SCM

A Presentation on

Barilla SPA
Section – B, Group - 5
Case Facts

Introduction – Company Background

• Barilla was founded by Pietro Barilla in 1875
• High quality products supported by innovative marketing programs
• Barilla was organized into 7 divisions
• 3 Pasta Divisions
• Barilla, Voiello, Braibanti
• Bakery products division
• Fresh bread division
• Catering division
• International division

Manufacturing Process
• Flour and water mixed to form dough
• Dough is rolled into long thin sheets
• Sheet is forced through a bronze extruding die screen – Where it gets the shape
• Pasta is cut in specified lengths
• Cut pieces are moved slowly through a long tunnel klin
• After 4 hours of drying process, the pasta is weighed and packaged

Sources:
Barilla Spa Case , Janice H. Hammond
Case Facts

Channel Distribution
Dry Products
• Longer Shelf life bakery products (18 to 24 Months)
• Medium Shelf life (10 to 12 weeks)
• 800 different package SKUs
• 2/3rd of the products goes to supermarkets from Distributor - CDC – Plant
• 1/3rd goes to small shops from 18 barilla owned depots – CDC – Plant
Fresh Products
• Pasta products – 21 day shelf life ( Plant to CDC to Distributors to 70 regional WHs )
• Fresh bread – 1 day shelf life ( Plant to CDC to Independent Agent to 70 regional WHs )
• Retail outlets ( Small independent grocers, supermarkets, independent supermarkets)

Sales & Advertisement

Advertising:
• Heavily advertised
• Positioning – High quality & sophisticated pasta
Trade Promotion:
• 2 to 3% discounts for orders in full truck load
• Each year divided into 10 to 12 canvas (4 to 5 weeks length)

Sources:
Barilla Spa Case , Janice H. Hammond
Q1: Cause of the difficulties that the JITD program was created to solve
The main cause of the difficulties faced by the company is Bullwhip effect. There was a lot of fluctuations in demand. The orders of Barilla dry products
swung wildly from week to week.

Other causes are Large number of SKUs (800). Pasta was made in 200 different shapes and sizes in 470 different packages.

Promotions is also a cause of the difficulties. Salespersons were given commission based on the amount of the products sold. The sales person may
push more products to the distributors during promotion period. The distributor will end up storing more products in his/her inventory.

Benefits of implementing the program

This caused the following problems
• Stockouts- (Exhibit 13) Retailers needs are not met
by the distributors
• Reduced service level-Many distributors service level
to the retailers were unacceptable
• Unsatisfied customers- The company wants its
customers to hold more inventory. But due to limited
space in their warehouse, the customers’ are
unhappy with the company.
• Increasing inventory holding cost
• Increasing manufacturing costs
• Reducing margin for both manufacturer and
distributor
• The company is providing additional service at no cost. Vitali thinks this will lead to
good relationship with customer
• Reduced inventory levels in distributor end
• Reduced distribution costs
• Reduced manufacturing costs
• Increase in service level
• Improved planning procedures
Cons of implementing the program:
• Relationship with some distributors may be affected
• Morale of the salesforce will be affected
• Better forecasting models should be developed

Sources:
Barilla Spa Case , Janice H. Hammond
Q2: Barriers, Cause and Solution for JITD

S.no. Resistance/Barriers Cause Solution

Infrastructure limitation for proper Pilot launch in a limited scope, train & familiarize
1 Lack of training, IT systems in place
JITD implementation workforce and then do a full launch
Sales team can focus and be compensated on basis
of new customer convertion
Sales teams resistance because of Flat & predictive sales resulting in sales
2 fear of losing importance in the force redundancy Use SF in consumer market reasearch, and other
hierarchy Promotions becoming redundant aspects of sales rather than using then in store floor

Keep extra safety stock to account for the error in

Lack of sophisticated forecasting Skills
Lack of accurate existing forecasting forecasting in initial time. Gradually account the
3 (Previously we never did such
technique error in forecasting to make it more accurate and
forecasting)
slowly removing this extra ss
Pilot launch in a limited scale, train & familarize
Risk of benefits using an unexplored, Pioneering in the industry with a new
4 workforce, fix the problems and then do a full
new technique technique
launch
Reduction in no. of SKUs.
Long term benefits from forecasting will supersede
5 Need for increace in CDC Capacity Increase in inventory, safety stock the cost
Reduce your manufacturing lead time, set up time
to trade off the increase in inventory

Sources:
Barilla Spa Case , Janice H. Hammond
Q3:Barilla's customers’ response to JITD? Why?

GD (Grande Distribuzione) DO (Distribuzione Organizzata)

Conditional Yes Yes

• Own sophisticated system of forecasting and • No actual data from independent

systems in place
• Demand forecasts of Barilla products can be
supported by JITD demand forecasting
• Ordering rights with GDs only
• Reconfirming the established forecast by GD
supermarkets
• No inventory tracking systems
• Forecasting is far from accuracy
• Stockouts or inventory holding

Sources:
Barilla Spa Case , Janice H. Hammond
Q4: Feasibility in 1990, it’s effectiveness

• It is feasible to implement the JITD program. Since the data is being sent by the distributors on daily basis for previous day
sale, there is no requirement for real-time data collection. Thus, it is easy to collect the data from the distributors. Forecasting
model can be developed over a period of time by correcting the errors calculated over the period of time.

• We can target the customers who look for SKU expansion but facing space constraints in the warehouse to maintain
inventory. Also, distributors who look for incentives from Barilla for implementing the JITD system. The incentives can be
provided as a result of reduction in manufacturing costs.

Sources:
Barilla Spa Case , Janice H. Hammond