(C4) Barilla SpA2009

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Presented by:

Luu Quoc Dat (Peter) D9801801

Olvin B9501012Bireswar M9821809

Tony D9801002

Case: Barilla SpA (A)

Supply Chain Management

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Outline

Introduction

Plant Network

Channels of Distribution

Problem Facing

JITD(Just-in-Time Distribution)

Question & discussion

Conclusion

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Case overview (the value of information)

Giorgio Maggiali,1990, Presently director of logistic,

Barilla SpA (worlds largest pasta producer)

Brando Vitali,1988,Previos director of logistic, Barilla

SpA Introduced Just-in-Time-Distribution(JITD) was modelled

after the popular just-in-Time manufacturing concept

Maggiali, strong supporter of JITD, but how to implement

it

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Barilla SpA wasfounded in 1875, Italy,

Parma Mr. PietroBarilla,(laboratory)

Pietros son Ricardoled the company in1940.1971 Mr.

Barilla build up thelargest In pasta plant

Italy

1971 Mr. Barilla indebt sold the

company to the U.S,multinational firmW.R. Grace, Inc

Introduction

Company Background

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Grace broughtadditional capital

investment andprofessional

Management andlaunched an important

new Mulino Bian co(White Mill)line of

bakery product

1979 Grace sold thecompany back to

Pierto Berlia .Duringthe 1980 Berlia

enjoyed an annualgrowth rate of over

21%

1990s Barilla is thelargest pasta

Manufacturer in theworld, making 35% ofthe pasta sold in Italy,and 22% of the pasta

sold in Europe

Introduction (cont.)

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Industry Background

Some believe it originated in China and brought it to Italy by Marco

Polo in the 13th century

Using a bas relief on a third century tomb (near Rome) try to prove

it originated in Italy

Per capital pasta consumption is highest in Italy (nearly 18 kilos)

than other western European country

In the late 1980 Italian pasta market was relatively flat, growing less

than 1% per year

In 1990 the Italian pasta market was estimated at 3.5 trillion lire.

Export market was growing up at the same time

In 1990 it was expected to rise 20-25%

2/3rd of this increase would be attributed to eastern European

country(low priced basic food products)

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25 Plants, including

large flour milks,

pasta plants and

fresh bread plant

Plant Network

PP PP

PP

P

PP

PP

P

P PP

P

P

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Northern & Southern

Central Distribution

Center

PP PP

PP

PPP

PP

P

P PP

P

P

Plant Network (cont.)

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25 Plants

Maintaining state-of -the-art

research and development

(R&D) and a pilot

production plant in

Pedrignanao

Company headquarters

PP PP

PP

PPP

PP

P

P PP

P

P

Plant Network (cont.)

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PP PP

PP

PPP

PP

P

P PP

P

P

Products:

Fresh pasta,

Fresh bread,

Pasta,

Breadsticks,

Flour mill,

Noodles,

Cakes,.

Fresh products sales -

25%

Dry products sales -75%

Product (Fresh &Dry)

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Channels of Distributions

Product Categories

Barilla divided its entire production line into twocategories

Dry: Made of little more than semolina flour, water,

and salt, dried pasta can be stored at roomtemperature almost indefinitely.

Fresh: It contains eggs and additional water, freshpasta is more tender than dried and takes about halfthe time to cook. 25% of

Sales

75% ofSales

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Barilla distribution patterns

Barilla dryproductfactories

Grandedistribuzione

Distribuzioneorganizzata

ChainSupermarket

IndependentSupermarket

18

Barilla-rundepots

SignoraMaria Shops

65% TL

TLTL

TL

35%

LTL

LTL

LTL

TL = Delivery in truckload quantities.

LTL = Delivery in less-than-truckload quantities

BarillaCDCs

InventoryDry = 1 month

Fresh = 3 days

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Barilla distribution patterns (cont.)


Grandedistribuzione


ChainSupermarket


18

Barilla-rundepots

SignoraMaria Shops

65% TL

TLTL

TL90%

35%

LTL

LTL

LTL

10%



BarillaCDCs

InventoryDry = 2 weeks

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Grandedistribuzione


ChainSupermarket


18

Barilla-rundepots

SignoraMaria Shops

65% TL

TLTL

TL90%

35%

LTL

LTL

LTL

10%



BarillaCDCs

InventoryDry = 2 weeks

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Grandedistribuzione


ChainSupermarket


18

Barilla-rundepots

SignoraMaria Shops

65% TL

TLTL

TL90%

35%

LTL

LTL

LTL

10%



BarillaCDCs

70% 30%

InventoryDry = 10~12 days

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Just-In-Time-Distribution Program

Problem Facing (Barilla): increasingly felt the effects of

fluctuating demand; weekly demand swung so much and was

so difficult to predict (see figure).

