Barilla Spa A
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 and professional manag… Barilla SpA Case Study The biggest challenge facing Giorgio Maggiali and Barilla SpA is the mounting burden that fluctuations of demand have placed on Barillas’ manufacturing and distribution methods, and whether or not to implement a Just-in-Time Distribution (JITD) system for their distributers.
The implementation of Just in Time Distribution would allow for a more efficient process for getting the products to the end user when and where they are needed. Solution #1: To implement Just in Time Distribution. For this to succeed, Mr. Maggiali as the director of logistics for Barilla will need to be personally and intimately involved and partner with Mr. DiMaria who is in charge of sales for Barilla and to obtain the support from their own sales reps. Barilla will need to pull the sales reps in for training on how implementing JITD would benefit their accounts, Barilla SpA and themselves.
The sales reps will need to “sell” their customers on this idea and to shift the mentality of their distributers away from “this is the way we have always done it” and for them to be amiable to exploring new and more efficient ways to replenish their stock. Pro: Barilla would more easily be able to control their manufacturing process and greatly reduce production overruns and stock outs thus enable to pass cost savings onto their distributors. Con: Resistance from the distributors to change may continue. Their distributer may ask “why is that a concern of mine? ” I just want the product I want when I want it.
Con: Will incur costs to purchase or develop software needed to gather and correlate sales information. Pro: The initial cost for software development will be offset by savings in lost sales opportunity, reductions in buybacks and an overall increase in productivity and sales. Barilla already has much of the needed data pertaining to sales to the distributers. Con: Customers may be resistant to providing their sales and customer base data to Barilla. Pro: Barilla Sp… Company Overview Barilla Spa is a large vertically integrated family owned largest pasta producer in Italy.
Its operations are divided into seven divisions: three Pasta divisions, the bakery products division, the Fresh Bread division, the Catering division and the International division. Barilla products were sold through three types of retail outlet: small independent grocers, supermarket chains, and independent supermarkets. Products were sold through CDCs and through intermediate distribution channels. Fresh products were sold through a network of brokers. Inventory levels in the supply were high with larger levels of stock held for dry pasta since its shelf life was high as compared to wet pasta. Barilla enjoyed a strong brand image in Italy.
Its marketing and sales strategy was based upon a combination of advertising and promotions. Also distributors can buy as much product as they want to for meeting their demand at the discount offered by the company. Barilla produced two major kinds of products:- a) Dry Products- These include dry pasta, cookies, biscuits, flour, bread sticks and dry toasts. These make 75% of the Barilla sales. They had long shelf lives of 18-24 months or medium shelf lives of 10-12 weeks depending on the product type. b) Fresh products- These include fresh pasta products with 21 day shelf life and bread with 1 day shelf life.
Issues Faced The company was suffering from the following problems: 1. Variability in demand- This lead to operational inefficiencies on the part of the company. 2. Inventory Management- The company produced over 800 SKUs, most of which had long or medium shelf lives, thus could be easily stored up at the company warehouse or with the distributors. During periods of low demand, high inventory holding costs had to be incurred. 3. Stock outs- This was one of the major problems which Barilla faced. Many of the distributors were not able to cater to the demands of the retailers during times of high demand.
This time B… Thoughts on Supply Chain Management The JITD program was supposed to tackle the uneven distribution workload Barilla encountered with its distributors. In order to achieve this, better demand forecast was needed with the support of the distributors. Benefits of the program are below. – Barilla’s own logistics organization would be allowed to specify the appropriate delivery quantities that would more effectively meet the end consumer’s needs – It would also allow Barilla to distribute the workload on manufacturing and logistics systems more evenly Drawbacks of the program are below.
Higher investment costs such as training – Since JITD is a new concept, and has not tried out before, there is a risk that serious errors may occur during the implementation process, and this would ruin all previous efforts The value chain consists of five major components, and it can be represented as SIPOC, where S is Supplier, I Input, P Production, O Output and C Customer. Between C and P, there are also the distributors, wholesalers and retailers.
It is almost impossible to develop an accurate sales forecast because the market is constantly changing. Factors affecting the market situation are also changing. Without an accurate sales forecast, it is difficult to achieve JIT. This is basically a paradox. No enterprise is able to develop an accurate sales forecast, and without an accurate sales forecast, it is not possible to achieve JIT. Is there really no way out? How about Dell?
Dell basically builds computers on a BTO (build-to-order) basis, and this makes JIT possible. But how many enterprises can really deliver products on a BTO basis? What are the requirements to produce on a BTO basis? Barilla definitely was not one of them. Communication here is the critical success factor. The supplier, in this case, Barilla, has to collect information from the distributor, and the distributor has to be able to collect information from the wholesaler, and then the wholesaler has to d…