...Solution…………………………………………………………………………....11 Recommendations to the solution …. …….………………………………………12 Other recommendations…………………………………………………………...15 Customer response to the solution…………………………………………………16 Conclusion………………………………………………………………………....21 Executive Summary Barilla SpA, an Italian pasta manufacturer is experiencing problems in manufacturing and distribution systems caused by fluctuations in demand. To eliminate these difficulties Giorgio Maggiali, the Chief of Barilla’s Logistics Department, has been trying to implement the Just-In-Time-Distribution, further referred as JITD, system proposed by his predecessor Brando Vitali. JITD can be called a remake of popular “Just-In-Time” manufacturing concept. Although Maggiali has been trying to convince his consumers that the JITD would definitely work, he has not made much progress. The program was met with significant resistance by the distributors and Barilla’s own Sales and Marketing organizations. Now Maggiali is looking for possible solutions of the problem. In the following analysis we will provide recommendations, which will help Barilla to successfully implement the JITD system and thus decrease its costs, increase efficiencies and its profits. Introduction Barilla SpA was founded in 1975 by Pietro Barilla. From a small shop in Palma, Italy, it became a large, vertically integrated corporation with mills, plants and factories located throughout the Italy. Barilla’s success highly depended on its’ quality of product and innovative marketing programs...
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...Executive Summary Barilla SpA, an Italian pasta manufacturer is experiencing problems in manufacturing and distribution systems caused by fluctuations in demand. To eliminate these difficulties Giorgio Maggiali, the Chief of Barilla’s Logistics Department, has been trying to implement the Just-In-Time-Distribution, further referred as JITD, system proposed by his predecessor Brando Vitali. JITD can be called a remake of popular “Just-In-Time” manufacturing concept. Although Maggiali has been trying to convince his consumers that the JITD would definitely work, he has not made much progress. The program was met with significant resistance by the distributors and Barilla’s own Sales and Marketing organizations. Now Maggiali is looking for possible solutions of the problem. In the following analysis we will provide recommendations, which will help Barilla to successfully implement the JITD system and thus decrease its costs, increase efficiencies and its profits. Introduction Barilla SpA was founded in 1975 by Pietro Barilla. From a small shop in Palma, Italy, it became a large, vertically integrated corporation with mills, plants and factories located throughout the Italy. Barilla’s success highly depended on its’ quality of product and innovative marketing programs, which created strong brand name. The company was sold to Grace Inc. in 1971, because the building of a huge plant in Perdignano drove the owners “deeply into debt”. Grace brought additional capital investment...
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...Executive Summary Barilla SPA, an Italian pasta manufacturer is the world’s largest pasta producer. Due to its multiple distribution channels, the company gradually suffered operational inefficiencies and increasing overhead costs that resulted from fluctuating demand - orders often swung wildly from week to week. Feeling that an alternative approach needs to be implemented for improvement, the company’s former Director of Logistics, Brando Vitali had proposed a new system call ‘Just-in-Time Distribution (JITD). Rather than simply fulfill distributor’s weekly order; the new system requested customer to submit their detail sales data which Barilla could then use to make decision for the “appropriate’ delivery quantities. Unwilling to give up authority and fear of losing potential sales commission or even become unemployed, the new system had met significant resistance within Barilla’s own sales and marketing organizations, and the distributors Barilla approached. The purpose of this report is review the issues and analyze the “Just-In-Time Distribution (JITD) system, in order to further understanding for the decision processes involved in implementing this new supply chain system. Issue(s) Identification As described by Brando vitali: “Both manufacturers and retailers are suffering from thinning margins”. Barilla’s supply chain of dry products was facing significant problems. The following are some of the issues must be reviewed for the company. By viewing...
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...Barilla SpA ------------------------------------------------- Rohit Agarwal Barilla SpA ------------------------------------------------- Rohit Agarwal Barilla SpA (A) Introduction: Barilla was founded in 1875 when Pietro Barilla opened a small shop in Parma, Italy on via Vittorio Emanuele. Adjoining the shop was the small “laboratory’ Pietro used to make the pasta and bread products he sold in his store. 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 the Europe. Barilla was organized into seven divisions: three pasta divisions, the Bakery Products Division, the Fresh Bread Division, the Catering Division, and the International Division. Giorgio Maggiali, the director of logistics was becoming increasingly frustrated. His predecessor Brando Vitali, who had served as the director of logistics for Barilla before Maggiali had proposed implementing Just-in-Time Distribution (JITD), which was modeled after the popular ‘Just-in-Time’ manufacturing concept. Vitali had proposed that, rather than following 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 would instead specify the “appropriate” delivery quantities – those that would more effectively met end-customer’s needs yet would also more evenly distribute the workload on Barilla’s manufacturing and logistics system...
