...Executive Summary In 1875, Pietro Barilla opened a small shop and laboratory where they produced, and sold pasta and breads. In 1990, Barilla was the largest pasta manufacturer in the world, making 35% of all pasta sold in Italy and 22% of all pasta sold in Europe. Since Pietro’s grandsons took over, Pietro and Gianni, Barilla evolved into a vertically integrated company with flour mills, pasta plants and baking products. This case study outlines Giorgio Maggiali’s (Director and Logistics) concern of the growing burden that demand fluctuations imposed on the company’s manufacturing and distribution system. Currently, Barilla’s dry product orders range greatly from week to week, causing an increase on stock outs. Given the information provided in this case, my executive decision is to implement the idea of Just-In Time Distribution (JITD) strategy, which is modeled after the widely popular “Just-In-Time” manufacturing concept. This strategy will allow Barilla to forecast and maintain inventory levels by shipping product to the distributors based on the customer’s internal planning processes and forecast. Unfortunately, the customers are showing unfavorable responses to this new strategy. Barilla needs to convince the distributors that this strategy will reduce the average delivery time. The JITD model should be considered a selling tool offering customers additional service without any extra cost. The JITD proposal will be a help to all parties; from manufacturer, to end customer...
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...CASE: Barilla SpA (A) I.Overview of the Case Barilla SpA (Barilla) is a renounced Italian manufacturer that sells several brands of pasta to retailers mainly through third-party distributors. The company was founded in 1875 by Pietro Barilla in Parma, Italy, on Via Vittorio Emanuele. The company passed through the hands of generations from Pietro to his son Ricardo, then to his sons, Pietro and Gianni. The sons “drove the Barillas deeply into debt”; in 1971 the company was sold to a U.S. firm, W.R. Grace, Inc. (Book, 144). Not able to see a profit with their investment, Grace sold the company back to Pietro Barilla. During the 1980s, Barilla relished in an “annual growth rate of 21 percent” with 35 percent being sold in Italy and 22 percent sold Europe. Barilla progressed into a highly vertically integrated company operating flour mills, pasta plants and fresh bread plants as well as distribution warehouses. With growth, there are falls… Barilla was experiencing problems in the manufacturing and distribution systems caused by fluctuations in demand. Giorgio Maggiali, Director of Logistics became extremely frustration with the situation. Mr. Maggiali tried to implement the just-in-time distribution (JITD), which was proposed earlier by his predecessor, Brando Vitali. It was an up-hill battle because “Barilla’s customers were simply unwilling to give up their authority to place orders as they pleased” and did not share their sales data which would have assisted...
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...CASE STUDY BARILLA SpA (A) TABLE OF CONTENTS PAGE 1 COVER PAGE PAGE 2 TABLE OF CONTENTS PAGE 3 EXECUTIVE SUMMARY PAGE 4 ISSUE IDENTIFICATION – IMMEDIATE ISSUE PAGE 4 ISSUE IDENTIFICATION – SYSTEMIC ISSUES PAGE 5 ISSUE IDENTIFICATION – SYSTEMIC ISSUES CONTINUED PAGE 6 ENVIRONMENTAL & ROOT CAUSE ANALYSIS PAGE 6 ALTERNATIVES AND / OR OPTIONS PAGE 7 ALTERNATIVE AND / OR OPTIONS (CONTINUED) PAGE 8 RECOMMENDATIONS & IMPLEMENTATION PAGE 9 IMPLEMENTATION PLAN PAGE 9 MONTIOR AND CONTROL PAGE 10 MONITOR AND CONTROL (CONTINUED) EXECUTIVE SUMMARY Barilla SPa(A) was the world’s largest pasta producer during the 1990’s and held a significant market share in Italy and Europe. They produced dry pasta, fresh pasta and bakery items at several factories throughout Italy. Their route to market was through central distribution centers which they owned who in turn sold Barilla products to other distribution centers who sold to the retail stores. Barilla was experiencing huge fluctuations in demand for its products, which was causing serious stock outs at the distribution centers and ultimately on the retail store shelves. Taking into account the manufacturing process time line, the non-existent forecasting of customer demand from the distribution centers, the ever increasing Bullwhip Effect, MY DECISION is to implement a Just in Time Distribution System (JITD), with a staggered implementation approach. I will first approach all Management with my implementation...
