Barilla Spa is a large, vertically integrated, family owned pasta company based in Italy.

It maintains a leadership position among a field of thousands of Italian competitors producing and distributing brand-name pasta. Its operations are divided among 3 production divisions and two distribution channels, based on product shelf life. Distribution was further divided between two central distribution centers (CDCs), based on geography.

Customers were divided into three primary segments: Small retail shops; Large independent supermarkets; and Large supermarket chains. Distribution to small retail shops was direct from the CDCs. Distribution to the supermarkets went through intermediate distribution centers, either owned by the chain, or operated by a third party representing multiple independent supermarkets. Fresh product was distributed through a network of brokers.

Inventory levels in the supply chain, managed via periodic-review inventory systems, were high, with larger levels of safety stock held for dry pasta (which had longer shelf-lives) than for fresh pasta. The CDCs carried approximately a 1-month supply in inventory, and supermarket distributors maintained a 2-week supply, yet stockouts still occurred frequently. These high inventory levels were in part a result of heat control issues in the production process making it difficult to respond quickly to shortages, so increased safety stock was the preferred response to demand variability.

The Pasta supply chain suffered from classic bull-whip effect problems. High inventory levels stored at each level of supply chain Stock out at distributor level A lack of information for forecasting demand Increasing product variability exacerbated all of these problems

A JITD program would help to reduce inventory held at the distributors It builds inventories at the central warehouses and then deliver only the quantities required by the end-users through more frequent checks of the distributors' inventory. Thus, the JITD approach will save the entire supply chain money in reduced inventory costs and will result in high service levels.

Internal opposition originated both from job security fear as well as more legitimate concerns, such as the culture of promotions and fear of competitor encroachment into distributor warehouse space following a reduction of Barilla inventories. Outside opposition was most vocal from distributors' buyers, who were most directly threatened by the JITD system.\par \par Availability of demand information, even at the store levels, also presented difficulties in implementing a system that would be completely dependent upon using this information to forecast.\par \par

Barilla spa ran first JITD experiment at its Florence depot During the very first month of the program Inventory dropped from 10.1 days to 3.6 days Service level to retail stores increased from 98.9% to 99.8% Depots staff was not comfortable working with such low inventory levels Inventory levels finally allowed to increase to 5 days One of the arguments against JITD was that it will lead to waste empty spaces in the ware houses

In Florence case Barilla growing at rapid rate in the region Plans to expand warehouse Existing warehouse able to accommodate the increased requirement Substantial investment on expansion was avoided JITD next tried at Milan Depot Similar performance improvement as Florence These experiments established the credibility of JITD system

The decision to implement JITD in Marchese DC of Cortese involved Barilla: Director of Logistics, Executive vice president of sales and Manager in charge of JITD implementation Cortese: Nine managers including Managing director, new services manager, logistics manager and logistics, purchasing, marketing and sales personnel from Corteses Marchese DC Consultant Claudio Ferrozzi was roped in Neutral party trusted by both the groups

For six months, Barilla team analyzed daily shipment data of the DC Created the data base of DCs historical demand pattern Simulated shipments with JITD in place The implementation yielded phenomenal results Prior to JITD x Stock out rate : 2 to 5% ( Occasionally as high as 10 to 13%) After JITD x Negligible stock out rate of less than.25%(Never exceeded 1%) x Average inventory level also dropped

With new confidence they approached other customers Customers apprehensive about JITD repeating the same success as Cortese for them as they had varied systems Barillas team developed capacity to translate customers standards into internal standards

Developed a protocol which could be used to communicate with all customers Each SKU identified with three different product codes
Barillas code Customers code EAN (European article numbering system) barcode Most common barcode standard in Europe

Advantages of the coding system

Information can be received through any code Reduce impact of internal changes in product or code on clients system