Giorgio Maggiali is the director of Logistics for Barilla and was appointed to this position when his predecessor Brando Vitati was promoted. Vitati had proposed a Just in Time Delivery (JITD) model for Barilla. Vitati has commented on the “thinning margins” the industry was experiencing and the need to “take costs out of our distribution channel without compromising service”. He felt operations could be improved if Barilla was responsible for determining the quantities and delivery schedules to their customers. Giorgio is frustrated with the opposition and resulting lack of progress in implementing this new process. My decision upon reviewing the information provided in the case is to recommend that Barilla continue to implement JITD focusing on dry goods shipped to distributors. Maggiali must first convince Barilla’s employees (Sales especially) that the JITD system will be a success before influencing its distributors. Sales personnel and distributors will have to work together to implement the JITD program. The system will require the distributors to share their sales data with Barilla, who would then forecast and deliver appropriate amounts of products to the distributors at the right time in order to effectively meet demand. This will not only result in better performance in terms of time and money but also promote trust and good relations among all the partners in the supply chain. Barilla made its mark in the world by taking a commodity and selling it in a very different way. They now need to apply this innovative thinking again and use the JITD system and reduce the bullwhip effect in its supply chain.
Barilla SpA is a large, vertically integrated Italian pasta manufacturer and in 1990, was the largest pasta manufacturer in the world, making 35% of all pasta sold in Italy and 22% of all pasta sold in Europe. Barilla is organized into seven divisions: three pasta divisions named Barilla, Voiello and Braibanti, the Bakery products division, the Fresh Bread division, the Catering division and the International division. Barilla has three production divisions and two distribution channels based on the shelf life of the product. Distribution is also further divided between two central distribution centers. Corporate headquarters are located next to the plant in Pedrignano. Barilla’s pasta plants are specified to the type of pasta to be made. The main distinction is what the pasta is made of, as different types of pasta use a different combination of flours and other ingredients. There is also a further distinction made within these families of products based on the size and shape of the pasta. Temperature and humidity have to be very tightly controlled and there is a specific production sequence that must be followed. Barilla has three main customer types, larger supermarkets chains, large independent supermarkets and small retail shops. How the product is distributed is influenced by customer type and expiration date of the product being shipped. Fresh product is distributed through brokers directly but all other products flow through the Central Distribution Centers (CDC). Barilla is increasingly feeling the effects of fluctuating demand as orders for Barilla dry products often swing wildly from week to week. This demand variability is straining Barilla’s manufacturing and logistics. Plants are so tightly specified to the types of pasta they can produce, that it makes the production facilities inflexible and unable to respond to these fluctuations. Environmental and Root Cause Analysis
Barilla has a very complex distribution system, an inflexible production process and many SKU’s it has to manage. It cannot tolerate the huge swings in demand and the resulting overstocks or shortages that results. It must address this demand variation. There are many “bullwhip effect” issues contributing to the demand variation that need to be addressed: 1. Marketing...