Barilla SpA

Group 8

Introduction
Company Background
Founded in 1875 by Pietro Barilla
Largest pasta producer in 1990
Differentiated by providing high quality products supported by
innovative marketing
35% market share in Italy and 22% market share in Europe

Industry Background
Per capita consumption of pasta was exceedingly higher in
Italy
In late 1980s the pasta market slowed down
In contrast the market was expected to rise in the early

Channels of Distribution
Products divided into 2 product
lines- Dry (75%) and Fresh
(25%)
Dry products had
longer/medium shelf lives
compared to fresh products
Barilla had 2 Central Distribution
Centres (CDCs)- Northern and
Southern
Each CDC held about 1 month
dry product inventory
Dry products meant for chain
and independent supermarkets
were channelled through GDs
and DOs respectively

Problem Statement

Demand fluctuations leading to burden on the companys

manufacturing and distribution system
Lack of information sharing from customer side created barriers
to implementation of Vitallis proposal

Sales and Marketing

The brand was heavily advertised as one with the highest quality
Evoked a sense of luxury and sophistication
10 to 12 trade promotion periods in a year which included no
limit on ordering, promotional discounts and volume discounts
Intensive sales representation at DOs rather than GDs
Merchandising Barilla Products
Setting up in-store promotions
Knowledge transfer regarding competition
Developing ordering strategies for retailers

Just In Time Distribution Implementation

Issues Solved:
Lower Inventory Levels and lower Inventory Carrying Costs
Fewer Stock Outs and increased Profit Margin of Distributors
Lower Demand Variability
More Organizational cooperativeness and efficiency

Faster & Reliable Information Processing and Effective Promotiona

activities
Reduced Manufacturing Costs
Reduced Inventory Cycle
Improved fill rates, quicker response, and high service level
Higher bargaining power over distributors

Inventory Levels
Forecasting of demand fluctuations and application of sophisticated
forecasting techniques
More accurate planning of production, packaging, & distribution
Reduced Inventory will cost less
Reduction of carried SKUs leads to more effective advertising and
promotional activities.

Stock Outs
Improved Forecasting leads to lower instances of stock outs
Consistent product availability increases market presence and sales.

Demand Fluctuations
Current mode of operations is traditional linear supply chain, which can be changed to
a network design
Better communications with 3rd Party Logistics would help in going from a moderately
Push system to a Pull system of SC delivery
Easing the demand fluctuations via promotional strategies leading to more
responsiveness and mitigate the Bull-Whip Effect

Organizational Deficiencies

Centralization of Production Planning on the basis of sales data of distributors benefi

everyone
Elimination of unwanted fixed ordering costs.
Customized production schedule and cheaper production & distribution
Long Term consistency & relationships with stakeholders

Obstacles to JITD
Job Loss & Loss of Autonomy: fewer sales representatives can do the same job
since order taking, processing and inventory management no longer as critical
Fear of Change of Pay: away from incentive based depending on number of orders
towards fixed compensations
Lack of Belief & Trust: absence of numerical data to show actual benefits of JITD
makes the process appear too complex and raises the belief that promotions will
stop.
Lack of alignment between logistics departments & sales departments and
complexity of structure due to the large number of SKUs
Investment in Technology for covering a supply chain wide information system
and Training for the same would be large initially
Cost to Benefit Analysis is unavailable
Inability to bring all stake holders on-board due to skepticism of cost reduction and
stock outs

JITD Implementation Recommendations

Pilot run in small stores which in turn can be used to persuade other distributors
System implementation at warehouses to collect sales data through sales reps
In-depth cost benefit analysis required: Addressing the total cost of implementation
of JITD against cost of issues attempting to overcome. This ensures Barilla
customers get on-board for the change.
Transparency & simplified explanation brief of JITD scheme to on-board the
distributors
Benchmarking the process with KPIs such as days of inventory stocked. Fill rate and
cycle service level to track improvements of processes
Linking all customers electronically to obtain complete and real time POS data
Involving Higher Management to influence trust and commitment to the change and
viewing it as an integrated company wide change, not just a supply-chain & logistics
department change

Conclusion:
SCM Goals Achieved
Waste reduction
Flexibility & responsiveness
Unit Cost reduction
Slower time to production
Improved timeliness to customer delivery
Improved service quality
Improved cash flows, revenues, profit margin
Improved information flow
Improved partnership, leading to further innovation