Barilla Case Study: Operational Ineffeciencies
Case Presentation Barilla SpA
Introduction
Company & Industry background • World’s largest pasta producer in 1990 • Pasta Share - 35% in Italy and 22% in Europe Channels of Distribution • Products divided in 2 categories – “Fresh” and “Dry” • Fresh Products had 21 day Shelf Lives • Dry Products had Long ( 18 to 24 Months) or Medium(10 to 12 weeks) Shelf Lives • Retail Outlets – Small independent
The Issue
• During the late 1980s, Barilla suffered increasing operational inefficiencies and cost penalties that resulted from large week-to-week variations in its distributors’ order patterns
Distribution Procedure
• Original flow of goods and information
PLANT CDC’s Barilla run depots GD’s Chain supermarkets DO’s Independent supermarkets “Signora Maria” Shops
Customers
Customers
Customers
*CDC = Central Distribution Centre GD = Grand Distributors DO = Organized Distributors
Sales and Marketing
• Advertising – Heavy, Brand Positioned as the Highest Quality • Trade promotions – Frequent • Canvass period, 10 to 12 in a year, typical duration of 4 to 5 weeks • Distributor could buy as much product as desired to meet present and future needs at the offered discount • Volume Discounts also given • Sales representatives used more at DO’s than GD’s – Merchandise Barilla Products – Set up In-Store Promotion – Take note of competitor’s prices, stockouts, new product launches – Work out ordering strategies for the retailer etc
• Demand Fluctuations • Just in Time Distribution
Variability in Demand
• Reasons
– – – – Transportation discounts Volume discount Promotional activity No minimum or maximum order quantities – Product proliferation – Long order lead times – Lack of forecasting systems or sophisticated analytical tools at Distributer’s end
Exhibit 12: Demand Fluctuations
Variability in Demand
• Methods employed to counter variability
– Holding buffer FGs to meet Distributor requirements – Asking Distributors/Retailers to carry
Introduction
Company & Industry background • World’s largest pasta producer in 1990 • Pasta Share - 35% in Italy and 22% in Europe Channels of Distribution • Products divided in 2 categories – “Fresh” and “Dry” • Fresh Products had 21 day Shelf Lives • Dry Products had Long ( 18 to 24 Months) or Medium(10 to 12 weeks) Shelf Lives • Retail Outlets – Small independent
The Issue
• During the late 1980s, Barilla suffered increasing operational inefficiencies and cost penalties that resulted from large week-to-week variations in its distributors’ order patterns
Distribution Procedure
• Original flow of goods and information
PLANT CDC’s Barilla run depots GD’s Chain supermarkets DO’s Independent supermarkets “Signora Maria” Shops
Customers
Customers
Customers
*CDC = Central Distribution Centre GD = Grand Distributors DO = Organized Distributors
Sales and Marketing
• Advertising – Heavy, Brand Positioned as the Highest Quality • Trade promotions – Frequent • Canvass period, 10 to 12 in a year, typical duration of 4 to 5 weeks • Distributor could buy as much product as desired to meet present and future needs at the offered discount • Volume Discounts also given • Sales representatives used more at DO’s than GD’s – Merchandise Barilla Products – Set up In-Store Promotion – Take note of competitor’s prices, stockouts, new product launches – Work out ordering strategies for the retailer etc
• Demand Fluctuations • Just in Time Distribution
Variability in Demand
• Reasons
– – – – Transportation discounts Volume discount Promotional activity No minimum or maximum order quantities – Product proliferation – Long order lead times – Lack of forecasting systems or sophisticated analytical tools at Distributer’s end
Exhibit 12: Demand Fluctuations
Variability in Demand
• Methods employed to counter variability
– Holding buffer FGs to meet Distributor requirements – Asking Distributors/Retailers to carry