Distribution Design Systems.

From the distributors’ point of view, they too are feeling a need to add more inventory of items they already stocked and to add new items; however, they want to do so on their own terms.  One of the reasons why the distributors are resisting the JITD changes is because they fear losing control of managing the stock.  This is important to the distributors because of the reward system that is currently in place.  The distributors are making their order decisions by determining the best advantage of the trade promotions rather than focusing on the needs of the retailers.  The distributors would rather see Barilla reduce their lead delivery time to 36 hours rather than the existing 10 days.  The distributors are also not eager to change because of technology issues.  Most of the grocers in Italy aren’t equipped yet with the necessary bar-code scanners and computer networks that could be used to easily gather and share this data.  Introducing this type of technology would be costly and time consuming in order to train and implement it throughout the nearly 100,000 retailers.  

This situation is a classic example of the Bullwhip effect.  We can see areas of isolated decision making, inappropriate incentives, forecasting errors, and order batching.  One of the ways that JITD will help correct this problem is by improving communications with the distributors in order to share valid and meaningful data.  The retailers are sending orders to the distributors on a daily basis; however, these orders are not directly passed on to Barilla.  The distributors are comparing these orders with inventory levels and current trade promotions before they submit their weekly order to Barilla.  This process does not provide Barilla with the true sense of the demand.  By implementing JITD, Barilla would be able to monitor and view the daily requests made by the stores.  This data would make the production forecast much more valuable.  Barilla also needs to restructure the incentive program such that the distributors are not encouraged to batch their orders.  Barilla should implement a structure that encourages smaller batches with a higher level of frequency.  These recommendations would allow Barilla to generate a better production plan and in turn, smooth out the fluctuations, lower the excess inventory/manufacturing costs, as well as minimize the stock-outs that the DOs have experienced.