Barilla SpA

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Barilla SpA

• Supply Chain Management
• Prof. Shuo-Yan Chou

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Group members
M9701017 ???(Sylvia)
M9701015???(Steve)
D9701106???
M9701006???(Jacob)
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Outline
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Outline
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Introduction
Products Pasta
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Introduction
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Outline
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Plant Network
25 Plants
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Plant Network
25 Plants Northern Southern Central
Distribution Center
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Plant Network
25 Plants Northern Southern Central
Distribution Center Company headquarters
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Plant Network
Products Fresh pasta, Fresh bread, Pasta, Breads
ticks, Flour mill, Noodles, Cakes, .
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Products
Fresh Products
Dry Products
Sales 25 Shelf life short
Sales 75 Shelf life medium/long
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Outline
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Channels of Distribution
Barilla dry product factories
SL 1 month
Barilla CDCs
18 Barilla run depots
Grande Distribuzione
Distribuzione Organizzata
Signora Maria Shops
Chain supermarkets
Independent supermarkets
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Channels of Distribution
Barilla dry product factories
SL 1 month
Barilla CDCs
18 Barilla run depots
JITD
SL 2 weeks
Grande Distribuzione
Distribuzione Organizzata
Signora Maria Shops
Chain supermarkets
Independent supermarkets
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Channels of Distribution
Barilla dry product factories
SL 1 month
Barilla CDCs
18 Barilla run depots
JITD
SL 2 weeks
Distribuzione Organizzata
Grande Distribuzione
SL 2 weeks
Signora Maria Shops
SL 1012 days LT 12 days
Chain supermarkets
Independent supermarkets
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Outline
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Problem Facing (Barilla)

• Weekly demand swung so much and was so difficult
  to predict
• 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
  distributors order requirements was extremely
  expensive

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Fluctuating Demand
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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

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Inventory Level
mean
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Service Level
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Outline
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JITD Program

• 1988, Vitali, Barillas director of logistic,
  proposed
• Key concept
• look at all of the distributors shipment data
• send only what is needed at the stores
• Barilla is responsible for creating the delivery
  schedules (VMI)
• How would this work?
• every day each distributor provided Barilla
  shipment and stock level data
• then Barilla could look at all of the data and
  make replenishment decisions based on Barillas
  forecasts.
• JITD Program is similar to using point-of-sale
  data

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Resistances on JITD

• Thats hard to come by given the structure of our
  distribution channel and the fact that most
  grocers in Italy arent equipped yet with the
  necessary bar-code scanners and computer
  linkages.
• We wouldnt be able to run trade promotions with
  JITD.
• The distribution organization is not yet ready to
  handle such a sophisticated relationship.
• Its not clear that costs would even be reduced.

Uncertainty
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Redirection on JITD

• 1988
• Marconi, a large, fairly old-fashioned GD
• Aldo, a large DO in Udine that's been a great
  customer of Barilla for years
• 1990
• In September, Battistini ran a JITD experiment at
  its Florence depot, using a personal computer to
  store the necessary data and perform computations
• Next targeted Barilla's Milan depot for a JITD
  trial

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Result

• Results of Internal Experiment in Florence

The shaded bar charts depict inventory levels at
the depots the line graphs depict each depot's
line fill rate to retailers.
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Outline
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The Value of Information
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The Causes of Variability
Question1

• What are the reasons for the increase in
  variability in Barillas supply chain?

• Transportation Discounts
• Volume Discounts
• Promotional Activity
• No Minimum or Maximum Order Quantities
• Product Proliferation
• Long Order Lead Time
• Poor Communication

Answer1
Price fluctuations
Demand Forecasting
Inflated orders
Lead time
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Transportation Discounts
Answer1

• Barilla paid for transportation
• Providing incentives of 2 3 Discount for
  orders in full truckload quantities

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Volume Discounts
Answer1

• 1,000 lire per cartoon discount (4 discount)
  for minimum purchase of 3 truckloads of Barilla
  egg pasta

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Promotional Activity
Answer1
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No Minimum or Maximum
Order Quantities
Answer1

• Distributor could buy as many as products as
  desired to meet current and future demand

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Product Proliferation
Answer1

• Barilla dry product were offered in 800 SKUs
• Pasta was offered in 470 SKUs in 200 different
  shapes

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Long Order Lead Time
Answer1

• Distributors placed order once per week
• Barilla send product in 8-14 days

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Poor Communication
Answer1
Product Flow
Information Flow
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The solution for increasing Variability
Question2

• How can the firm cope with the increase
  in variability?

Answer2

• Eliminating Discount Promotion
• Constrain the order quantity by stocks
• Decrease SKUs of products
• Build up Extranet Network
• EDI (Electronic Data Interchange )
• JITD (Just-In-Time-Distribution)

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VMI (Vender Managed Inventory)
Question3

• Can the VMI strategy solve the
  operational problems faced by Barilla?

Yes!
Answer3
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Outline
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Conclusion

• The Barilla case raises three important issues
• Bullwhip effect the increase in variability in
  the supply chain
• Global optimization vs. sequential optimization
• Vendor managed inventory(VMI)

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• Thank youFor your attention