BARILLA SpA CASE ANAYLSIS
XUELAI (ANDY) HU
Environmental and Root Cause Analysis
Alternatives or Options
Recommendations and Implementation
Monitor and Control
Barilla SpA, a large vertical integrated corporation that makes pasta and bread products is experiencing rising costs due to extreme variability in demand from its distributors. In order to improve company’s sale margins, Giorgio Magialli, the Director of Logistics at Barilla suggests to implement a Just-In-Time Distribution (JITD) system. The JITD system is a continuous replenishment distribution strategy, which the responsibility for determining inventory quantities shifts from the distributors to Barilla based upon its demand forecasts. This system is entirely different from the existing distribution system and is rejected by Barilla’s internal sales and marketing department and the external distributors. In this case analysis, the main issues: whether JITD system is feasible for Barilla and how it can be implemented effectively is discussed. Some other issues such as difficult to obtain sales data from distributors, inefficient forecasting techniques, highly complex manufacturing processes, large selections of SKUs, and long lead time to full fill the orders that have made the distributor’s order pattern volatile and have made JITD system difficult to apply are also discussed in the case. After identifying the issues and analyzing their root causes, alternatives, recommendations and implementations are provided in this case. By following the recommendations and implementations that have been provided, all existing issues can be resolved. As a conclusion, JITD system, a centralized supply chain with Barilla controlling the orders will result in better profits for all parties. JITD system should be implemented.
The main issue in this case is how to effectively implement JITD system, which Barilla analyses, forecasts and delivers products to the distributors by getting support from the entire corporation and requiring the distributors to share their sales data with Barilla. This in turn will decrease Barilla’s distribution costs, inventory levels, and ultimately makes the entire operation more effective.
The following lists some other issues Barilla facing when the company tries to implement JITD system: 1. Data sharing: distributors are not willing to lose their control over managing their own inventory by sharing data with Barilla. 2. Forecast techniques: Barilla does not have enough experiences and sophisticated techniques to forecast demand from distributors and retailers. 3. Manufacturing process: Barilla has a long manufacturing process for its dry products, which makes the company more difficult to quickly react to the unexpected demand from the distributors. 4. SKUs: Barilla has an enormous amount of different packaged SKUs for its dry products, which makes the business complex to operate. 5. Lead-time: Barilla has a long lead-time for distributors to order the right amount of products. Environmental and Root Cause Analysis
In the late 1980´s, the Italian pasta market as a whole was practically a mature industry with growth less than 1% per year. The higher growth trend was through international expansion from Italy to other European countries. By the year 1990 Barilla was the largest pasta manufacturer in the world, with 35% of all pasta sold in Italy and 22% sold in Europe. Starting from 1980s, Barilla felt the effects of fluctuating demand, which strained the manufacturing and distribution network of the company. This variability in demand, week forecast techniques, large selection of SKUs, long order lead time, along with the difficulty of the manufacturing process to deal with fast-track orders were forcing the company to maintain a higher level of...
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