Barilla Spa Case Analysis

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Barilla SpA (A) Case Analysis

Teona Omiadze, Nino Tskhvariashvili, Mari Zaridze

School of Economics, Business and Administration of the University of Georgia

Instructor: Natia Zedgenidze

Tbilisi
2011
Table of Contents
Executive Summary……………………………………………………………….3 Introduction………………………………………………………………………..4 Problem Description……………………………………………………………….5 External and Internal Resistances to JITD program……………………………….9 Solution…………………………………………………………………………....11 Recommendations to the solution …. …….………………………………………12 Other recommendations…………………………………………………………...15 Customer response to the solution…………………………………………………16 Conclusion………………………………………………………………………....21

Executive Summary
Barilla SpA, an Italian pasta manufacturer is experiencing problems in manufacturing and distribution systems caused by fluctuations in demand. To eliminate these difficulties Giorgio Maggiali, the Chief of Barilla’s Logistics Department, has been trying to implement the Just-In-Time-Distribution, further referred as JITD, system proposed by his predecessor Brando Vitali. JITD can be called a remake of popular “Just-In-Time” manufacturing concept. Although Maggiali has been trying to convince his consumers that the JITD would definitely work, he has not made much progress. The program was met with significant resistance by the distributors and Barilla’s own Sales and Marketing organizations. Now Maggiali is looking for possible solutions of the problem. In the following analysis we will provide recommendations, which will help Barilla to successfully implement the JITD system and thus decrease its costs, increase efficiencies and its profits.

Introduction
Barilla SpA was founded in 1975 by Pietro Barilla. From a small shop in Palma, Italy, it became a large, vertically integrated corporation with mills, plants and factories located throughout the Italy. Barilla’s success highly depended on its’ quality of product and innovative marketing programs, which created strong brand name. The company was sold to Grace Inc. in 1971, because the building of a huge plant in Perdignano drove the owners “deeply into debt”. Grace brought additional capital investment and professional management practice into the company. In 1979, Grace sold the plant back to Pietro Barilla. During the 80s Barilla had an annual growth rate of over 21%. In 1990 Barilla was making 35% of all pasta sold in Italy and 22% sold in Europe. It held significant shares in pasta and bakery-products markets in northern and southern Italy. By this period Barilla distributed dry products including pasta and some of the bakery products, such as cookies, biscuits, etc. and fresh products including fresh pasta and bread. Barilla had a carefully chosen production schedule that minimized the changeover costs and maximized the quality of the product. Barilla’s plants were also specialized by the type of pasta they produced according to the composition of the pasta. Barilla distributed its product though three types of retail outlets: small independent shops, supermarket chains and independent supermarkets. Small independent shops were serviced by Barilla-run depots which stored approximately 35% of dry products. The rest 65% was shipped to Barilla’s Central Distribution Centers (CDCs) from which 90% was shipped to Grande Distribuzione serving Chain Supermarkets and Distribucione Organizzata serving Independent Supermarkets. The rest 10% was shipped to Barilla-run depots. Barilla-run depots also provided less than truck-load quantities to Chain and Independent Supermarkets. Barilla used trade promotions to push the products thought the supply chain. It divided each year into 10 to 12 “canvass” periods, with price discounts ranging from 1.4% to 10%; volume discounts consisted of carton discounts and the transportation discounts consisted of free shipping to the distributors. The company also designed special promotional programs, which meant that Barilla’s distributor could “buy...
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