The specific sequence of pasta production made it difficult to

quickly produce a particular pasta that had been sold out.

Holding plenty finished goods inventories to meet distributorsorder requirements was extremely expensive.

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Fluctuating Demand

Figure 5-3: Weekly demand for Barilla dry product from Corteses Northeast Distribution Center to the Pedrignano CDC, 1989

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Problem Facing (distributors):

Carrying too much inventory;

Service levels to the retailers were unacceptable;

A lack of forecasting systems or sophisticated analytical

tools for determining order quantities.

Just-In-Time-Distribution Program (cont.)

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Inventory Level

mean

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Service Level

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The director of logistics suggests: Implementation of Just-in-

Time Distribution (JITD) with Barillas distributors.Key concept:

look at all of the distributors shipment data and send only what

is needed at the stores (rather than send product to the

distributors according to their internal planning processes);

Barilla is responsible for creating the delivery schedules.

How would this work?

every day each distributor provided Barilla shipment and stocklevel data;

then Barilla could look at all of the data and make

replenishment decisions based on Barillas forecasts.

Just-In-Time-Distribution Program (cont.)

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Resistance from the Distributors

Managing stock is my job; I dont need you to see my warehouse or my

figures.

I could improve my inventory and service level myself if you would deliver

my orders more quickly

We would be giving Barilla the power to push products into our warehouse

just so that Barilla can reduce its costs.

Our sales levels would flatten if we put this program in place.

How can we get the trade to push Barilla product to retailers if we dont

offer some sort of incentive?

If space is freed up in our distributors warehousesthe distributors would

then push our competitors product more than ours.

the distribution organization is not yet ready to handle such a

sophisticated relationship.

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How Can Maggiali Solve the Implementation Problems?

Demonstrate that JITD benefits the distributors (lowering

inventory, improving their service levels; decrease their

inventories, improve their fill rate to their store and increasing

their returns on assets)

Maggiali needs to look at JITD not as a logistics program, but

as a company-wide effort.

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Barilla paid for transportation

Providing incentives of2 3%Discount for orders in full

truckload quantities

Full Truckload Not-Full Truckload

2-3% Discount No Discount

Answer1Transportation Discounts

Question 1: What are the reasons for the increase in variability

in Barillas supply chain?

Question & Discussion

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Volume Discounts

1,000 lire per cartoon discount (4 % discount) for minimum

purchase of 3 truckloads of Barilla egg pasta.

Promotional Activity

Divided each year 10 or 12canvassperiods, four to five weeks

in length;

During this time Bailla distributor could buy as many as product;

Sales representatives gets incentatives based on achieving sales

target;

Promotional discounts are different on different product.

Answer1

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No Minimum or Maximum

Distributor could buy as many as products as desired tomeet current and future demand

Answer1Order Quantities

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Distributors placed order once per week

Barilla send product in 8-14 days

Answer1Long Order Lead Time

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Answer1

Product Flow

Information Flow

Poor Communication

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How can the firm cope with the increase invariability?

Question2

Eliminating Discount & Promotion

Constrain the order quantity by stocks

Decrease SKUs of products

EDI (Electronic Data Interchange )

JITD (Just-In-Time-Distribution)

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Question 3: What are the impacts of transferring demand

information across the supply chain?

Delivery decisions and improve demand forecasts are the

greatest impacts of this information sharing.

Question 4: Can the vendor managed inventory strategy solve

the operational problems faced by Barilla?

Yes

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Conclusion

Variations in distributors order patterns have caused severe

operational inefficiencies and cost penalties for Barilla.

In JITD, Barrillas own logistics organization would specify the

appropriate delivery quantities-those that would more

effectively meet the end consumers needs yet would also more

evenly distribute the workload on Barillas manufacturing and

logistics systems.

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THANK YOU FOR YOUR

ATTENTION

Documents

(C4) Barilla SpA2009