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...Barilla SpA, the world's biggest pasta manufacturer, has continuously experienced problems with increased costs and inefficiencies in their operation. The fluctuations in demand have caused Barilla SpA's manufacturing costs, inventory costs, and distribution costs to go up. Issues that influenced the demand fluctuations are the discounts Barilla SpA offers on both price and transportation, the compensations for sales representatives that is based on the volume of goods they sell to the distributors, and long lead times between time of order and time of delivery - just to name a few. The idea of JITD is to allow sales and inventory data to be shared along the supply chain. By doing so, Barilla SpA can use that data from its distributors to better understand the demand of its products and perform better forecasting. The results would be lower transportation costs due to better shipment planning, increase manufacturing efficiency, reduce inventory costs, and less stock outs for its distributors. This will benefit both Barilla SpA and its distributors, but resistance from the distributors and Barilla SpA's internal opposition makes it difficult to implement such strategy. Barilla SpA's sales representatives were afraid of losing their jobs because they felt with the JITD in place; they will no longer be needed. Also, it would essentially eliminate the current compensation system, meaning they would make less money. As for the distributors, the idea of providing sales data...
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...EXECUTIVE SUMMARY Barilla SpA, world’s largest manufacturer of pasta based in Italy is experiencing extreme demand variability resulting to operational inefficiency and increased cost. To combat the key issues stated my decision is to implement the Just In Time Distribution (JITD). This new system, contrary to current system Barilla has will eliminate Bullwhip effect and stock outs by having centralized information, there will be data transparency between Barilla and distributors. Distributors will provide actual sales data which will be the basis of forecasting and production thus increasing in efficiency in operation and alleviating stock out among distributors. JITD will lead to improved supplier-customer relationship which in the long run can be perceived as a win-win situation. Internal resistance coming from Sales and Marketing will be resolved by involving the top management and by presenting the benefits of the JITD in figures and by emphasizing that role of Sales team in JITD is of paramount to the implementation. External resistance will be combated by thorough discussion presenting the long term benefits of all parties involved. Implementation of JITD as soon as possible will position Barilla on even stronger pasta producer and will potentially increase growth rate of the company resulting from increased business efficiencies and reduced cost. Barilla can have a pilot run on the DO (Distribuzione Organizzata) where sales representatives functions are dominant, sales...
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...Barilla SpA (Written Case Report) By Imran Chaudhry Overview: Barilla SpA one of the world’s largest pasta producer has growing burden of demand fluctuations and venialities on its manufacturing and distribution system. Giorgio Maggiali as director of logistics trying to implement idea of JITD (Just-in Time Delivery) so that Barilla’s own logistics department could manage more effectively delivery quantities and meet end consumer’s needs and more evenly distribute the workload on its manufacturing and logistics systems. Giorgio Maggiali after couple of years of efforts to implement the idea has not been successful and could not make significant progress. Problems to implement JITD The problems and weaknesses Giorgio Maggiali has to implement the JITD are: • Barilla’s distributors unwilling to support the idea as they do not want to give up their authority to place and order and lose control over it • Distributors reluctant to provide sales data upon which Barilla could forecast demand and make decisions to improve delivery and manufacturing, as a result Barilla is relying on distributors demands, which is having bullwhip effect for Barilla. • Barilla’s own marketing and sale people resisting the idea. Bullwhip Effect: Bullwhip Effect is a phenomenon in supply chain where distorted information is passed through large variations and swings in demand Barilla’s Distribution system: Barilla has divided its product line into Dry which represents...
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...Barilla SpA What underlying problem is JITD trying to solve? And what are the causes of that problem? Barilla SpA experience serious fluctuations caused by small swings of the end customer demands, even it was the biggest pasta manufacturer in the Italy and even in Europe and has a systematic distribution channel over decades. The stockouts caused by the fluctuations gave Barilla SpA and its distributors pressures to have more inventories in the warehouse, which increase the cost of both parties. In addition, incrementally push the distributor to have more inventories of Barilla SpA is more and more impossible, because of the limited shelf spaces and the increasing number of new products. To reduce the costs and improve the service quality between Barilla SpA and distributors, Brando Vitali introduced the concept of Just In Time Distribution (JITD). The JITD system is a forecasting technology that specifies the delivery quantity by using the data from the retailors, instead of from the distributors requests. Are there internal barriers to JITD that would need to be dismantled? There were many barriers to the JITD both from the internal and external, and the internal barrier are from the marketing and sales department because they thought it is infeasible and dangerous. The most significant resistance was from the sales representatives, who believed that the JITD would make them less important because they might lose the control of inventory and promotion management. From a...
