Barilla Case: Causes of Fluctuation
1. What are the causes of fluctuation? (20 points) Fluctuation of Raw Materials Pasta is produced with various types of raw material, including wheat and egg. If the supply of raw materials has high level of fluctuation, (which may be caused by weather condition or cost of raising chicken) then the production and supply of pasta will be influenced.
Diverse Product Category Barilla’s products are divided into Fresh products and Dry products. The demand for these two distinct kinds of products is quite different, and the order, shipment and delivery methods for them are also various.
Diverse Distribution Methods Three different types of retail outlets – small independent grocers, supermarket chains, and independent supermarkets, make the demand pattern more complex and delivery method have higher level of variety, which bring more fluctuation.
Marketing Strategy Advertising, promotions and sales representatives will all influence the demand for pasta. They may cause great increase in demand within very short time, which result in fluctuation in demand. Moreover, different products are offered with the discount in different period, which make the demand unstable and more difficult to forecast.
Distribution Process First of all, there is no limitation for order quantities size of the distributor, which results in various demand quantities and high level of fluctuation. Second, distributor’s ordering pattern and volumes is varied from each other, which makes demand various from time to time. In addition, most distributors’ inventory systems are simple, and few had forecasting systems or sophisticated analytical tools for determining order quantities. As a result, it is difficult to forecast the accurate demand.
2. What are the costs of fluctuation? (10 points) When there is fluctuation on the demand, it is very difficult to Barilla, as the manufacturer of many different products with different
Diverse Product Category Barilla’s products are divided into Fresh products and Dry products. The demand for these two distinct kinds of products is quite different, and the order, shipment and delivery methods for them are also various.
Diverse Distribution Methods Three different types of retail outlets – small independent grocers, supermarket chains, and independent supermarkets, make the demand pattern more complex and delivery method have higher level of variety, which bring more fluctuation.
Marketing Strategy Advertising, promotions and sales representatives will all influence the demand for pasta. They may cause great increase in demand within very short time, which result in fluctuation in demand. Moreover, different products are offered with the discount in different period, which make the demand unstable and more difficult to forecast.
Distribution Process First of all, there is no limitation for order quantities size of the distributor, which results in various demand quantities and high level of fluctuation. Second, distributor’s ordering pattern and volumes is varied from each other, which makes demand various from time to time. In addition, most distributors’ inventory systems are simple, and few had forecasting systems or sophisticated analytical tools for determining order quantities. As a result, it is difficult to forecast the accurate demand.
2. What are the costs of fluctuation? (10 points) When there is fluctuation on the demand, it is very difficult to Barilla, as the manufacturer of many different products with different