Barilla Spa v2.0.Orig

7/31/2019 Barilla Spa v2.0.Orig

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The Value of Information

Barilla SpA

Group 2


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Italian Pasta Industry

Italians adore pasta Avg per capita consumption 18kg peryr

Limited seasonality in demand, Special pasta for pastasalads, Egg pasta & lasagna for Easter

Highly fragmented, 2000 pasta manufacturers

Price sensitive

Italian Market stagnant with 1% Growth Rate

Export Market Rising with 20-25% Growth Rate/Year


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Founded in 1875 in Parma, Italy

Differentiated through Quality and Innovative Marketing

cardboard boxes, large scale advertising

By 1990, Largest Pasta Manufacturer in World

State of the Art R&D facility and Pilot Production

Plant

Vertically integrated - flour mills, pasta plants and bakeryproduct factories

Barilla The Company


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Fresh Product

Fresh pasta - 21 dshelf life

Fresh bread 1 dshelf life

25% of sales

Dry Product

Dry pasta & toasts -18 24 m shelf life

Cookies - 10 -12 wshelf life

75% of Sales

Product Type


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Distribution System

Fresh products from CDC to 70 Regional Warehouses by independent agents

Dry product mostly from CDC to Supermarket through Distributors own warehouse

3 Types of Retail Outlets Small Independent Groceries, Supermarket Chains &Independent Supermarket

Distributors Warehouse keeps 2 week Supply

Stores order daily with 24-48 hours lead time

Average Lead Time 10 days between Barilla and Distributors


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Sales and Promotion

Promotion based Sales Strategy

Use of Trade Promotion to Push Products

4-5 weeks Canvas Period where Distributor can buy asmuch as wish

Volume Discount also offered

Sales & Marketing Division has incentive


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Reasons For Increase in Variability

Demand is Distributor order driven

No sophisticated forecasting System

Simple periodic inventory review System

No system of POS data from retailer

Price fluctuations Sales promotions


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Coping with variability

Better SC communication (mainly in outbound logistic) such as PoS data

Centralized demand information

More accurate forecast mechanisms

Curb promotion & trade discount

Lead time reduction i.e. Reduce the no. of SKUs if so possible

Vendor Managed Inventory


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Impact of transferring demand

information across SC

Improved sales planning & forecasting

Reduced variability in SC

Improvedcoordination betweenmanufacturing , distribution & retail systems

Lead time reductions

Rapid resolution of supply problems


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VMI strategy to solve operational

problems of Barilla

Lets manufacturer maintain inventory at retailer outlet

Better coordination & information flow in supply chain

Able to get PoS data at retail level

Reduce operational issues

Reduced bullwhip effect


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Dealing with conflicting goals of

Partners and Facilities

Short term phenomenon sincepush sale will stop

Will vanish in the long runconsidering pull from retailers

Concern: Saleslevels will flatten

Distributors will have a minimumsafety stock for contingency

A longer strike can affect presentsupply level as well

Concern: Strikeor other

disturbances


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Short term issue

Trend analysis of different distributors will ensureadequate supply

Concern: Supply isnot flexible

JITD will not lead to free space since distributorswill rather get rid of over stocking

Cost saved through JITD can be used for marketing

Barilla - biggest player with 35% share of pastamarket in Italy

Concern:Competitors will

use up distributors

free space


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Order delivery will be faster when exactmarket demand known and productiondone accordingly

Concern:Instead of JITD,

focus on fast

order delivery

JITD will reduce distributors cost as well,since barilla will not ask distributors toover-stock

Barilla may pass on a portion of savedcost to the distributors

Concern: Whywould

distributors helpBarilla reduce itscost


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Barilla Spa v2.0.Orig

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