Post on 05-Apr-2018
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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.)
Barilla dryproductfactories
Grandedistribuzione
Distribuzioneorganizzata
ChainSupermarket
IndependentSupermarket
18
Barilla-rundepots
SignoraMaria Shops
65% TL
TLTL
TL90%
35%
LTL
LTL
LTL
10%
TL = Delivery in truckload quantities.
LTL = Delivery in less-than-truckload quantities
BarillaCDCs
InventoryDry = 2 weeks
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Barilla distribution patterns (cont.)
Barilla dryproductfactories
Grandedistribuzione
Distribuzioneorganizzata
ChainSupermarket
IndependentSupermarket
18
Barilla-rundepots
SignoraMaria Shops
65% TL
TLTL
TL90%
35%
LTL
LTL
LTL
10%
TL = Delivery in truckload quantities.
LTL = Delivery in less-than-truckload quantities
BarillaCDCs
InventoryDry = 2 weeks
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Barilla distribution patterns (cont.)
Barilla dryproductfactories
Grandedistribuzione
Distribuzioneorganizzata
ChainSupermarket
IndependentSupermarket
18
Barilla-rundepots
SignoraMaria Shops
65% TL
TLTL
TL90%
35%
LTL
LTL
LTL
10%
TL = Delivery in truckload quantities.
LTL = Delivery in less-than-truckload quantities
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