Case Study: Barilla Spa
Executive Summary:
Barilla was the largest pasta manufacturer in the world, making 35% of all pasta sold in Italy and 22% of all pasta sold in Europe. In addition, Barilla held a 29% share of the Italian bakery-products market. Competing in a crowded field of over 2,000 Italian pasta manufacturers and the Italian pasta market as a whole was relatively flat, growing less than 1% per year. Per capita pasta consumption in Italy averaged nearly 18 kilos per year and relatively consistent throughout the year. A few pasta types experienced some seasonality.
Variation in distributor’s order pattern have caused severe operational inefficiencies and cost penalties for Barilla. The extreme variability in orders that Barilla receives is surprising considering the distribution of demand for pasta in Italy. Indeed, while variability in aggregate demand for pasta is quite small, orders placed by the distributors have a huge variability.
Though Barilla products are heavily advertised but Sales and Marketing strategies are pushing more product down the supply chain. Trade promotions, sales incentive system, lack of input information of demand forecasting, long lead time (10- 14 days) to full fill the order etc. made the distributor’s order pattern so volatile.
Our logistics department is trying to implement JITD, encountered by huge resistance from internal and external sources.
As per our business model, to solve this problem we should not increase Inventory Level or break the Best Production Schedule for our factories. Only option left here is to modify our sales and marketing tactics and involve the whole company to implement JITD by making strategic partnership with our clients (DCs).
VP sales and marketing will be the head the JITD implementation team, under his direction all other departments will work together.
After successful implementation we will be able to bring down Inventory Level, Ordering Variance, Stock out rate and Order Fulfillment Lead
Barilla was the largest pasta manufacturer in the world, making 35% of all pasta sold in Italy and 22% of all pasta sold in Europe. In addition, Barilla held a 29% share of the Italian bakery-products market. Competing in a crowded field of over 2,000 Italian pasta manufacturers and the Italian pasta market as a whole was relatively flat, growing less than 1% per year. Per capita pasta consumption in Italy averaged nearly 18 kilos per year and relatively consistent throughout the year. A few pasta types experienced some seasonality.
Variation in distributor’s order pattern have caused severe operational inefficiencies and cost penalties for Barilla. The extreme variability in orders that Barilla receives is surprising considering the distribution of demand for pasta in Italy. Indeed, while variability in aggregate demand for pasta is quite small, orders placed by the distributors have a huge variability.
Though Barilla products are heavily advertised but Sales and Marketing strategies are pushing more product down the supply chain. Trade promotions, sales incentive system, lack of input information of demand forecasting, long lead time (10- 14 days) to full fill the order etc. made the distributor’s order pattern so volatile.
Our logistics department is trying to implement JITD, encountered by huge resistance from internal and external sources.
As per our business model, to solve this problem we should not increase Inventory Level or break the Best Production Schedule for our factories. Only option left here is to modify our sales and marketing tactics and involve the whole company to implement JITD by making strategic partnership with our clients (DCs).
VP sales and marketing will be the head the JITD implementation team, under his direction all other departments will work together.
After successful implementation we will be able to bring down Inventory Level, Ordering Variance, Stock out rate and Order Fulfillment Lead