Barilla Case Project

Topics: Logistics, Inventory, Supply chain management Pages: 5 (1683 words) Published: January 21, 2013
Executive Summary
Barilla SpA is a world largest past manufacturer has experienced a phenomenal growth. The company had pasta share of 35% in Italy and 22% in Europe, plus 29% in Italian bakery product market(page 2 case) However, it began taken a tall on Barilla’s “manufacturing and distribution system” (page 1 Case). Without having proper data and control over the orders the company experienced wide fluctuations in demand. As a result Barilla experienced bullwhip effect where demand forecast was not centralized but instead done by separate stores and distribution centers. Giorgio Maggiali took over Brando Vitali as a director of logistics. He followed his predecessor’s vision to create Just in Time Distribution system. However, after two years of trying, little progress was made. Maggiali had met resistance internally and externally. Internally sales and marketing departments were completely opposing new concept. Externally, distributors did not want to relinquish power over managing their own inventory. Although “total pasta consumption was relatively consistent throughout the year”, Barilla experienced extreme fluctuations in orders from week to week. (page 2 and exhibit 13). Barilla had many distributors which used “internal planning process,” and was not consistent across the board. There lack of sophisticated forecasting system and no limit on order quantity contributed to fluctuating demand. In addition there were other factors such as too many promotional activities throughout the year. As a result this caused strain and pressure on manufacturing, lead time, perishability of the product, high operating costs due to inefficiencies, unacceptable cycle service level, and inability for distributors to carry many of Barilla’s SKU’s. Director of Logistics was on the right track to implement JITD system. At first he needed to convince internal and external take holders that by implementing the new system and brining forecasting internally will benefit everyone. Issues Identification

Barilla faced extreme fluctuations on a weekly basis that put significant strain on its Supply Chain. Variance in demand put pressure on manufacturing such as production lead time and perishibility of the product. The company was not able to forecast demand and relied on its distribution centers to analyze and submit orders which led to spikes in demand. This in term led to bullwhip effect and caused high inventory and manufacturing costs. The key was to implement sophisticated forecasting techniques internally by taken away order forecasting from distributors. However, Internal and external opposition opposed brining JITD system which included in house forecasting. Internally, Sales and Marketing department were opposed to change. They feared that “their responsibilities would be diminished” if new concepts implemented (Case page 7). They have extensive promotional campaign 10 to 12 times a year, as a result did not want to change existing system because they were afraid that they will not be able to meet their targets. Sales team is obviously under impression that revenue generated by sales alone. They did not understand other factors that affect companies bottom line. Externally customers did not trust and did not want to share information. Almost none distributors wanted to share historical and current data. Customers did not want to relinquish control over forecasting and ordering. In addition, they did not want to be relied extensively on Barilla. Just like internally Sales Reps opposed to new system externally distributors Sales Reps were also opposed. All of this combined with unorganized distribution system. Inaccurate and slow information flow resulted in problems with distribution. One example was ten days lead time. Barilla’s information flows from retailers(downstream) to distributors(upstream) which caused bullwhip effect. Environmental and Root Cause Analysis

One of the main issues for Barilla was...
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