Barills Spa (a) Report on Supply Chain Management Issues

Barilla Spa (A)

Report on Supply Chain Management Issues

Table of Contents

Executive Summary

Issue Identification

Root Case Analysis

Alternatives and Options

Recommendations

Implementation

Monitor and Control

Exhibits

Executive Summary

Giorgio Maggiali, director of logistics of Barilla SpA stated the the growing burden that demand fluctuations imposed on the company's manufacturing and distribution system. The solution was proposed as Just In Time Distribution Program. Due to specific Barilla's supply chain system it is not quite simple. Barilla needs to improve their own forecasting system and need to develop a set of decision rules.

They need to re-group and decide where to go with JITD. For this purpose the main issues where identified and and recommendations were made. The implementation plan is filled with immediate and short run activities.

Barilla enjoys a strong brand image in Italy. It was driven by success as the highest quality pasta for every Italian family - “Where is Barilla, there is a home”. Timely distribution of quality products is a strategic mission Barilla SpA and the recommendations made can be used to reflect and strengthen this mission.

Issue Identification

The following are the list of issues that must be addressed:

• Too many different types of distribution centres
• Long inventory time
• Small product variety in stores
• No minimum or maximum  order quantities
• Long lead time
• Root Case Analysis
• Too many different types of distribution centres

Most Barilla products were shipped from the plants to one of two Barilla central distribution centres (CDCs) from where they were distributed through three types of retail outlets: small independent grocers, supermarket chains and independent supermarkets. Approximately 35% of Barilla's dry products (30% in the north of Italy and 40% in the south) were distributed from Barilla's internally-owned regional warehouses to small independent shops. The remaining dry products were distributed through outside distributors to supermarkets – 70% to supermarket chains and 30% to independent supermarkets. Dry products destined for a supermarket chain were distributed through the chain's own distribution organization (Large distributor) – GD. Those destined for an independent supermarket were channeled through a distributor (Organized Distributor) – DO.

•             Long inventory time

Each CDC held about a month's worth of dry product inventory. Small independent shops typically held over 2 weeks of inventory at the store level. Supermarkets typically held from 10 to twelve days of dry-grocery inventory within the stores. A distributor's warehouse typically held a two-week supply of Barilla dry products in inventory.

Small product variety in stores

Although Barilla offered many pasta products in multiple package types, most retailers would carry the product in inly one (and most two) packaging options. Distributors typically carried from 7,000 to 10,000 SKUs in total.

No minimum or maximum  order quantities

Distributors' sales volumes varied; small distributors might order only one truckload per week whereas the largest warranted deliveries of as many as five truckloads per week.

Long lead time

Most distributors – Gds and Dos checked their inventory levels and placed orders with Barilla once per week. Barilla product wold then been shipped to the distributor over the course of the week that started eight days after the order was placed and ended fourteen days after the order was placed – the average lead time was ten calendar days.

• Alternatives and Options

• Recommendations
• The following is a summary of my recommendations:
• 1. Set one central Dry Products Distribution Centre (DPDC) which will sell products to all types of retail outlets: small independent grocers, supermarket chains, and independent supermarkets. It will have few departments to deal with different types of outlets.
• 2. Shorten inventory time in distribution centre and in the stores accordingly due to more often orders and less lead time.
• 3. With every order send new types of products to try and see how they go, imply discount system for the try products.
• 4. Set minimum order quantity for distribution centre. Continue to use volume incentives of 2% to 3% for orders in full truckloads depending on quantity.
• 5. Shorten lead time to 3 days.

Implementation