MICHAEL SMURFIT GRADUATE BUSINESS SCHOOL
UNIVERSITY COLLEGE DUBLIN
Barilla Spa (A) Case Memo
Supply Chain Analytics: BMGT 43840
Dr. Vincent Hargaden
“I declare that the material contained in this assignment is the end result of my own work and that due Acknowledgement has been given in the bibliography to ALL sources, be they printed, electronic or personal”
Barilla was originally established by Pietro Barilla in the year 1877 as a pasta and bread shop in Parma, Italy . Barilla was a clear brand leader in the Italian pasta market with 35% market and 22% market share in Europe(2). In addition to the manufacturing of pasta they also produce bread, cookies, sauces etc. In their channel of distribution, the products are divided in to two categories as dry and fresh products based on their products life cycle. Fresh products have 21 day shelf lives where as dry products are further divided in to two types as long (18 to 24 months) or medium (10 to 12 weeks) shelf lives. Barilla consists of a highly complex distribution network such as Grand Distributors (super market chains), Organised Distributors (independent super markets) and their own depots (2). Moreover, Barilla has been evolved in to vertically integrated business model by increasing the number flour mills, pasta plants and bakery product factories throughout Europe. Additionally, Barilla holds a strong brand image in Italy because they were the largest pasta producers in Italy moreover their marketing strategy fully depends up on combination of advertising and promotion discounts. Furthermore, Barilla was using the well known athletes and celebrities to advertise and promote their products.
As 1980 progressed Barilla was more affected by demand fluctuation from their downstream distributors. The demand fluctuation was due to inefficient supply chain and that makes the manufacturing department inaccurate in decision making (3). To solve this Brando Vitali director of logistics in Barilla, clearly indentified that demand fluctuation from their distributors was due to the lack of forecasting in their supply chain. Lack of demand data sharing causes the lack of accuracy in forecasting and this leads to lot of inventory, variation in demand and it is nothing but the Bullwhip effect(4). To overcome Bullwhip effect, he had proposed a Just-In-Time Distribution (JITD) method. This method requires the customers of Barilla to share their point of sale (POS) and inventory data with them. However, this method is totally new from their traditional method so some of the customers were not interested on JITD to provide the demand data and inventory level. On the other hand, sales and marketing department of Barilla saw the concept as dangerous because they felt that their responsibilities would be diminished and the idea was simple unworkable(4). So, they completely opposed in and outside the organisation and makes the JITD ineffective at that time. In 1998, Giorgio Maggiali was appointed as a director of Logistics for Barilla. Due to the growing pressure of demand fluctuation he was trying to implement the idea of Vitali called JITD (4) concept. Conversely, data sharing from their customers and negative feedback from their sales and marketing department remains the same. Now, Maggiali is trying to overcome these factors to implement the JITD method.
Maggiali initial plan was to control the demand fluctuation in their market because it affects the total supply chain and that leads to accuracy in forecasting. Therefore, fluctuating demand leads to variation in order point between the retailer, wholesalers and distributors and it makes lot of inventory between them. Thus Maggiali identified the variation in order point that moves in to the supply chain was referred as Bullwhip effect. The variation in demand which causes variation in order point and it moves upward in the supply...
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