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...Barilla SpA Case Study Operations Management Prabir K. Bagchi, Ph.D. April 11th, 2012 [pic] Jason Grossman_____________________________________ Odelya Hayon_______________________________________ Evan Kline__________________________________________ Stephen Nason_______________________________________ Victoria Portale______________________________________ Current Problems Barilla SpA is the world leader in producing and selling a multitude of different pastas and baked goods, however, after reviewing Barilla’s case study, we took note of all of the underlying factors that are preventing the company from maximizing their productivity and ultimately, maximizing their profitability. Barilla faces a number of issues that are limiting the company’s ability to maximize profit, reduce costs, and ensure adequate available inventory levels. Barilla's main issues include extreme demand fluctuations, extensive lead times, an insufficient channel of communication between several distribution partners, high inventory carrying costs, and their current discount/promotion programs. The coupon and discount system that Barilla advertises to their distributors is a major factor contributing to their detrimental demand fluctuations. Barilla offered volume discounts including paid transportation to distributors, 2-3% price-breaks for full-truck orders, and even greater discounts (around 4%) in some instances where a given buyer placed purchases of three or more full-truck orders...
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...For years Barilla was successful in selling their brand of fine pastas but when a shift in demand for products resulted in items being sold out, Barilla tried to operate like a responsive supply chain which did not work for this functional product. Based on Fisher’s 2x2 model Barilla’s supply chain should be run as a functional product with an efficient supply chain. Barilla should run a more efficient supply chain which can be achieved through the use of the Just-In-Time-Distribution (JITD) program; effective communication with the distributor will allow Barilla to retailers with proper stock of goods through more accurate forecasting and sales data. The critical elements of the JITD program employ the use of distributors’ shipment data to send only what is needed to the retailer. Each day the distributor will provide information on what is shipped to retailers and current stock levels of each location; essentially the manufacturer would co-manage the inventory with the distributor. By implementing the JITD program the suppliers would receive the right amount of product due to Barilla’s ability to improve their forecasting through current sales data and provide the necessary product to the distributor. They would also be able to manage the shelf-space and material distribution through the use of vendor-created delivery schedules. This program takes the pressure off the distributor to hold inventory they didn’t carry and increase the stock of items they already had. The JITD...
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...SUPPLY CHAIN INVENTORY MANAGEMENT SUBMITTED BY A CASE STUDY OF BARILLA SpA. Table of Contents 1. Executive summary 2. Body of the repot 3. conclusion Executive Summary Barilla SpA is the case study that I will be examining in this paper presentation. I will be looking critically into some of the issues why the Just-in-time-distribution (JITD) program that was proposed by Brando Vitali who had served as Barilla’s directors of logistics before Maggiali had met a strong resistance both from the distributors and the sales and marketing organization. Vital had proposed rather than follow the traditional practice of delivering product to Barilla’s distributors on the basis of whatever orders those distributors placed with the company, Barilla’s own logistics organization would instead specify the appropriate delivery quantities –those that would more effectively meet end-consumer’s needs yet would also more evenly distribute the workload on Barilla’s manufacturing and logistics system. Was this program necessary at this time? Is it that both the distributors and sales and marketing organization do not understand the benefits of the program? Do they see it as a program that will distort all what they passive to be running smoothly? Should this program have been introduced at this time? Who stands to gain from this program? Will this program actually reduce cost from logistics as envisaged by Vitali? Will this program address the thinning margin that is being...
