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Barilla

Case Presentation

Team: Horizons
Saras Agarwal, Kevin Love, Jennifer Mason, Benedetta Piva, Janani Prithviraj

Barilla Positioned For


Growth
Revolutionized Pasta Industry
Strong brand name
High quality product
Innovative Marketing program

Complex distribution network 2 CDCs


Large number of products causes additional
complexity in the supply chain
Varying shelf life affects distribution
More complex manufacturing processes
Fresh from 1 21 days
2 CDC Independent agents 70 regional warehouses
in Italy Supermarkets

Dry from 10 weeks 24 months


2 CDC Distributors supermarkets Remaining dry products
18 small Barilla owned warehouses

Supply Chain Issues


Overview
High variable ordering patterns from downstream
distributors
Opposition from distributors as well as internal
sales staff to implement a Just-In-TimeDistribution (JITD) policy
Bullwhip effect in the supply chain: increases cost
and decreases fill rates

Focused on the fulfillment of distributor orders,


not customer demand

Issue #1: Ordering Patterns


Highly variable ordering patterns from
Barillas downstream distributors
Fluctuations are not a result of market
characteristics but rather caused by an
inefficient supply chain
They have caused inefficient reactionary
decision making in manufacturing operations
Inefficient supply chain could be problematic for
expansion in Europe

Issue #2: Opposition for Just In Time


Distribution
Sales Force believes JITD will hinder in sales
promotions
- Current pricing strategy results in stock outs and
higher costs
- The sales force are incentivized to push large
quantity purchases during promotion periods: this
leads to order spikes
Distrobutors were reluctant to provide detailed
sales data to Barilla

Issue #3: The Bullwhip


Effect
Variability at the end of the supply chain is
amplified as you travel up the supply chain
The manufacturer receives the most dramatic
effect
Without visibility into demand, forecasting is very
inaccurate
Reason for Bullwhip Effect at Barilla:
Ordering Spikes
Order Batching

Issue #4: Focus on Distributor


Orders
Current business model focuses on orders placed
by the distributor to the manufacturer
Not able to get sales data from some retailers due
to lack of sophisticated technology at the store
level
Focus should be on distributor shipments and
current inventory

Recommendations Internal
Staff
Barilla needs to restart the JITD program
beginning with internal staff
WIIFM
Program will assist them in meeting their
sales targets.
How
Everyday low pricing strategy
New Promotion Policies
New sales incentive program

Recommendations Distributors
Continue JITD program with distributors
WIIFM
Increased service levels with less effort
Lower required safety stock
How
Discounts to distributors willing to
implement two-way Electronic Data
Interchange (EDI)
Implementation of the Vendor Management
Inventory (VMI)