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H2 Group6 Barilla Case Study

H2 Group6 Barilla Case Study

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Published by: xpj on Sep 05, 2010
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11/11/2010

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Barilla SpA (A

)
Submitted by - Ashwin Susarala - Bhuvaneshwari Dharmar - Divyangana Sharma - Nikhil Khedekar - Rohit Arora Company's Introduction and brief background:
Barilla which was originally established in 1877 is today one of the top Italian food groups. It was the world’s largest pasta producer in 1990. The details of the pasta share - 35% in Italy and 22% in Europe. A leader in the pasta business worldwide, in the pasta sauces business in continental Europe, in the bakery products business in Italy and in the crisp bread business in Scandinavia.

Different types of Products, and network of distribution:
Products are divided into 2 types- Dry and Fresh products Dry Products: Dry pasta, cookies, flour and bread sticks to name a few. Dry products have long shelf life of either 18 to 24 months or medium shelf life of 1- to 12 weeks. Fresh products: Fresh pasta and fresh bread. Shelf life between 1 to 21 days. The company boasted of an extensive network of plants located throughout Italy. Barilla used three types of retail outlets: small independent grocers, supermarket chains and independent supermarkets. The modus operandi of their activities were as listed below: • First, the products were shipped from the plants in which they were made to one of two Barilla central distribution centers (CDCs). • Depending upon the product variety, it was moved within 3 days (fresh products) and a month (dry products) out of CDC. Certain fresh products did not flow through CDCs. • Independent agents purchased the fresh products from CDCs and channeled the product through 70 regional warehouses. Dry products were purchased by distributors and shipped them to supermarkets.

Benefits of JITD: It helps in better collaboration between the manufacturers and distributors and is also beneficial for both. It will also increase the supply chain visibility. New Idea: The new concept is the Just-in-Time Distribution (JITD). It will help the manufacturer to better forecast the demand and hence maintain an optimal level of inventory. Thus it will help in enhancing the relationship between the manufacturer and distributor. To reduce variability by having year round low price. Distributor is also benefited as his inventory holding costs would reduce. How to go about dealing with it: • • • To reduce uncertainty by sharing information. Barilla suffered increasing operational inefficiencies and cost penalties that resulted from large week-to-week variations in its distributors’ order patterns and demand fluctuations. To reduce lead times by cross docking. . the supply channel experienced the Bullwhip effect. The variation in demand showed a remarkable variations as one moved up the supply chain.Issue in hand: In the late 1980s. Essentially. The various reasons for the variations were attributed as: • Lead time issues: Long order lead times • Transport issues: Transportation discounts • Order size issues: varying order size • Discount issues: Volume discount • Promotional issues: Promotional activity • Forecasting issues: Lack of forecasting systems. A new Barilla’s logistics organization which will help in more effectively predicting the future demand and thus enabling to effectively meet end-customer’s need and also in distributing the workload on Barilla’s manufacturing and logistics systems.

. Way forward: • • • Working with one or more distributor so as to showcase the JITD benefits. • Suspected increasing power of Barilla by the distributors. • Non-presence of the infrastructure required to handle JITD. External: • New process making the distributor’s skeptic and hence their unwillingness to share the warehouse data. • Lack of faith in Barilla’s inventory management. JITD to be adopted as a part of the operating strategy of the company. • Increasing competitor’s shelf space.Challenges: Internal: • Sales representatives not comfortable with the diminishing trends in their responsibilities. Establishing effective communication channel with the customers so as to make them aware of the benefits of the new process. • Cost benefits not clearly evident.

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