Barilla Case Report
SUMMARY
Barilla SpA, an Italian manufacturer and world’s largest pasta producer that sells to its retailers largely through third-party distributors, experienced widely fluctuating demand patterns from its distributors during the late 1980s and Barilla suffered increasing operational inefficiencies and cost penalties. Brando Vitali, Barilla’s ex-Director of Logistics, proposed a Just-In-Time Distribution (JITD) system to counter this demand variation. This system required the distributors to share their sales data with Barilla, who would then forecast and deliver appropriate amounts of products to the distributors at the right time in order to effectively meet demand. This was a radical change from the current and more traditional supply-chain setup where the distributors were not sharing any data and could place orders at will. This new system brought resistance within Barilla's different functional areas and within the distributors Barilla approached with the proposal.
ISSUES IDENTIFICATION
Bullwhip Effect
The extreme demand variability due to Bullwhip effect in entire supply chain seriously strained Barilla’s manufacturing and logistics operations (see Exhibit 12).
Unanticipated Demand
- Barilla’s highly automated manufacturing system was not designed to accommodate large fluctuations in demand nor, was it designed to accommodate sudden changes in demand or product. For example the manufacturing sequences of pasta production made it very difficult to produce particular types of pasta that had been sold out due to unexpectedly high demand. The temperature and humidity in the kiln had to be precisely specified for each size and shape of pasta and had to be tightly controlled to ensure that quality was maintained. This procedure limited the ability to rapidly shift production between different pastas.
- Different sizes of pasta were also made in different plants based on the variety of equipment required for pasta production. This limited
Barilla SpA, an Italian manufacturer and world’s largest pasta producer that sells to its retailers largely through third-party distributors, experienced widely fluctuating demand patterns from its distributors during the late 1980s and Barilla suffered increasing operational inefficiencies and cost penalties. Brando Vitali, Barilla’s ex-Director of Logistics, proposed a Just-In-Time Distribution (JITD) system to counter this demand variation. This system required the distributors to share their sales data with Barilla, who would then forecast and deliver appropriate amounts of products to the distributors at the right time in order to effectively meet demand. This was a radical change from the current and more traditional supply-chain setup where the distributors were not sharing any data and could place orders at will. This new system brought resistance within Barilla's different functional areas and within the distributors Barilla approached with the proposal.
ISSUES IDENTIFICATION
Bullwhip Effect
The extreme demand variability due to Bullwhip effect in entire supply chain seriously strained Barilla’s manufacturing and logistics operations (see Exhibit 12).
Unanticipated Demand
- Barilla’s highly automated manufacturing system was not designed to accommodate large fluctuations in demand nor, was it designed to accommodate sudden changes in demand or product. For example the manufacturing sequences of pasta production made it very difficult to produce particular types of pasta that had been sold out due to unexpectedly high demand. The temperature and humidity in the kiln had to be precisely specified for each size and shape of pasta and had to be tightly controlled to ensure that quality was maintained. This procedure limited the ability to rapidly shift production between different pastas.
- Different sizes of pasta were also made in different plants based on the variety of equipment required for pasta production. This limited