Barilla Spa – Executive Summary

EXECUTIVE SUMMARY saltwort SpA, worlds largest manufacturer of pasta base in Italy is experiencing thorough command variableness resulting to operational inefficiency and annexd embody. To combat the key issues utter my decision is to implement the Just In Time dispersal (JITD). This newfangled formation, contrary to current system kali has will eliminate Bullwhip exertion and spr come on discloses by having centralized selective information, there will be selective information transp arncy between kali and distributors.Distributors will provide actual gross revenue data which will be the basis of forecasting and proceeds thereof increasing in efficiency in operation and alleviating stock extinct among distributors. JITD will calculate to improved supplier-customer relationship which in the long brave can be perceived as a win-win posture. Internal opposite coming from Sales and Marketing will be resolved by involving the top management and by presenting the be nefits of the JITD in figures and by emphasizing that reference of Sales police squad in JITD is of paramount to the implementation.External resistance will be combated by thorough discussion presenting the long term benefits of all parties involved. death penalty of JITD as soon as possible will position glasswort on even stronger pasta producer and will potentially increase growth rate of the company resulting from increased business efficiencies and skipd price. barilla can collect a pilot elude on the DO (Distribuzione Organizzata) where gross sales representatives functions are dominant, sales representatives are one of the key factors on the success of JITD implementation.Weekly shock between kelpwort and DO will pass on to take place for couple of months upon implementation to monitor its status. ISSUE acknowledgment A. Immediate Issue Because glasswort is facing extreme variability in demand week by week which causes operational inefficiencies, mellow enrolm ent and stock outs, Maggiali is fighting for the implementation of Just In Time Distribution (JITD) system despite of the internal objection from Sales and Marketing team and external resistance from distributors. B.Systemic Issues Poor Forecasting system character StrategicTiming petty term & Long term Most distributors like GDs and DOs ticktock inventory levels and place orders with Barilla erstwhile per week using artless periodic review. They do not follow any forecasting stick they just do replenishment ordering without minimum/maximum quantity. Barilla has no visibility on actual data, their basis of exertion is per distributors information per week and this causes pressure on manufacturing & distribution team of Barilla. Too many an(prenominal) SKUs & High level of inventory Nature StrategicTiming Long term & fiddling term On dry growths alone, Barilla offers 800 SKU. Pasta is made in 200 different shapes and sizes and has more than 470 packaged SKUs. Typically dist ributors carry 150SKU out of 800 SKUs Barilla leaving high inventory on the CDC. There is high level of inventory across the image overall there is slightly 2 months of inventory on the entire supply chain at any given time. Frequent Trade Promotion leads to Bulk parliamentary law Nature Tactical Timing Short termBarilla has 10-12 canvass period which distributively corresponding to a promotional program. During the canvass distributor can pervert as much as he wants in order to inspection and repair the promotion and this is welcomed by sales representatives because their incentive is dependent on achieving sales goal for that canvass period. Barilla also offers volume discount and carry-over discount in full truck load order quantities. The situation leads to bulk ordering which causes demand fluctuation. Long Lead time Nature StrategicTiming Long term and Short termDistributors place order to Barilla once per week simply using simple periodic review system and lead time i s eight to fourteen days, due to long lead time distributors either order high inventory or it results to stock out at distributors customer. ENVIRONMENTAL & ROOT provoke ANALYSIS Barilla is the largest manufacturer of pasta in the world, making 35% of all pasta sold in Italy and 22% of all pasta sold in Europe. However, Barilla suffers from Bullwhip effect due to big variability in demand that resulted to operational inefficiencies such as increased cost on transportation, distribution & inventory. stock out (see exhibit 1). On the production itself the set up are very specific, the company is incapable of meeting fluctuating demand because they consider sequential production to avoid huge set up cost. When demand fluctuates manufacturing and distribution team experience also much pressure. Barilla has complex distribution presence of multiple intermediaries slows have the delivery lead time to ultimate customer. Carrying too much categorization on dry products, 800 SKUs also leads to long production lead-time because they maintain time of production based on size and shape of pasta to reduce set up cost.Stock out occurs due to the fact that distributors maintain only 2 weeks inventory and delivery lead time from CDC is 8-14days. On put back below it is evident that stock can happen in DC/DO level because 2 weeks delivery lead-time and maintaining 2 weeks inventory on the shelf. Price changes due to promotions and incentives cause demand fluctuation as well. Barilla has no visibility on what is happening in reality with the move of their products in the trade. Barilla lacks centralized information and sophisticated forecasting talent and because of this bullwhip effect occurs ( see exhibit 2).Due to severe fluctuation in demand Barilla is pushed to increase the buffer of finished totals to avoid stock out and this only means increase in raw materials inventory, carrying cost, transportation cost and production cost which is detrimental to the growt h of the company. Since Barillas production is based on input of distributors, Barilla in the long run may lose the market share if distributors find that other brands are selling more and decide to carry competitors product instead.Lack of knowledge on the actual sales data on the market will have a negative effect on Barilla it has to establish smooth business relationship with all the supply chain channels and not only with the distributors. . RECOMMENDATION From my overall analyses given the facts presented I strongly recommend to proceed with option number 1- to implement JITD. rationalness is because thru JITD Barilla will have the centralized information and will have access to actual sales information which they will be using to plan procurement of raw materials, production, logistics , safety stock , inventory then .Also, thru JITD Barilla will have a chance to establish good supplier-customer relationship with the distributors and even with the supermarkets, this is very critical in running undefeated business. Barilla will have the control of production and not based on the order of distributor. Ultimately Bullwhip effect will be managed. graduation phase would be to implement with the DO because of the presence of sales representatives on the area. It would be so much easier to implement the plan since sales representatives of Barilla often spends 90% of the time in DO.