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...EXECUTIVE SUMMARY Barilla SpA, world’s largest manufacturer of pasta based in Italy is experiencing extreme demand variability resulting to operational inefficiency and increased cost. To combat the key issues stated my decision is to implement the Just In Time Distribution (JITD). This new system, contrary to current system Barilla has will eliminate Bullwhip effect and stock outs by having centralized information, there will be data transparency between Barilla and distributors. Distributors will provide actual sales data which will be the basis of forecasting and production thus increasing in efficiency in operation and alleviating stock out among distributors. JITD will lead to improved supplier-customer relationship which in the long run can be perceived as a win-win situation. Internal resistance coming from Sales and Marketing will be resolved by involving the top management and by presenting the benefits of the JITD in figures and by emphasizing that role of Sales team in JITD is of paramount to the implementation. External resistance will be combated by thorough discussion presenting the long term benefits of all parties involved. Implementation of JITD as soon as possible will position Barilla on even stronger pasta producer and will potentially increase growth rate of the company resulting from increased business efficiencies and reduced cost. Barilla can have a pilot run on the DO (Distribuzione Organizzata) where sales representatives functions are dominant, sales...
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...Barilla SpA (A) – Case Report ISSUE IDENTIFICATION: Main Issue Barilla’s manufacturing and distribution system continuous and growing burden due to tremendous demand fluctuations and variability on a weekly basis had Brando Vitali, former Director of Logistics, propose the idea of Just-In-Time- Distribution (JITD) as an alternative to Barilla’s traditional practice of delivering product to distributors on the basis of what orders they placed. Barilla’s own logistics organization would instead specify and determine the delivery quantities. This issue only deals specifically with Barilla’s Dry products which represents 75% of their sales. Issues with current traditional ordering method and JITD are analyzed and listed below: Traditional Method Immediate Issue: Current distribution order procedures consist of most distributors checking their inventory levels and placing orders with Barilla once per week. Under this system, orders for Barilla dry products fluctuate greatly from week to week. Such extreme demand variability strained the manufacturing and logistics operations. Systemic Issues: Barilla fully-automated manufacturing system is not designed to meet and accommodate the large fluctuation demands. The manufacturing sequences of pasta production made it very difficult to produce particular types of pasta that had been sold out due to unexpected high demand. The temperature and humidity in the kiln is precisely specified for each size and shape of pasta and is...
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...Executive summary Barilla SpA, an Italian company, is the largest pasta manufacturer in the world in 1990. It produces 35% of all pasta sold in Italy and 22% of all pasta sold in Europe. Besides its pasta business, Barilla manufactures bakery and bread products as well. In order to tackle the increasing fluctuating demand, the Just-in-Time Distribution (JITD) was introduced by Brando Vitali in late 1980s, which was designed to streamline the manufacturing process and reduce the inventory cost. However, after two years’ implementation, Giorgio Maggiali, the successor of Brando felt frustrated facing so much internal resistance and ineffectiveness of the system. In my decision, I suggest that Barilla SpA should continue to apply the JITD program as long as several improvements could be made. I will illustrate my recommendation and implementation plans accordingly. Issue identification Based on the current situation of Barilla’s supply chain, two aspects of issue can be concluded as below. Immediate issue Due to the fluctuating demand in the market, orders for Barilla dry products often swung wildly from week to week. Such extreme demand variability strained Barilla’s manufacturing and logistics operations. Based on the existing process, it was very difficult for Barilla to quickly react to changing market demand by producing particular pasta. Thus it directly resulted in stockouts and losing potential sales. Systemic issues 1. Category Management (Timing: Short...
