Barilla Case Study

Immediate Issues:

• Promotions: Barilla’s sales strategy relied heavily on the use of promotions, in the form of price, transportation and volume discounts.

• Sales Representatives: The sales reps would try and push more products during the promotional period to get a bonus and were not able to sell as much during non-promotional periods.

• Large number of SKU’s: Most of the popular products were offered in as many as 8 different packaging options. These large numbers led to greater complexity.

• Gaming Behavior: The distributors were used to having full control of their orders to Barilla and indulged in gaming by ordering different quantities in different periods.

• Bad forecasting by Distributors: The distributors did not have forecasting systems or sophisticated analytical tools for determining order quantities.

• Absence of Maximum or Minimum order quantities: Barilla does not require its distributors to order any minimum quantities every time it places an order. Also, there are no maximum order quantities during promotional periods, thereby allowing distributors to order large quantities at low prices and thus creating a false demand.

• Long Lead Times: Barilla supplied its distributors between 8 and 14 days after it received their orders, the average lead-time being 10 days. This was slightly long and a lot could change in the supply chain during this period, causing rise in variability.

Basic Issues:

• Production Costs: These costs increased drastically as the demand variation increased. As Barilla struggled to cope up with the fluctuating demand, the production costs rose as changeover was costly and lead times as well as backorders increased.

• Scheduling Difficulties: It was difficult for Barilla to schedule its resources and facilities like Labor, Machinery and Trucks due to demand variations. They would tend to overuse the resources when the demand was high.

• Transportation Costs: As a result of uneven demand, Barilla had to...