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Case: Barilla SpA A

Outline. Case overview (the value of information). Giorgio Maggiali,1990, Presently director of logistic, Barilla SpA (world's largest pasta producer)Brando Vitali,1988,Previos director of logistic, Barilla SpAIntroduced Just-in-Time-Distribution(JITD) was modelled after the popular

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Case: Barilla SpA A

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    1. Presented by: Luu Quoc Dat (Peter) D9801801 Olvin B9501012 Bireswar M9821809 Tony D9801002 Case: Barilla SpA (A)

    2. Outline

    3. Case overview (the value of information) Giorgio Maggiali,1990, Presently director of logistic, Barilla SpA (world’s 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

    4. Introduction

    6. 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)

    7. Plant Network

    8. Plant Network (cont.)

    9. Plant Network (cont.) The company headquarters is near the northern CDC.The company headquarters is near the northern CDC.

    10. Product (Fresh &Dry) The products including pasta, bread and snacks. barilla followed a carefully chosen production sequence let temperature and humidity remains stable To keep changeover costs low and product quality high. Barilla’s pasta plants were specialized by the type of pasta produced in the plant. Even within the same family of pasta products, individual products were assigned to plants based on the size and shape of the pasta. Its because of the different sizes of equipment required.The products including pasta, bread and snacks. barilla followed a carefully chosen production sequence let temperature and humidity remains stable To keep changeover costs low and product quality high. Barilla’s pasta plants were specialized by the type of pasta produced in the plant.Even within the same family of pasta products, individual products were assigned to plants based on the size and shape of the pasta. Its because of the different sizes of equipment required.

    11. Channels of Distributions Product Categories Barilla divided its entire production line into two categories Dry: Made of little more than semolina flour, water, and salt, dried pasta can be stored at room temperature almost indefinitely. Fresh: It contains eggs and additional water, fresh pasta is more tender than dried and takes about half the time to cook.

    12. Barilla distribution patterns

    13. Barilla distribution patterns (cont.)

    14. Barilla distribution patterns (cont.)

    15. Barilla distribution patterns (cont.)

    16. 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 distributors’ order requirements was extremely expensive.

    18. 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.

    21. The director of logistics suggests: Implementation of Just-in-Time Distribution (JITD) with Barilla’s 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 stock level data; then Barilla could look at all of the data and make replenishment decisions based on Barilla’s forecasts.

    22. Resistance from the Distributors “Managing stock is my job; I don’t 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 don’t offer some sort of incentive?” “If space is freed up in our distributors’ warehouses…the distributors would then push our competitors’ product more than ours.” “…the distribution organization is not yet ready to handle such a sophisticated relationship.”

    23. 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.

    24. Barilla paid for transportation Providing incentives of 2 – 3% Discount for orders in full truckload quantities Full Truckload Not-Full Truckload 2-3% Discount No Discount

    25. 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 12“canvass”periods, 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.

    26. No Minimum or Maximum Distributor could buy as many as products as desired to meet current and future demand

    27. Distributors placed order once per week Barilla send product in 8-14 days

    29. How can the firm cope with the increase in variability?

    30. 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

    31. Conclusion Variations in distributors’ order patterns have caused severe operational inefficiencies and cost penalties for Barilla. In JITD, Barrilla’s own logistics organization would specify the appropriate delivery quantities-those that would more effectively meet the end consumer’s needs yet would also more evenly distribute the workload on Barilla’s manufacturing and logistics systems.

    32. THANK YOU FOR YOUR ATTENTION

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