BARILLA Spa Case study

Topics: Inventory, Customer service, Sales Pages: 5 (1406 words) Published: January 23, 2014

CASE STUDY

BARILLA SpA (A)
Report on Supply Chain Inventory Management

TABLE OF CONTENTS

Executive Summary3
Issue Identification4
Issue Identification & Root Cause Analysis5
Alternatives and options7
Recommendations9
Implementation10
Monitor And Control 11

EXECUTIVE SUMMARY

Barilla SpA (Barilla), is an Italian largest pasta manufacturer in the world manufacturer that sells pasta to retailers largely through third-party distributors. Barilla has been facing huge variability in demand which is straining the manufacturing and distribution network of the company. This fluctuation in demand, are forcing the CDCs to maintain a higher level of inventory. The proposed new system, Just-In-Time Distribution (JITD), is the solution suggested to resolve the demand fluctuation issues and lower costs. This new process would move forecasting and shipment allocation responsibilities to Barilla rather than allowing each distributor/retailer place the order amounts separately. This approach has both internal and external complications as there is much resistance from both within the company and from the suppliers and distributors. Implementing the JITD is a good idea for a number of reasons. This will streamline the information flow, reduce uncertainty in demand , reduce the lead time, and decrease both finished and raw material inventory, thus making the system efficient and reducing the overall cost. A good plan would be for Barilla to start by running a pilot test within its own depot then with 1 or 2 distributors and use the results of the test regarding the cost savings and improvement in supply chain efficiency to convince other distributors about how beneficiary will be to all by implementing JITD.

ISSUE IDENTIFICATION
Immediate issue:
The main issue in this case is the fluctuating demand imposed on Barilla’s manufacturing and distribution system. Once this is brought under control, many other problems will be solved. These following are some of the causes of this fluctuating demand that must be addressed: Demand fluctuations (Bullwhip effect)

Cost of having to hold high inventory in order to meet distributor’s order Transportation cost
Barilla’s sales strategy relied heavily on the use of promotions Long Lead time
Customer service.
Higher overall warehouse and transportation costs
Sales Representatives Incentives based on the amount of the products that they sold to the distributors

ISSUE IDENTIFICATION & ROOT CAUSE
Demand fluctuations (Bullwhip effect)
As the 1980s progressed, Barilla has been facing huge variability in demand essentially affecting dry products, such extreme demand fluctuation strained the manufacturing and distribution network of the company (see Exhibit 12) Cost of having to hold high inventory

This fluctuation in demand and the difficulty of the manufacturing process to deal with fast-track orders are forcing the CDCs to maintain a higher level of inventory in order to meet distributor’s order. “ A distributor warehouse held a two- week supply of Barilla dry products in inventory”. (see Exhibit 13) Reduce the number of Skus

Transportation cost
The greater number of trucks that it required in periods of high demand increased its Transportation costs. Barilla’s sales strategy relied heavily on the use of promotions In the form of price, transportation and volume discounts

Long Lead time
Barilla supplied its distributors between 8 and 14 days after it received their orders, the average lead-time being 10 days. Customer service
Barilla has no visibility when it comes to plan and forecast in order to meet the customer demand. Higher overall warehouse and transportation costs
The fluctuation demand may lead to overtime shifts in order to meet the demand, higher inventory of raw materials and frequent capacity adjustments, as well as higher...
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