Barilla: Coordinating Supply and Demand
OPIM: 615, Class 8
Kunal Mahajan (Penn ID: 56704329)

Question 1: Diagnose the underlying causes of the difficulties that the JITD program was created to solve. What are the benefits and drawbacks of this program?
JITD was targeted at solving two issues in the supply chain- high inventory and stock outs in stores.
A. High Inventory
Barilla, distributors and retailers were all carrying excess inventories which caused a drain on profits in the entire business chain because of the high cost of carrying inventory- warehousing, transportation, scrapping etc. The underlying reasons for the high inventory were:


SKU & Supply Chain Complexity: The safety stock/inventory required in the supply chain increases with increased complexity. Barilla made Pasta in 200 different shapes and sizes and was sold in over 470 different packaged SKUs. Additionally, the Barilla products were in 100,000 stores in Italy, which also increased the overall complexity.
 Demand Fluctuation: The fluctuations in end demand for Pasta meant that there was a bullwhip effect across the supply chain leading to increased inventory at all points. o Lack of proper demand forecasting: The Distribuzione Organizzata’s (DO’s) did not employ any sophisticated forecasting methodologies to place order with Barilla. Instead the orders were based on replenishment of stock on need basis. o Over dependence on promotions: The Barilla sales teams used trade promotions to push product into the channels. This meant that there was uneven demand because of forward buying during the promotion periods by both retailers and consumers. o Seasonality in some types of pasta- for example special pasta types were used for pasta salads in the summer and egg pasta and lasagna were very popular for Easter meals
B. Stock outs in stores
The in store stock out was