Barilla Spa Case

Barilla SpA Case

Problems:

Supply Chain for Barilla consisted of several levels. It consists of:

Manufacturer CDC Distributors Retailers

Barilla took 1-2 weeks to fulfill the order request placed by distributors. Barilla had to 2 different product lines (1 Day Perishable and 4-6 month perishable product lines (Dry)). Distributors maintained 2 weeks of safety stock. Barilla also served its customers through 2 different distribution organizations, namely, DO and GD.

The main problem for this Barilla is that there is an increase in variability in their supply chain.

Reasons for increase in variability of demand in barilla's supply chain

a) Demand fluctuation: There is a weekly variation in customers demand for the pasta products.

b) Bull-whip effect: Retailers, wholesalers, distributors and suppliers make their own demand forecasts and place the orders which considerably increased the inventory levels in the two facilities of the barilla. This happens because of lack of access to customers demand at each level of supply chain.

c) Volume Discounts: Barilla offered volume discounts for the retailers ordering full truck load quantities which made retailers to order more than necessary thereby increasing their inventory levels.

d) Not enough information regarding the kind of item sold in Barilla: Each level in the supply chain maintained their own inventory levels and placed their orders with barilla once a week. Also most distributors used a periodic inventory model to control their inventory and ordered when the inventory level is below the reorder point, but this model is beneficial only for small scale industries but not for a huge company like barilla. Also even though this model has track of number of merchandize sold it does not give any information regarding the kind of item sold.

e) Minimal research on customer demand data: Barilla thought that orders were an unchangeable input and responding to these unstable orders were their...