Barilla Spa
Barilla SpA was founded in 1875 by Pietro Barilla and has evolved into a large, vertically integrated corporation with flour mills; pasta and bakery factories located throughout Italy and is a global leader in producing and selling a multitude of these goods.
Review of this case study shows a core problem of weekly demand fluctuations in the distribution order patterns which impacted manufacturing and other chains in the system. The fluctuations brought increasing operational inefficiency and cost penalties. The Logistics Director – Giorgio Maggiali was faced with huge resistance on the innovative idea of Just in Time Distribution (JITD); both internally with sales and marketing team, and externally with the distribution network. This underlying problem was preventing Barilla from maximizing productivity and simultaneously profitability (reduce costs, ensure adequate inventory level). The lack of appropriate logistics program resulted in extreme demand fluctuations, long lead times (8-14 days replenishment lead time); insufficient and inefficient communication between distribution partners, high inventory carrying costs, and their discount/promotions programs just as well magnified the issue at hand.
The JITD would drastically bring many benefits to Barilla and also transform other business units. Rather than placing traditional orders with the factories, the distributors will instead provide demand information from distribution or retail locations. The use of factual data would help the logistics team optimize plan upon which to base production and distribution. It would eliminate demand fluctuation and the lack of forecasting; it would enable logistics and underlying chains adequately and timely replenish orders and eliminate stock outs. This would also result in reduced manufacturing costs, reduced inventory and carrying costs, enhance production planning ability, and increased supply chain visibility.
A recommended approach for executing the JITD
Review of this case study shows a core problem of weekly demand fluctuations in the distribution order patterns which impacted manufacturing and other chains in the system. The fluctuations brought increasing operational inefficiency and cost penalties. The Logistics Director – Giorgio Maggiali was faced with huge resistance on the innovative idea of Just in Time Distribution (JITD); both internally with sales and marketing team, and externally with the distribution network. This underlying problem was preventing Barilla from maximizing productivity and simultaneously profitability (reduce costs, ensure adequate inventory level). The lack of appropriate logistics program resulted in extreme demand fluctuations, long lead times (8-14 days replenishment lead time); insufficient and inefficient communication between distribution partners, high inventory carrying costs, and their discount/promotions programs just as well magnified the issue at hand.
The JITD would drastically bring many benefits to Barilla and also transform other business units. Rather than placing traditional orders with the factories, the distributors will instead provide demand information from distribution or retail locations. The use of factual data would help the logistics team optimize plan upon which to base production and distribution. It would eliminate demand fluctuation and the lack of forecasting; it would enable logistics and underlying chains adequately and timely replenish orders and eliminate stock outs. This would also result in reduced manufacturing costs, reduced inventory and carrying costs, enhance production planning ability, and increased supply chain visibility.
A recommended approach for executing the JITD