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...GLOBAL LOGISTICS MANAGEMENT IE 576 ASSIGNMENT: BARILLA SpA, Case Study ELABORATED BY: Jose David Padilla 1028909 Cindy Sutanto 1025458 Karina Anchecta 1025454 1. What factors, internal and external, contribute to the Barilla supply chain carrying large quantities of inventory? Be specific about how these factors increase inventory in the Barilla supply chain. Internally, their manufacturing process causes long lead time and slow responsiveness to quick changes in demands, especially cause by the constant sale promotions. The Barilla manufacturing’s weakness is shown on how they built the plants based on the type and even size of pasta. Also, there are too many SKU’s available, many which are just different presentations of the same product. Their distribution system has at least one unnecessary level, and instead of pooling their demand it adds more variance to it affecting whatever possible forecast they could have. The external factor that causes large quantities of inventory is the highly unpredictable demand they face. It seems that the sales team doesn’t have an organized schedule of when each promotion will begin or at least they don’t communicate it to the production plants. The company has many promotional activities throughout the year and the customers buy in advance to benefit from lower prices. This causes increased variation in orders and since there is no minimum order quantity customers are allowed to order whatever they “feel” they...
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...Session 5 Case Study: Barilla SpA Executive Summary In order to reduce the strain that fluctuating demand is putting on our manufacturing and logistics systems, I am moving forward with an action plan to implement Just-in-Time Distribution at Barilla. Under the Just-in-Time Distribution system, Barilla’s internal logistics will determine the optimal levels of distribution necessary to meet customer demand. While we are likely to face opposition to this program, it is vital that the entire organization understands the process efficiencies and bottom line savings that will result from this distribution system and that there will be a positive impact on the entire manufacturing and distribution channels. Over the next two months, our sales and management team will be visiting a select number of distributors in order to sell-in the JITD program that will result in the sharing of information, in both directions, in order remove any environment of doubt our customers may have. Our sales team will act as our lead in the gathering and distributing both hard and soft data and maintaining relationships with our distribution customers. The program, once implemented, benefits distributors by lowering inventory, improving service levels and increasing return on assets (ROA). In addition, our manufacturing and logistics systems will be relieved from the pressures of fluctuating demand. I will be scheduling a meeting with the entire sales and...
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...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...
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...Barilla SpA (A) Case Module 1 ------------------------------------------------- Table of Contents ------------------------------------------------- Executive Summary 3 Issue Identification and Root Case Analysis 4 Alternatives and Options 7 Recommendations and Implementation 8 Monitor and Control 9 Exhibits 10 ------------------------------------------------- Executive Summary ------------------------------------------------- The tremendous fluctuation that occurred from week to week in the number of Barilla dry products being ordered by the distributors and the extreme demand variability seriously strained Barilla’s manufacturing and logistics operations. Barilla’s highly automated manufacturing system was not designed to accommodate large fluctuations in demand nor, was it designed to accommodate sudden changes in demand or product. Brando Vitali, Barilla’s director of logistics, proposed the idea of Just-In-Time Distribution (JITD) in the 1980’s as an alternative to Barilla’s traditional...
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...Implementation…………………………………………………9 Monitor and Control………………………………………………………………………..11 Executive Summary Barilla SpA was experiencing extreme order fluctuations from its distribution network despite of stable consumer demand for pasta. This demand variation was taking a toll on its profit margin and operation efficiencies. Management planned a JITD to deal with the problem but this was met with internal and external resistances. This report analyzed the Bullwhip effect that contributed to the demand fluctuation and recommended reducing lead time and improving communication and forecast/data exchange to mitigate the Bullwhip effect. It is also recommended that when implementing changes to a supply chain, management must take a complete channel approach from a strategic supply chain management perspective to ensure that every partner in the supply chain benefit from the change. It is challenging to implement a new system, and many factors must be considered, such as culture change, power and inertia. Issue Identification Barilla SpA is the world’s largest pasta manufacturer. It owned and operated an extensive network of plants located throughout Italy. Most Barilla products were shipped from its manufacturing plants to one of two Barilla central distribution centers (CDDCs). Third party distributors purchased pastas from CDCs and sent them to supermarkets. In the 1980s, Barilla increasingly felt the effect of fluctuating demand. Orders for dry products often swung wildly from...
