The Bullwhip Effect:

One of the main issues at Barilla is the Bullwhip effect. The Bullwhip effect is a
phenomenon in a forecast driven distribution channels, which means that the orders sent to the
Manufacturer has a great variance than those received by the distributors, which have a great
variance than those received from retailers. All of this finally causing build up inventory and
putting the whole supply chain especially the production and the logistics under a tremendous
amount of pressure.
The main factors contributing to the BWE are Demand forecasting, which amplify the
Quantity requested from each step of the chain, as every level do his own forecasting without
communication or real Point of sale view. Second factor is the lead time, which create
uncertainty and hence a tendency for hedging. Finally, is the promotions which creates peaks
in the demand and in the case of Barilla, we can argue that its a buying forward strategy,
especially for the long shelf life products.

Actually, this can be shown from Exhibit 12 in the case, as we can see that mean value
of the orders is 300 Quintals, While the standard deviation is 227, which is pretty close the
mean.

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