Barilla SpA Case Report
Barilla SpA, an Italian pasta company has grown to be highly successful. The company is founded on quality and the ability to vertically integrate, market and distribute their products to markets across Europe. This case study looks at the fluctuating demands of these markets and what Barilla can do to improve their ability to forecast and meet these demands. They introduced and attempted to implement Just-In-Time-Distribution (JITD), however this was met with resistance from internal and external partners. Further investigation shows that the company did not set the stage for this type of change in the organization and across the supply chain with existing stable systems. In order to adjust to meet the challenge and to ensure competitiveness in the industry, Barilla needs to choose to stick to the JITD, evaluate the supply chain management system to see if JITD will help them achieve their objectives or develop a new strategy. Evaluating their supply chain management system will help the company to determine their next steps. CONTENTS
Impact of the Current Order Pattern
ANALYSIS: Underlying Issues
ISSUE: The Impact the Current Order Pattern
Barilla SpA is needs to find a way to reduce the bull-whip effect of the current order pattern. Fluctuating demand wreaks havoc with the logistics and manufacturing operations of the plants, increases cost and leads to stock-outs and inventory overages. Limited space on shelves means that the corporation needs to examine their ability to meet customer needs while balancing operation details. Efforts to implement a Just-in-Time-Delivery (JITD) system have not been successful due to internal and external environment resistance; however the issue remains. Something needs to be done to improve forecasting and ensure a healthy bottom line. ANALYSIS:
Barilla SpA is a vertically integrated pasta manufacturer based in Italy supplying European countries with dry and fresh products. The company started in 1875 began as a small shop in Parma and has grown to be the largest pasta manufacturer in the world. The success of the corporation is largely due to its positioning its products with a strong brand name and reputation for quality pasta. They operate technologically advanced plants, making a wide range of products.
With technologically advanced plants and production sequences to allow for processes ensuring quality product, Barilla produces 900,000 kilos of pasta daily. All but the fresh products are then distributed to central distribution centers (CDCs), and then to distributors, who in turn ship to grocery stores. The fresh products are shipped to warehouses through independent agents. Approximately 35% of Barilla’s dry goods are shipped to independently owned small shops which held up to two weeks of inventory. The Supermarkets make up 70% of the distribution, holding inventory for up to 12 days. A distributor’s warehouse often holds up to two weeks of inventory. Orders are made on a daily basis by supermarkets; however the distributors would place orders weekly. Delivery on the weekly orders would be made within 10 days. There are no forecasting systems in place for these orders. Barilla promoted their products through a push-strategy to appease buyers who expect volume discounts and trade promotions to meet internal sales targets that included incentives such as free shipping to encourage distributor purchases. Sales staff worked at the store level on promotions, troubleshooting deliveries and assisting with orders.
The idea around Just in Time Delivery (JITD) implemented by Brando Vitali, the Director of Logistics, was to anticipate distributor demand through reports and data, then ship accordingly reducing unpredictable variations in orders and reducing stock-outs. The benefit to this...
References: Hammond, Janice H., Barilla SpA (A), 9-694-046, Harvard Business School Publishing, Boston, 2006
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