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...inventory for distributors and retailers. 2. The firm can cope with increase in variability by: i. Supervision of order lead and information time which involves utilizing better production, planning, scheduling and transportation methods (using cross-docking and in the other hand exchanging information in the supply chain for instance using electronic data exchange). ii. Concentration on constant low competitive price or everyday low pricing (EDLP) strategies for reaching stable demand. iii. Counting on actual customer demand data and information thereafter, implementing the Just In Time Distribution (JITD) program. In addition with considering the Min and Max order quantity, variation in demand will decrease in whole supply chain. iv. Barilla can contemplate on execution of Vendor Management Inventory (VMI) by grand distributors or organized distributors which have considerable effect on performance level of supply chain. v. Reduction of SKU numbers and implementing new incentive policy and encouraging DOs and GDs adopting better forecasting method. 3. Impact of transferring demand information across the supply chain are: i. Reduced variation in demand...
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...| Barilla SpA – Case Report | Implementation of the Just in Time Delivery System | Supply Chain Management | | | | Contents Part 1 – Executive Summary 3 Part 2 – Immediate Issue 3 Part 3 – Systemic Issues 4 Part 4 - Qualitative Analysis 4 Part 5 - Quantitative Analysis 5 Part 6- Alternatives and Options 5 Part 7 - Recommendations and Implementation 6 Part 8 - Monitor and Control 7 Part 9 – Conclusion and Management Plan 7 Part 10 – Exhibits 8 Part 1 – Executive Summary To date, implementation of the Just in Time Distribution System (JITD) has not been successful. It has been resisted both internally with our sales force, and externally with our distribution network. The potential benefits of the JITD remain the same as they did upon the conception of the system designed by Brando Vitali. Rather than placing traditional orders with our factories, the distributors will instead provide us the demand information from the retail store locations. Using the data from the retail store orders, we can determine the optimum schedule upon which to base our production and distribution plans. This will eliminate demand fluctuation and the current lack of ability to plan. We will determine the replenishment orders for the distributors, offering them an additional value added service and minimizing stock outs. The benefits of the JITD system include reduced manufacturing costs, reduced inventory and carrying costs, production planning ability...
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...program? In your answers, consider the Barilla and distributors points of view (400-500 words). Late in the 80’s of the 20th century, Barilla SpA, faced increased difficulties caused by the variability of its distributors demand, these difficulties translated into augmented inefficiencies and rising costs of production and distribution of finished products. Barilla’s management noted that this high variability was in spite of the relatively stable consumers demands. A clear manifestation of the bullwhip effect. From Reading the posted Case we can identify many factors that contribute to the amplification of the bullwhip effect, exposed in what follows. Barilla had a typical multi layered distribution system with finished products having to be moved from the factory to Central distribution centers then to distributors to reach the shelves of supermarkets where actual demand is exerted, supply chain members at every tier had to make their own forecasting, which accentuated variability from one tier to the next up the supply chain structure. Variability was accentuated further by the fact that distributors (GDs & DOs) are independent third parties who use their own forecasting system based on “second hand” info already distorted by retailers’ forecasts, and the multiplicative effect travels further up the chain. The multi layered system also meant longer lead time; a lead time of 10 to 14 existed between the Distributors and the Barilla CDCs, comparable delay periods should have...
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...What would you describe Barilla's strengths as a company? Barilla’s strengths come from their top-notch management. Management wants to have the best product in the market. They do not want to short anyone of traditional, flavorful Italian cuisine. Management does this while also finding new manners to market products distinct from competitors. What are its prospects in the pasta and bakery business going forward? For just Barilla, I feel as though they are on a very high plateau. Though with Academia Barilla, the company has found a way to go beyond just pasta and sauce. Having Barilla in the name of Academia Barilla could help, sales to lower income people may rise because they can associate Barilla with a nice Italian brand. How would you assess Barilla's efforts so far in establishing Academia Barilla? They deserve an A+ for their efforts. Most companies would not want to commit to something that is not gaining profits and spending a lot of effort. What is the potential of Academia in the United States? The potential is there, it is a matter of if they want to sell to just restaurants or retail stores also. If they can make Americans realize the difference in the ”fake” Italian products they can make progress. What will be the challenges in marketing Academia as a local product in the U.S.? The challenges will be the price constraints, and figuring out how to market a high priced item. They are trying to make expensive products a local product. They will...
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