Barillo Case
BARILLO CASE
In 1987 Brando Vitali, then Barilla's director of logistics, had expressed strong feelings about finding an alternative approach to order fulfillment. At that time, he noted, "Both manufacturers and retailers are suffering from thinning margins; we must find a way to take costs out of our distribution channel without compromising service." Vitali was seen as a visionary whose ideas stretched beyond the day-today details of a logistics organization. He envisioned an approach that would radically change the way in which the logistics organization managed product delivery. In early 1988 Vitali explained his plan:
I envision a simple approach: rather than send product to the distributors according to their internal planning processes, we should look at all of the distributors' shipment data and send only what is needed at the stores-no more, no less. The way we operate now it's nearly impossible to anticipate demand swings, so we end up having to hold a lot of inventory and do a lot of scrambling in our manufacturing and distribution operations to meet distributor demand. And even so, the distributors don't seem to do such a great job servicing their retailers. There are stockouts despite their holding a couple of weeks of inventory.
In my opinion, we could improve operations for ourselves and our customers if we were responsible for creating the delivery schedules. We'd be able to ship product only as it is needed, rather than building enormous stocks in both of our facilities. We could try to reduce our own distribution costs, inventory levels, and ultimately our manufacturing costs if we didn't have to respond to the volatile demand patterns of the distributors.
We have always had the mentality that orders were an unchangeable input into our process and therefore that one of the most important capabilities we needed to achieve was flexibility to respond to those inputs. But in reality, demand from the end consumer is the input and I think
In 1987 Brando Vitali, then Barilla's director of logistics, had expressed strong feelings about finding an alternative approach to order fulfillment. At that time, he noted, "Both manufacturers and retailers are suffering from thinning margins; we must find a way to take costs out of our distribution channel without compromising service." Vitali was seen as a visionary whose ideas stretched beyond the day-today details of a logistics organization. He envisioned an approach that would radically change the way in which the logistics organization managed product delivery. In early 1988 Vitali explained his plan:
I envision a simple approach: rather than send product to the distributors according to their internal planning processes, we should look at all of the distributors' shipment data and send only what is needed at the stores-no more, no less. The way we operate now it's nearly impossible to anticipate demand swings, so we end up having to hold a lot of inventory and do a lot of scrambling in our manufacturing and distribution operations to meet distributor demand. And even so, the distributors don't seem to do such a great job servicing their retailers. There are stockouts despite their holding a couple of weeks of inventory.
In my opinion, we could improve operations for ourselves and our customers if we were responsible for creating the delivery schedules. We'd be able to ship product only as it is needed, rather than building enormous stocks in both of our facilities. We could try to reduce our own distribution costs, inventory levels, and ultimately our manufacturing costs if we didn't have to respond to the volatile demand patterns of the distributors.
We have always had the mentality that orders were an unchangeable input into our process and therefore that one of the most important capabilities we needed to achieve was flexibility to respond to those inputs. But in reality, demand from the end consumer is the input and I think