BARILLA SpA Case Study

Presented by Bishwa Prakash Pati u408014 Brahma Prakash Pati u408015 Ranjeeta Pattnaik u408039 Dambaru kar u408053

COMAPNY BACKROUND
- Founded by Pietro Barilla in 1875 - Opened shop in Parma, Italy - Subsequently run by son Ricardo, passed to his own sons Pietro & Gianni - 1990 - Largest Pasta maker in world - During 1960 constructed .25 million sq.m.Pasta plant in Pedrignano

Background cont.........
- 1971 - company sold to W.R. Grace,Inc. USA - 1979 Grace sold the company back to Pietro - 1980 annual growth rate of 21% - Growth achieved through expansion of existing business & acquisition of new business - Brands BARILLA, VOIELLO & BRAIBANTI - 1990 7 Divisions 3 Pasta division, Bakery Product division, Fresh bread division,Catering division & International division

INDUSTRY BACKGROUND
- Origin of pasta unknown - Per capita Pasta consumption in Italy averaged 18 kilos per year - 1980 market grew by less than 1 % - 1990 Semolina & Fresh Pasta only growth segments - export market was experiencing record growth

PRODUCTS
- Fresh Products Fresh Pasta shelf life of 21 days,fresh bread shelf life 1 day - DRY Products Medium shelf life of 10 to 12 weeks or Long shelf life of 18 to 24 months

CHANNELS OF DISTRIBUTION

SALES & MARKETINGS

- Advertising - Trade Promotions - Sales representatives

JITD Program
- 1980 Barilla witnessed Fluctuating demand - Extreme demad variability strained Barilla manufacturing and logistic operatons - 1987 Brando Vitali then Barilla director of logistics felt both manufacturers & retailers were suffering fron thinning margins - Early 1988 he thought of JITD Program

JITD cont....
- Rather than send product to the distributor as per their internal Planning - He suggested they should send only what is needed at the stores - To consider distributor shipment data for forecasting - He suggested sending product only as it is needed rather than building huge inventory at both areas

JITD cont....
- He suggested they reduce distribution & inventory cost to ultimately reduce manufacturing costs - Resistance from within the company Sales & marketing Personnel

Remarks of Sales & marketing

- Our sales level would flatten - We run risk of not being able to adjust our shipment sufficiently quickly to meet demand - objection from distribution channels - we would not be able to run Trade promotions with JITD - It is not clear what cost would be reduced

Vitali Counter to concerns

- JITD should be considered selling tool - We offer coustomers extra service at no extra cost - Program will improve Barilla Visibility - It would improve relations with Distributors - Distributor data would improve our Planning process

Change
- 1988 Giorgio Maggiali appointed as director of logistics as Vitali promoted - Maggiali appointed Vincenzo to help develop JITD Program - Implementation was difficult as manager of one distribution said managing my stock is my Job

Two Important Issues

- Extreme variations in distributors order patterns have caused severe operational inefficiencies and cost penalties for Barilla - In JITD program Barilla's own Logistics organisation will specify delivery quantity to distributor whereas normal process is reverse.