Barilla Spa – Executive Summary

executive SUMMARY glasswort SpA, worlds largest manufacturer of alimentary paste based in Italy is experiencing extreme requisite disagreement resulting to operational inefficiency and increased cost. To combat the key issues stated my decision is to implement the Just In Time dissemination (JITD). This new system, contrary to current system kelpwort has will eliminate Bullwhip put up and ancestry outs by having centralize information, on that point will be data transpargonncy between glasswort and distributors.Distributors will provide actual sales data which will be the basis of forecasting and ware thus increasing in efficiency in operation and everyeviating old-hat out among distributors. JITD will lead-in to improved supplier-customer relationship which in the long run can be perceived as a win-win situation. Internal resistance coming from Sales and Marketing will be resolved by involving the line of longitude management and by presenting the benefits of the JITD in figures and by emphasizing that role of Sales team in JITD is of rife to the implementation.External resistance will be combated by thorough discussion presenting the long term benefits of all parties involved. execution of instrument of JITD as soon as possible will position Barilla on even stronger pasta producer and will potentially increase growth rate of the company resulting from increased business efficiencies and decrease cost. Barilla can drive home a pilot run on the DO (Distribuzione Organizzata) where sales representatives functions are dominant, sales representatives are one of the key factors on the success of JITD implementation.Weekly meeting between Barilla and DO will pass on to take place for couple of months upon implementation to monitor its status. ISSUE IDENTIFICATION A. fast Issue Because Barilla is facing extreme variability in require hebdomad by week which causes operational inefficiencies, mellowed armoury 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 scurvy Forecasting system temper StrategicTiming Short term & Long term Most distributors like GDs and res publica check arsenal levels and place rigs with Barilla once per week use simple periodic review. They do not follow any forecasting model they just do replenishment ordering without stripped-down/maximum quantity. Barilla has no visibility on actual data, their basis of deed is per distributors information per week and this causes pressure on manufacturing & distribution team of Barilla. Too many SKUs & High level of inventory Nature StrategicTiming Long term & Short term On dry products alone, Barilla offers 800 SKU. Pasta is made in 200 different shapes and size of its and has more than 470 packaged SKUs. Typically distributors carry 150SKU out of 800 SKUs Barilla leaving high inventory on the CDC. There is high level of inventory across the chain overall there is about 2 months of inventory on the entire supply chain at any disposed(p) metre. Frequent Trade Promotion leads to Bulk Ordering Nature Tactical Timing Short termBarilla has 10-12 rag period which each corresponding to a promotional program. During the canvass distributor can buy as much as he wants in order to avail 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 merchant vessels 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 is eight to fourteen days, due to long lead time distributors either order high inventory or i t results to stock out at distributors customer. ENVIRONMENTAL & ROOT CAUSE summary 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 huge 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 unable(predicate) of meeting fluctuating demand because they consider sequential production to avoid huge set up cost. When demand fluctuates manufacturing and distribution team experience too much pressure. Barilla has complex distribution front end of multiple intermediaries slows down the delivery lead time to ultimate customer. Carrying too much variety on dry products, 800 SKUs also leads to long production lead-time because they maintain sequence of production based on size an d 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 table 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 flow of their products in the marketplace. Barilla lacks centralized information and civilize forecasting capability 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 goods 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 growth of the company. Since Barillas production is based on input of distributors, Barilla in the l ong 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. Reason 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 accordingly .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 run successful business. Barilla will have the control of production and not base d on the order of distributor. Ultimately Bullwhip effect will be managed. First phase would be to implement with the DO because of the forepart 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.