Case Barilla SpA

8/11/2019 Case Barilla SpA

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Barilla SpA (A)By-

Group A1


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Q1. What could be the fundamental reasons demand fluctuation experienced by Barilla?

reflection of change in customer preferen


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Reasons for demand fluctua

Variety of SKUs (dry products800 SKUs, different packaging)

Absence of accurate forecasting tool- Bullwhip effect - amplification of the ordered quan

Average lead time of 10 days

Distributors sales volume varied simple periodic review inventory systems

Promotions, Volume discounts

Sales strategy of Barilla, pastas sold at market price, discounts observed immediately

Truckload dependent discounts

Promotion might result in increased sales followed by no subsequent rise in sales until the next promotion

Sales incentive for representatives

Different for different products in different periods

Stockoutspressure on manufacturing due to longer lead times and product perishabili


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Q2. What do you think of the JITD Model? Wsolve problems Barilla is facing now? Why?

not?


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JITD Modelsolution to probl

Just in time distributionWhen and how much to ship?

Barillas logistics organization - specify delivery quantitieseffectively meet demands

Solely focussed on dry products sold through distributors

Distribute workload on manufacturing and logistics systems more evenly

Problems faced

Demand Forecasts - Burden on manufacturing as well as logistic network

Bullwhip effect (Forward buying due to discounts offered may lead to this as well)

Inventory levelshigh carrying cost- operational inefficiency

Each CDC held about a months worth dry product inventory

Distributors and retailers margin might suffer

Small independent shops and supermarkets held approx. 2 weeks of inventory at stor

Unnecessary worker, equipment usage and truck charges


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JITD Evaluation

Advantages

Better planning and promotional activitiesmanagement

Reduced inventory level and hence its carrying cost

Increased supply chain visibility

Increased bargaining power

Reduced burden on both manufacturing andlogistics

Disadvantages

Distributors wont be motivated t Shift of power to the company

Sharing warehouse figures

Empty shelf spaces might lead to

Lack of sophisticated infrastructumodelmay result in stockout

We think that JITD proposal is advantageous and can solve the problems faced by Barilla Need to establish credibility in the system- get top management convinced first followed by externa

Run experiments as a pilot followed by full fledged implementation

Effectively demonstrate the advantages of such a system to the distributorsimproved margins

Information centralization will lead to added advantage in terms of reduced inventory and bullwhip

Additional recommendations-

Have a product code to identify the product in the supply chain for efficient tracking


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Q3. Do you think JITD is useful for Barilla bufor DOs? What explains the resistance to JI


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JITD ModelUseful for Barilla and ris

JITD useful for Barilla Vendor Managed Inventory system will allow Barilla

To have access to actual retail sell-through data

To determine shipment quantity and time to distributors

To eliminate Bull-whip effect from the distribution cycle

To control production quantity, leading to costs reduction

To have high visibility and bargaining power

To strengthen relationships as distributors will be more dependent on Barilla

Risky for Organized Distributors (Dos)

Dos will have to share their sales data figures and relinquish their control over stoc


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Resistance to JITD Model

Internal resistance Sales and Marketing department were not ready to experiment with this

fearing

Flattened sales

Giving shelf space to competitors deliberately

Increased risks of stock outs due to uncontrollable reasons like strikes

External resistance

Distributors were not ready to share detailed sales data

Barillas increased control over inventory management decisions in ware


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Q3. What was the mistake of Maggiali? What he do now?


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Mistakes of Maggiali

Lack of conviction Could not convince the distributors about managing their stock

Could not convince them about the inability of Barilla to respond to the highly fluc

within 36 hours after placing the order

Made it look like Barilla had wanted to reduce its own costs only by pushing its prowarehouses of the distributors

Non-involvement of all players in the discussion

Maggiali should have involved all the players i.e. distributors and retailers in the in

regarding JITD

Maggiali should have involved top management of Barilla because it was a compan

logistics one.


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Recommendations

He should involve top management and publicize the benefits which Marconi had gotten from

JITD. This will reduce the skepticism of the distributors and retailers about J

He should introduce the JITD with Marconi for the trial basis only. The results will automatically

and its customers that the inventory costs have reduced.

Reduction in lead time would lead to the anticipation of the incoming order by studying the d

improve customer service

Maggiali should emphasize on the reduction of lead time due to availability of point-


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Thank you

Documents

Case Barilla SpA