Barilla Spa Case Study

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Table of Contents

Executive Summary        2

Issues Identification:        3

Operational Environment        5

Root cause Analysis        6

Alternatives and/or Options        8

Recommendation        10

Implementation        10

Monitor and Control        12

Executive Summary

Barilla SpA, an Italian pasta was founded in 1875 by Pietro Barilla by opening a small shop in Parma Italy; Giorgio Maggiali, the Chief of Barilla’s Logistics Department is undergoing issues with manufacturing and distribution due to the variabilities in demand of the customers. Giorgio Maggiali, the Chief of Barilla’s Logistics Department, wants to apply the Just-In-Time-Distribution, also known as JITD, which was implemented and use by the former Director of Logistics Brando Vitali.  Maggiali’s idea of JITD has not been accomplished well with his customers and distributors as they do not want let go with their traditional method of placing orders. Along with this, there is also opposition to Barilla’s sales and marketing team within the organization.

The following analysis outlines helps to decide how the JITD System could help the distributors and help them increase the profit with decreased cost and inefficiencies. Centralized supply chain strategy will help Barilla SpA to also control the order with their partners and increase the profit margins. With that being said the following recommendation can also help influence the sales and marketing team to work together in making the JITD distribution structure a success.

Issues Identification:

Due to variations in the customer demand, there has been a problem improving the distribution system. With the disapproval of both distributors and the sales and marketing within the organization, it is becoming difficult to start the JITD to improve organizational distribution strategy.

Forecasting issues (long Term)

Distributors were using the outdated system of placing an order depending on the physical inventory sold. Their inventory order depended on the physical counting of inventory rather than modern methods using handheld devices or systems that were more accurate and precise.

Impact:  

Due to lack of consistent order history, it was difficult for Barilla to forecast the inventory production.

Trade Promotions (Short Term)

Barilla SpA ran promotion activities and these periods were called canvass period, these promotional activities ran for 5 weeks in length and had different promotions during each canvass period. During this period the distributor would order and stock up heavily to make use of the discount as a result demand would rise drastically for to produce more product.

Impact:

These fluctuations had a major influence in demand of the product ordered.

No restriction on order (Long term)

Barilla SpA did have and restriction on the order the distributor would make hence they would order as much as they could so that they would save money and in this process.

Impact: 

Barilla had no control on the sales forecast of the distributor, in turn, resulted in cash flow which was uneven, Barilla’s sales representative pushed the distributor to order more inventory so that they would make more money with bonuses.

Free shipping (Short term)

 Barilla would also give volume discounts which included the cost was taken care by Barilla themselves due to the high demand during promotional months.

Impact: 

Barilla was unable to meet the requirements and hence in the interim lost money during this time

Distributor ordering procedure (Long Term)

One of the reasons the distributor ordered in bulk was because of the lead time Barilla took to fulfill an order. When a distributor placed an order it took a total of 10 days for the order to be fulfilled leading to ordering as much as even 5 truckloads even if they dint really require them.

Impact:

Distributors ordered in bulk so that they did not run out of inventory causing fluctuation in the order cycle for Barilla.

Operational Environment

Europe has big completion when it comes to pasta production and distribution especially In Italy due to high demand. Barilla SpA has over 2000 competitors in Europe who are competing for space in supermarkets, shops and market place. Due to the lack of sales forecast, Barilla was at a disadvantage when it came to handling customer arrangements at the marketplace in a professional manner.  This kind of marketing and distribution strategy made it difficult for Barilla to meet the end customer demand.

As barilla sales strategy was that the sales and marketing team were supposed to concentrate on the sales depending on the promotional activities which decided their commission they did not broaden their strategy to larger chains.

There were major fluctuations in demand of the products and due to this barilla has no control over its pricing strategy with changing distributor’s orders.

Root cause Analysis

Barilla SpA was known to be the biggest pasta manufacturer in Europe has a large and intricate distribution network. Their distribution channels are mostly through their central distribution centers (CDCs) and also a chain of distributors which includes Grand Distributors (GDs) which are owned by large supermarket chains. Barilla also works with Organized Distributors (DOs) which are third-party self-regulating suppliers.

Barilla SpA has good sales and personal client contact with the organized distributors but fails to build the same relationship with the grand distributors. The Traditional methods used by most distributors have limited systematic tools and use outdated forecasting systems which do not help Barilla to fulfill the customer order accurately due to lack of proper forecasting . This resulted in the insufficient supply of the product to the Customers leaving them unhappy.

Marketing of Barilla products showed a high degree of quality and superiority. Its sales strategy was completely dependent on promotions. Due to this, the distributors would order a bulk order and stock up their inventory even if it was not required. They also had heavy discounts on a truck load of order. The high demand during the promotion season led to high demand fluctuations during this time other than other normal non-promotional days.