Barilla was the largest pasta manufacturer in the world, making 35% of all pasta sold in Italy and 22% of all pasta sold in Europe. In addition, Barilla held a 29% share of the Italian bakery-products market. Competing in a crowded field of over 2,000 Italian pasta manufacturers and the Italian pasta market as a whole was relatively flat, growing less than 1% per year. Per capita pasta consumption in Italy averaged nearly 18 kilos per year and relatively consistent throughout the year. A few pasta types experienced some seasonality.
Variation in distributor’s order pattern have caused severe operational inefficiencies and cost penalties for Barilla. The extreme variability in orders that Barilla receives is surprising considering the distribution of demand for pasta in Italy. Indeed, while variability in aggregate demand for pasta is quite small, orders placed by the distributors have a huge variability.
Though Barilla products are heavily advertised but Sales and Marketing strategies are pushing more product down the supply chain. Trade promotions, sales incentive system, lack of input information of demand forecasting, long lead time (10- 14 days) to full fill the order etc. made the distributor’s order pattern so volatile.
Our logistics department is trying to implement JITD, encountered by huge resistance from internal and external sources.
As per our business model, to solve this problem we should not increase Inventory Level or break the Best Production Schedule for our factories. Only option left here is to modify our sales and marketing tactics and involve the whole company to implement JITD by making strategic partnership with our clients (DCs).
VP sales and marketing will be the head the JITD implementation team, under his direction all other departments will work together.
After successful implementation we will be able to bring down Inventory Level, Ordering Variance, Stock out rate and Order Fulfillment Lead time.
I am confident that our customers, employees and stakeholders will see the benefits.
Table of Content:
Process Elements/ Table of Content
Table of Content2
Issues with Impact Analysis
Environmental and Root Cause Analysis4- 6
Alternatives and/ or Options
List of Recommendations
Recommendations Implementation Plan9
Monitor and Control
Monitor and Control10
Issues with Impact Analysis:
Barilla is experiencing bullwhip effect and fail to establish JITD for it’s dry product distribution through distributers. For example, orders from Cortese Northwest DC to Pedrignano CDC: Example:week 12 = 850 Quintals;
Week 13 = 175 Quintals;
Week 14 = 90 Quintals;
Week 15 = 30 Quintals;
Week 16 = 180 Quintals;
Week 17 = 770 Quintals;
Week 18 = 100 Quintals; Where average order quantity is 300 quintals and standard deviation is 227 but end user’s demand fluctuation is negligible.
Barilla’s distribution channel holding a total of 8 week worth of inventories (CDCs hold 4 weeks, distributors hold weeks and shops keep another 2 week worth of inventories). Still DCs facing a very high rate of stock outs (5- 8%).
Barilla’s logistic team faced huge resistance when trying to implement JITD from both internal sales representatives and external customers.
Barilla follows the best production sequence and factories are not flexible for quick response to the customer demand.
Sales and Marketing strategies such as sales promotion, volume discount, transportation discount etc. are working against the distribution system (JITD).
Environmental and Root Cause Analysis:...