Barilla S.p.

A
GROUP 3

Case Facts

Started in 1875 as a small shop in Parma, Italy

By 1990, Barilla SPA became the Worlds largest
pasta producer
Pasta Share - 35% in Italy and 22% in Europe
Fresh Products had 21 day Shelf Lives
Dry Products had Long ( 18 to 24 Months) or
Medium(10 to 12 weeks) Shelf Lives
800 SKUs of Dry Products

Distribution System
PLANT
65
%

35
%

CDCs

Flow of
Information

Barilla run
depots
GDs

Chain supermarkets

Customers

CDC = Central Distribution Centre

GD = Grand Distributors
DO = Organized Distributors

DOs

Independent
supermarkets

Customers

Signora Maria Shops

Customers

Issues Faced

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

Bull Whip Effect

Barilla
Plant

Barilla
DC

Distributor

Retailer

Consumer

Causes of Bullwhip Effect

Inaccuracies in Demand Forecasting

Long Lead Times
Price fluctuation due to Promotional activities
Order batching
To reduce ordering Cost
To take advantage of Transportation economics such as full
truck load
Sales incentive
Forward buying due to promotional activities to get benefit
from lower price

Just In Time Distribution

(JITD)
JITD system or Vendor Managed Inventory (VMI)
1.Collect data from Distributors
2.Make the distribution process responsive
3.JIT distribution can make sure you arent paying for goods
that you dont need right now, and might never need.
(Perishable Items)

Challenges from Distributors:

.They were unwilling to give up their authority to place orders
.Were reluctant to provide detailed sales data
.Saw Benefit only for Barilla
.Preferred to sell the information rather than share it.

JIT Experiments
Florence Depot:
Results:
Inventory dropped from 10.1 days to 3.6 days
Service level to retail stores increased from 98.9%
to 99.8%
Challenges:
Depots staff was not comfortable working with
such low inventory levels
Inventory levels finally allowed to increase to 5
days

Milan Depot:
Similar performance improvement as Florence
Marchese DC of Cortese:
Prior to JITD
Stock out rate : 2 to 5% ( Occasionally as high as 10 to
13%)
After JITD
Negligible stock out rate of less than.25%(Never

Expansion of JITD Program

Barilla approached other distributors based on the credibility of its experiments and its
results.
Developed a protocol which could be used to communicate with all distributors.

Distributors each day sent following information to

Barilla Electronically
1.
Customer code number to identify customer
2.
Inventory for each SKU carried by DC
3.
Previous days sell through-All shipments of Barilla products out of DC to
consumers on the previous day
4.
Stock outs on previous day for every Barilla SKU carried by DC
5.
An advance order for any promotions that the customer planned to run in the
future
6.
Preferred delivery carton size

This coding system would have the following advantages:

. Information can be received through any code
. Real Time data sharing
. MIS Improved Analytics

Takeaways

Effective Demand Forecasting ensures a robust supply chain.

Excessive fluctuation(SD) leads to increased Average Inventory
Level, poor USL and frequent stock-out.

Information centralization reduces Bullwhip Effect and enhances

inventory management system

Pull based vs Push based systems

Involvement of Top management is important

Effective Communication of the Win-Win Proposition to Customers

Thank You