Team: HorizonsSaras Agarwal, Kevin Love, Jennifer Mason, Benedetta Piva, Janani Prithviraj
• Revolutionized Pasta Industry – Strong brand name – High quality product – Innovative Marketing program• Complex distribution network – 2 CDCs• Large number of products causes additional complexity in the supply chain – Varying shelf life affects distribution – More complex manufacturing processes – Fresh – from 1 – 21 days • 2 CDC Independent agents 70 regional warehouses in Italy Supermarkets – Dry – from 10 weeks – 24 months • 2 CDC Distributors supermarkets Remaining dry products 18 small Barilla owned warehouses
• High variable ordering patterns from downstream distributors• Opposition from distributors as well as internal sales staff to implement a Just-In-Time-Distribution (JITD) policy• Bullwhip effect in the supply chain: increases cost and decreases fill rates• Focused on the fulfillment of distributor orders, not customer demand
• Highly variable ordering patterns from Barilla’s downstream distributors• Fluctuations are not a result of market characteristics but rather caused by an inefficient supply chain• They have caused inefficient reactionary decision making in manufacturing operations• Inefficient supply chain could be problematic for expansion in Europe
• Sales Force believes JITD will hinder in sales promotions - Current pricing strategy results in stock outs and higher costs - The sales force are incentivized to push large quantity purchases during promotion periods: this leads to order spikes• Distrobutors were reluctant to provide detailed sales data to Barilla
• Variability at the end of the supply chain is amplified as you travel up the supply chain• The manufacturer receives the most dramatic effect• Without visibility into demand, forecasting is very inaccurate• Reason for Bullwhip Effect at Barilla: – Ordering Spikes – Order Batching
• Current business model focuses on orders placed by the distributor to the manufacturer• Not able to get sales data from some retailers due to lack of sophisticated technology at the store level• Focus should be on distributor shipments and current inventory
• Barilla needs to restart the JITD program beginning with internal staff – WIIFM • Program will assist them in meeting their sales targets. – How • Everyday low pricing strategy • New Promotion Policies • New sales incentive program
• Continue JITD program with distributors – WIIFM • Increased service levels with less effort • Lower required safety stock – How • Discounts to distributors willing to implement two-way Electronic Data Interchange (EDI) • Implementation of the Vendor Management Inventory (VMI)
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