Barilla Case Analysis

UCD Michael Smurfit Graduate Business School

MSc Supply Chain Management

Supply Chain Analytics

Professor Vincent Hargaden

Barilla Memo

31/10/2014

Paul Boles

Student No: 09274898

Introduction

Barilla is an Italian pasta manufacture. It has at present a highly complex distribution network that is helping to create fluctuations in demand that is causing stock-outs or high inventory, which is adding to distribution, manufacturer and inventory costs. Just in time distribution (JITD) was proposed to counter this problem of demand fluctuation. JITD program looks to use distributor’s sales data so that Barilla can forecast demand and then deliver their products at the right time to meet demand. This memo will analysis the case and put forward recommendations for its successful acceptance and implementation.

Analysis

Underlying causes of the Barilla’s present difficulties

There are several underlying causes that the JITD program was looking to solve. Firstly the production process was inflexible. This was due to the required temperature and humidity in the kiln being precisely specified for each size and shape of pasta, making change over slow and costly. It was not possible to speed up this process and maintain the high quality of the products.

Secondly, due to the unpredictability of the market, fluctuations in demand resulted in stock-outs or excess stock being held in inventory. There were several reasons for this namely, order batching, long lead times of 10 days on average, seasonality, huge variety of products (800 SKU’s) and package designs and sizes. These stock-outs meant that Barilla and the retailers were losing revenue and customers. Also when there was too much inventory, costs increased due to storage, administrative tracking and tracing, products expiring, insurance and possible markdowns. Additionally, cash flow was restricted due to it be held up in inventory waiting to be sold. Present methods to deal with this problem was to...