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...Jose A. Lavaro April 8, 2015 Barilla SpA (A) Introduction Barilla SpA is the world’s largest pasta manufacturer that’s based in Italy. The company enjoyed a 35% market share of the entire pasta industry in Italy and 22% market share in the entire continent of Europe. It manufactures pasta and sells to various retailers largely through third party distributors. In the late 1980’s, Barilla has been faced with fluctuations of variability in demand, which is straining the manufacturing and distribution system of the company. This has increased operational inefficiencies that resulted in week-to-week variations in its distributors’ order patterns, which has increased the cost of the company of having to hold a high inventory of goods in its distribution centers. Due to the abovementioned crisis, the former director of logistics proposed Just-In-Time-Distribution (JITD) to eliminate overhead costs and prevent fluctuational shortages and overstocking in distribution centers. This however was never implemented because of the customers’ hesitance and reluctance in providing the company with historical sales data. In addition, there was also an internal resistance rom the company’s own sales and marketing organizations that thought that the idea was infeasible. Problem statement To be able to convince Barilla’s customers both internal and external that the JITD will be beneficial not just to Barilla itself but to the customers as well. Key Factors * Increased...
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...The case covered Barilla SpA , a food manufacturing company that was trying to solve issues relating to demand fluctuation within its supply chain. The cost of transportation was also higher than normal and Barilla is forced to manufacture goods in terms of production lead time and shelf life of its products. These, coupled with inefficiency in Barilla’s operation due to high product change over cost, led to excess finished goods, high inventory carrying cost for Barilla, and ultimately, the “bullwhip effect”. The underlying causes of these issues, particularly pertinent to demand fluctuation from Barilla’s distributors, are excessive promotional activities, volume discount/order batching, and lack of specified minimum and maximum order quantities. These led to led to poor forecasting, increased lead-time, price variations, and heightened level of inventory. Upper management at Barilla, specifically Giorgio Maggiali, the company’s director of logistics, felt that implementing a sound JITD (Just-In-Time Distribution) program could provide some solutions to these issues. Rather than distributors specifying their own orders, JITD would enable Barilla to monitor the flow of its product through the supply chain (BarillaDistributorsRetailersConsumers), and then dictate order quantity to its distributors, including when these orders would be filled. However, this proposed solution has benefits and drawbacks. JITD is advantageous because Barilla would have better control of its operation...
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...Executive Summary Barilla SpA was founded in 1875 and today is the world's largest pasta manufacturer. They produce 35% of all the pasta sold in Italy and 22% percent of what is sold in Europe. Barilla has revolutionized the pasta industry's marketing practices by creating a recognizable brand name and strong image. However, their traditional business practices are becoming increasingly inefficient and costly. Operating within a environment of large scale demand variations which have grossly inflated manufacturing, inventory, and transportation costs Giorgio Maggiali, director of Barilla's logistics department is proposing an innovative idea created by his predecessor Brando Vitali called Just-in-Time Distribution (JITD). This is a significant change from their traditional methods of distributors ordering freely and independently from Barilla. JITD requires that all members of the distribution channel share sales information and allow Barilla to order and dispense the amount of products to each distributor that they deem appropriate. This would ideally more accurately match supply with demand decreasing operational inefficiencies within the entire supply chain. The following report outlines the current issues facing Barilla and how the JITD system should improve their incumbent deficiencies. Issue(s) Identification Immediate Issue Extreme fluctuations in demand causing operational inefficiencies has Barilla looking for new options to improve. Maggiali is...
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...Case Report Barilla SpA ------------------------------------------------- Table of contents Table of Contents | | | Section | TITLE | PAGE | | | | | | | | | 1 EXECUTIVE SUMMARY | 3 | | | | | * | | * 2 CHALLENGES OF A LEAN SUPPLY CHAIN | 4 | | | 3 PRACTICAL STEPS FOR BARILLA SPA | 5 | | | 4 CONCLUSION | 6 | | | * 5 BIBLIOGRAPHY | 7 | | | * | | | | ------------------------------------------------- Executive Summary Barilla SpA is the largest pasta manufacturer in the world, as a food manufacturer they sells to a wide range of retailers through a distribution network. An analysis of the demand for dry food pasta at Barilla SpA’s distribution centers and factories revealed extremely high variation in demand. The variation in demand observed was all the more remarkable considering that the underlying demand for pasta in Italy is fairly level. Currently, Barilla SpA is experiencing a full development burden of increasing production costs, inventory levels and inefficiencies in manufacturing and dissemination system due to huge fluctuations on demand and varied accuracy of forecasting knowledge. In order to combat this problem, we would like to realize and employ a Just-in-time scattering system (JITD) to enable information sharing along supply chain, improve...
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