Barilla Spa Case study

Topics: Inventory, Logistics, Supply chain Pages: 6 (2151 words) Published: February 25, 2014

Barilla SpA - Case Study

Table of Contents
I. Executive summary
II. Issue Identification
III. Environmental and Root Case Analysis
IV. Alternatives and Options
V. Recommendations
VI. Implementation
VII. Monitor and Control/ Conclusion

I. Executive Summary
My decision for this case is to implement the Just-In-Time Distribution (JITD) system. Barilla SpA, an Italian pasta manufacturer, is experiencing amplified levels of inefficiencies and rising costs due to variability in demand from its distributors. In order to bring things back into place and to improve margins, Giorgio Magialli, the Director of Logistics at Barilla wants to implement a Just-In-Time Distribution (JITD) system that was proposed by his predecessor Brando Vitali. This system is entirely different from the existing setup and is being opposed by both the distributors and Barilla’s Sales and Marketing Department. In this report we have studied the reasons for this opposition and have suggested strategies. We have given our rationale for the JITD system to work and have proposed recommendations to resolve all existing issues. We think that a centralized supply chain with Barilla having authority of the orders over the distributors will result in better margins for all the partners. We believe that by following these recommendations and implementations, Barilla will succeed in influencing its distributors and sales and marketing personnel to work together and apply the JITD program. This will not only result in better performance in terms of time and money but also promote trust and good relations among all the partners in the supply chain.

II. Issue Identification

Pietro Barilla founded Barilla in 1875 as a small shop in Parma, Italy. In 1990, Barilla SpA is the largest Pasta manufacturer in the world. It has a 35% market share in Italy and a 22% market share in Europe. In addition, Barilla divides its product line into “dry” and “fresh” product categories for which dry products represent 75% of Barilla’s sales. They include dry pastas (macaroni, spaghetti, fusilli, etc.) and also bread, cookies, biscuits, rusks, sauces, breadsticks, flour and dry toasts. Barilla has a very complex distribution network consisting of Grand Distributors (owned by large Supermarket chains), Organized Distributors (independent third party distributors) in addition to its own depots. Vitali’s JITD proposal focuses exclusively on dry products sold through distributors. Moreover, even though Barilla is the most successful pasta manufacturer in the world, they still face a few great issues. Ever since 1980, Barilla was increasingly dealing with demand fluctuations since their distributors order patterns often swung widely from week to week. Barilla also deals with high pressures of manufacturing in terms of production lead-time. They have high inventory carrying and manufacturing costs due to operational inefficiencies. In addition, they have unacceptable cycle systems due to inadequate product availability. Finally, their last issue is the distributors’ inability to carry a large number of SKU’s.

III. Environmental and Root Case Analysis
For instance, we have to begin by stating the reasons for the extreme demand fluctuation Barilla has been going through for decades now. To begin, Barilla brands are heavily advertised. Its marketing and sales strategy is based upon advertising and promotions. Since Pasta is very important for Italians, Barilla’s sales strategy relies on the use of trade promotions to push product into the grocery distribution network. Subsequently, this is the first reason for demand fluctuation because it results in excessive promotional activities. Barilla also offers volume discounts; paying for transportation to distributors and offering incentives of 2% to 3% for orders in full truck-load quantities which was another reason for demand fluctuation. Accordingly, most...
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