The Value of Information Barilla SpA

Group 2

Egg pasta & lasagna for Easter Highly fragmented. Special pasta for pasta salads.Italian Pasta Industry Italians adore pasta – Avg per capita consumption 18kg per yr Limited seasonality in demand. 2000 pasta manufacturers Price sensitive Italian Market stagnant with 1% Growth Rate Export Market Rising with 20-25% Growth Rate/Year .

Barilla – The Company Founded in 1875 in Parma. Largest Pasta Manufacturer in World State of the Art R&D facility and Pilot Production Plant Vertically integrated .flour mills. large scale advertising By 1990. pasta plants and bakery product factories . Italy Differentiated through Quality and Innovative Marketing – cardboard boxes.

10 -12 w shelf life • 75% of Sales .21 d shelf life • Fresh bread – 1 d shelf life • 25% of sales Dry Product • Dry pasta & toasts 18 – 24 m shelf life • Cookies .Product Type Fresh Product • Fresh pasta .

Supermarket Chains & Independent Supermarket Distributor’s Warehouse keeps 2 week Supply Stores order daily with 24-48 hours lead time Average Lead Time 10 days between Barilla and Distributors .Distribution System Fresh products from CDC to 70 Regional Warehouses by independent agents Dry product mostly from CDC to Supermarket through Distributors’ own warehouse 3 Types of Retail Outlets – Small Independent Groceries.

Sales and Promotion Promotion based Sales Strategy Use of Trade Promotion to Push Products 4-5 weeks Canvas Period where Distributor can buy as much as wish Volume Discount also offered Sales & Marketing Division has incentive .

Reasons For Increase in Variability Demand is Distributor order driven No sophisticated forecasting System Simple periodic inventory review System No system of POS data from retailer Price fluctuations – Sales promotions .

Reduce the no.e.Coping with variability Better SC communication (mainly in outbound logistic) such as PoS data Centralized demand information More accurate forecast mechanisms Curb promotion & trade discount Lead time reduction i. of SKUs if so possible Vendor Managed Inventory .

Impact of transferring demand information across SC Improved sales planning & forecasting Reduced variability in SC Improved coordination between manufacturing . distribution & retail systems Lead time reductions Rapid resolution of supply problems .

VMI strategy to solve operational problems of Barilla Lets manufacturer maintain inventory at retailer outlet Better coordination & information flow in supply chain Able to get PoS data at retail level Reduce operational issues Reduced bullwhip effect .

Dealing with conflicting goals of Partners and Facilities Concern: Sales levels will flatten • Short term phenomenon since push sale will stop • Will vanish in the long run considering pull from retailers • Distributors will have a minimum safety stock for contingency • A longer strike can affect present supply level as well Concern: Strike or other disturbances .

Dealing with conflicting goals of Partners and Facilities Concern: Supply is • Short term issue • Trend analysis of different distributors will ensure not flexible adequate supply Concern: Competitors will use up distributor’s free space • JITD will not lead to free space since distributors will rather get rid of over stocking • Cost saved through JITD can be used for marketing • Barilla .biggest player with 35% share of pasta market in Italy .

Dealing with conflicting goals of Partners and Facilities Concern: Instead of JITD. since barilla will not ask distributors to would over-stock distributors help Barilla reduce its • Barilla may pass on a portion of saved cost to the distributors cost . focus on fast order delivery • Order delivery will be faster when exact market demand known and production done accordingly Concern: Why • JITD will reduce distributors cost as well.

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