to be more consistent
company wide.
The most significant barrier would be within the company culture itself, and the major bouts of
resistance which have been expressed. Therefore, it would be crucial to emphasize the benefits
mentioned above in convincing

7. What alternatives other than JITD do you suggest to combat Barilla’s problems?
Barilla could continue to store and pay for large stocks of inventory, although this would incur higher
costs and damage their margins even more. They could also potentially eliminate all sales and trade
promotions in order to attempt to reduce the variability in the ordering. However, this would likely also
come against company cultural barriers as the sales team would still feel threatened and undervalued.
Lastly, they could minimize the variety of their products in order to gain more control over their supply
chain. Currently, Barilla distributes many different products with unique specifications. This complexity
could be reduced in order to better manage the supply chain as a whole.