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The fifth homework

Student number : 5080309369

Class number : F1003008
Name :
Case study : Barilla SPA
1. What are the reasons for the increase in
variability in Barillas supply chain?
The supply chain of Barilla is highly variable because of a number of reasons. One of
the major reasons is the fact that the distribution network for the firm is complicated
because of the involvement of middlemen who make the supply chain longer and
complex. In order to have adequate supplies, the firm depends on forecasting models,
which are improper, rather than depending on the distributors who will provide accurate
information from restock and refill strategy. Each of their product line has large SKUs,
which lead to increase in labor costs and production costs thus further leading to
increased variability in supply. In order to beat the many competitors, the firm uses
frequent promotions increasing demand but at low prices further increasing labor and
production costs. Barilla has two separate supply chain because it has to separate
products namely dry and fresh products and thus the two products must be treated
differently. The fresh product is from two central distribution centers that channel it to 70
regional warehouses while the most of the dry products are channeled to supermarkets.

2. How can the firm cope with the increase in

The problem of increased variability can be solved by solving the problem brought about
by the distribution system. Through the replenishment strategy, there is an agreement

between the supplier and the firm. Through this, the firm will be able to share with the
suppliers the data about inventory and frequency and thus be able to meet their
demands. If the products are delivered under the agreement between the firm and the
suppliers, JIT (Just in Time) distribution system will be followed and therefore customer
satisfaction will be increased.

3. What is the impact of transferring demand

information across the supply chain?
By transferring demand information across the supply chain, it will mean that
information is shared between the suppliers and Barilla. This will lead to positive effects
since the replenishment strategy will be combined with the JIT strategy and thus be able
to support the fluctuations of demand, reduce the inventory kept in the warehouses and
reduce stock-out rates. This will mean that want is produced balances with what is
demanded implying that demand and supply balances.

4. Can the VMI strategy solve the operational

problems faced by barilla? Why?
VMI strategy will help in solving the operational problems faced by Barilla since the
biggest challenge for this firm is the fluctuation in demand. This strategy will ensure that
the suppliers are responsible over the supply decisions since they will have to
determine the inventory levels and the delivery frequency. This will ensure that the
agreed upon stock levels are maintained for the suppliers will supply according to the
required levels. VMI will also help the firm in tracking performance data for instance outof-stock data and thus be able to order for it in time. With VMI, the firm will be able to
reduce costs of distribution as well as manufacturing and inventory costs. It will further
help the firm to decrease the risk, which may arise from out of stock situation in case
demand fluctuates and thus increase customer services and sales.