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Barilla Spa Case Study

Internet Business & ManagementCourse Offered by : Prof. J.J Rho

Ardimas | Riri | Phoumen | Pornprom

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Contents

• Background

• Problem analysis & solving

• Conclusion

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BACKGROUND

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Company Background

• Founded in 1875, small shop + experimental area on pasta

• Vertically integrated with Flour mills, pasta plants, bakery-product factories

• Differentiated product : – high-quality product supported

by innovative marketing programs

– Creating strong brand name + brand image

– Selling pasta in a sealed cardboard box

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Industry Background• Average pasta consumption

18kgs per year per capita• Limited seasonality in pasta

demand• Pasta market show flat trends– Semolina pasta & fresh pasta :

the only growth segment– Export market was growing

Saw it as excellent opportunity

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Technology Support

• Large flour mills, pasta plants, fresh bread plants

• Owned high-tech R&D facilities• Pilot production plant developing , testing

new products & product processes

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Sales & Marketing

Combination of Advertising & Promotions

Sales & Marketing Strategy

Sales Represen

tatives

Promotion AdvertisingAdvertising• Heavily advertised• Branding : Highest quality ,

most sophisticated pasta product, modern

• Engaged with famous athletes, celebrities

• Focus on developing & strengthening loyal relationship with Italian families

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Sales & Marketing (contd)

Trade Promotion• Promotion based strategy• Divided 1 year to 12 ‘canvass’

period,corresponding a promotional program with different product in each program– At anytime, buyers could buy as many as

possible– Incentives were given to those achieving

sales target

• Offering volume discount– Paid for transport if buyer buy truckload

quantities– Sales representative offer 1000 lire per

carton discount, if they buy a minimum 3 truckloads

Sales Representatives• Set up in store promotions• Took note of competitive

information• Ordering strategies with

store management

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BARILLA’S SUPPLY CHAIN

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DISTRIBUTION

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Distribution(1)

3 Types of Retail outlets : • Small independent grocers , • supermarket chains, • independent supermarkets

Distributors placed order

Ordered products send 8 -14 days after

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Distribution(2)

• Nearly all distributors had computer-supported ordering system– But few had forecasting system / analytical tools to determine order

quantities

Resulted in fluctuating demand of product

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Distribution(3)

• Distributor has the pressure to add more inventory + added items that they currently don’t have.

• Barilla thinks that distributors & retailers carries too much inventory– Some products is difficult to quickly

produced– Holding sufficient finished products

was expensive

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INFORMATION & SC PERFORMANCE

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Factors Related

• More than 800 Types of Products• Absence of Forecasting Tools in Distributor’s

Side• Specialized Plants for Each Types of Product

Long Production Time

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PROBLEM ANALYSIS & SOLVING

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Distribution Problem• Large Number of product

– Dry: 800 different package of SKU– Pasta: 200 different sharp and size and 470 different package.

• Different size and shape of product need different time• Promotion

– Price and Transportation: discount • No forecasting system

– Simple periodic review the inventory– Follow the replenishment ordering

• Fluctuate product order• Distributor manage their own if inventory• Lack information from distributor and retailer• Manufacturer wait the order from distributor

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Distribution Problem

High Inventory LevelAnd

Stock-out

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Distribution Problem

• High Inventory Level:– Labor cost: administrative, tracking and tracing…– Cash flow: cash will hold in the inventory, not in

business– Carry cost: product expire, insurance, inventory

cost• Stock out– Lost customer – Lost sale opportunity

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JITD & IMPLEMENTATION

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Solution

New IDEA – Don’t wait for the order for distributors– Send what the distributors will need

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Just In Time Distribution (JITD)

• JITD system - known as Vendor Managed Inventory (VMI)

1. Collect data from Distributors2. Make a prediction system3. Make decision rule base on information

getting

• Distributors reacted :– unwilling to give their authority to place

orders,– Reluctant to provide detailed sales data– Benefit for only Barilla– Prefer to sell the information

The Information regarding the supply of distributors provides us with objective data that would permit us to improve our own planning procedures - -Brando Vitalli-

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Just In Time Distribution (JITD)

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Just In Time Distribution (JITD)

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Just In Time Distribution (JITD)

• All Barilla’s JITD customers were linked electronically to headquarters

• Sent Data :– Inventory level– Previous day sell-through– Previous day stock-out– Advance order for any

promotions

Barilla made the shipment decision

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CONCLUSION

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SCM at a glance• SCM is the management of a network of all

business processes and activities involving procurement of raw materials, manufacturing and distribution management of Finished Goods.

• SCM is also called the art of management of providing the Right Product, At the Right Time, Right Place and at the Right Cost to the Customer.

Source: http://www.managementstudyguide.com/supply-chain-management-definition.htm

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ConclusionImportance• Competitive Edge through

Core Competencies– Reduced inventories along the

chain– Planning being done in

consultation rather than in isolation

• Value Advantage– Better information sharing

among the partners

Benefits• Boosts customer service

– Better customer service– Better trust among the partners

leading to win-win

• Improve bottom line– Lower costs– Efficient manufacturing

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Barilla Spa Case Study

Internet Business & ManagementCourse Offered by : Prof. J.J Rho

Ardimas | Riri | Phoumen | Pornprom