Long Summary for Barilla Spa (a)

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Giorgio Maggiali: Current director of logistics
oAppointed in 1988 tried to make way for an innovative idea proposed by Brando Vitali •Brando Vitali: Director of logistics before Giorgio Maggiali oProposed Just-in-Time distribution (JITD)
Modeled after the popular Just-in-time manufacturing concept oRather than delivering product to distributors when ordered, his logistics plan would specify the “appropriate” delivery quantities These quantities would more effectively meet end-consumer’s needs and more evenly distribute WORKLOAD on the manufacturing and logistics systems

-Maggiali tried for 2 years to implement the idea but little progress has been made oCustomers unwilling to give up authority in placing orders when desired oSome even reluctant to provide sales data to help assist the company with making decisions and improvements on forecast/delivery/timing oINTERNAL resistance from sales and marketing team

Saw the idea as infeasible and dangerous

Background:
-Founded in 1875
-In 1968 the company began construction of a 1.25 million m2 pasta plant -Cost drove owners into debt and were forced to sell to W.R. Gracce, Inc. oIn 1979 Grace sold the company back to the original owner (Pietro Barilla) -Barilla had a successful return

-ANNUAL GROWTH RATE OVER 21%
-In 1990 Barilla made up
o35% of pasta sold in Italy
32% Barilla brand
3% market share Voiello & Braibanti brand
o22% in Europe
oBarilla held 29% share of Italian bakery-products market
-In 1990 Barilla organized into 7 divisions
o3 pasta divisions
Barilla
Voiello
Braibanti
oBakery Products Division
Manufacturing medium to long shelf-life bakery products
oCatering Division
Distributing cakes and frozen crossants to bars and pastry shope oInternational Division
SEE exhibits 2 & 3 to show organization

Industry Background:
-Per capita pasta in Italy averages 18 kilos/year
-Some pasta experienced seasonality throughout the year
-Late 1980’s pasta market was growing less than 1%/year
-By 1990 pasta market was estimated at 3.5 trillion lire
-PASTA EXPORTS experienced record growth, expected to rise as much as 20-25%/year in early 1990’s

Channels of Distribution:
-Divided product line
o“Dry”- 75% of sales
Dry pasta, longer shelf life items, cookies, biscuits, flour, bread, etc. LONG SHELF LIFE= 18-24 months
MEDIUM SHELF LIDE= 10-12 weeks
Comprised of ~ 800 SKUs.
Pasta came in over 200 different shapes/sizes
Most popular offered in variety of package sizes
o“Fresh”-25% of sales
Fresh pasta= 21-day shelf life
Bread= 1-day shelf life
-Most products shipped to 1 of 2 distribution centers (CDCs) oNORTHERN CDC (in Pedrignano)
oSOUTHERN CDC (outskirts of Naples)
-Fresh products moved quickly
oOnly 3 days worth of fresh product inventory usually held in each CDC -Dry products more heavily stocked in CDCs
oEach CDC held about a month’s worth of dry inventory
-BREAD DOES NOT FLOW THROUGH CDCs

-Fresh Product distribution
oPurchased from the 2 CDCs by independent agents (concessionari) Agents then channeled product through 70 regional warehouses located throughout Italy EACH WAREHOUSE HELD ABOUT 3 DAYS OF FRESH PRODUCT IN INVENTORY -Dry Product Distribution

o~2/3 of dry product destined for supermarkets
First shipped to one of the CDCs
Then purchased by distributors who shipped product to supermarkets oJITD PROPOSAL FOCUSED SOLELY ON DRY PRODUCTS SOLD THROUGH DISTRIBUTORS The remainder of the dry products was distributed through 18 Barilla-owned small warehouses, MOSTLY TO SMALL SHOPS -BARILLA PRODUCTS DISTRIBUTED THROUGH 3 TYPES OF RETAIL OUTLETS 1. SMALL INDEPENDENT GROCERS

2. SUPERMARKET CHAINS
3. INDEPENDENT SUPERMARKETS
ESTIMATED THAT BARILLA PRODUCTS OFFERED IN 100,000 RETAIL OUTLETS IN ITALY ALONE 1.SMALL INDEPENDENT SHOPS
-Small shops more prevalent than in other countries
-In 1980’s Italy supported small...
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