Barilla Spa (a)

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BARILLA SpA (A)

Table of Contents
Part One: Executive Summary3
Part Two: Immediate Issue4
Part Three: Systemic Issues4
Part Four: Qualitative Analysis5
Part Five: Alternatives6
Part Six: Recommendation8
Part Seven: Recommendations Implementation Plan9
Part Eight: Monitor and Control10

Part One: Executive Summary

In order to respond to extreme demand variability and incidents of high stock out rates Barilla is currently applying pressure to both its’ manufacturing and logistics departments to restock distribution centres as quickly as possible. This is resulting in high distribution costs and a reduction in overall profits. In the long term I am recommending that Barilla SpA implement a Just in Time Distribution (JITD) system to reduce excess inventory and eliminate stock outs at the distributor to market level of the distribution chain. The new system will include a forecasting and planning system based on information provided by the distributors on a day-to-day basis. The JITD will reduce inventory to acceptable levels and will reduce inventory carrying cots. It will also flatten demand resulting in cost savings at the manufacturing and shipping levels. It will also provide an opportunity for new sales promotion types and levels. Initially the new system will be implemented on a trial basis and at the end of the trial with successful performance indicated; the system will be presented to internal departments as well as distributors. This report will be used as a basis for discussion in our production meeting at the end of the week. Giorgio Maggiali

Director of Logistics
Barilla SpA (A)
December 4, 2012
Part Two: Immediate Issue
Barilla SpA is experiencing difficulty in the manufacturing and logistics sectors of their operation because of an extreme variability in demand of their pasta products. Though demand for pasta in Italy is flat Barilla has been experiencing sudden spikes in demand for varying types of pasta from different areas. Because of rigid manufacturing requirements and lengthy lead times from placement of order to delivery, stock outs have been experienced between the distributors and retail stores. Part Three: Systemic Issues

Sales Operations:
Nature: Tactical Timing: Short Term Distributors are encouraged to purchase product based on discounts rather than product demand at their customer’s locations. The sales representatives are given specific sales targets to meet and are conceivably focusing on the discounted products because they are an easier sell to the distributors. Distribution:

Nature: Tactical Timing: Short Term and Long Term
Lead time from placement of order to delivery ranges anywhere from eight days to fourteen days, though the average is ten calendar days. This includes production and shipment of the product. Most distributors do not rely on forecasting systems to place their orders; they simply count stock on a cycle and place orders to refill to the previous level. There is no analysis based on product type, time of year etc. Stock outs are happening between the distributors and the stores; the lead time to fill the product gap is too long. Manufacturing Process:

Nature: Strategic Timing: Short Term and Long Term The pasta production process (particular sizes and types of pasta require fixed heat and humidity settings in the kiln) makes it difficult to replace a specific type of pasta that has sold out at a vendor’s store because of unusually high demand. The production process cannot be changed or sped up without risking a decline in quality of the product. Part Four: Qualitative Analysis

Barilla SpA is the largest pasta producer in the world. They offer both dry and fresh pasta as well as a variety of other products including cookies, cakes and breads. Currently, the demand for pasta in Italy is flat with only an approximate increase in demand of 1% per year. Barilla competes with other pasta...
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