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7/31/2019 Barilla Spa v2.0.Orig
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The Value of Information
Barilla SpA
Group 2
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Italian Pasta Industry
Italians adore pasta Avg per capita consumption 18kg peryr
Limited seasonality in demand, Special pasta for pastasalads, Egg pasta & lasagna for Easter
Highly fragmented, 2000 pasta manufacturers
Price sensitive
Italian Market stagnant with 1% Growth Rate
Export Market Rising with 20-25% Growth Rate/Year
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Founded in 1875 in Parma, Italy
Differentiated through Quality and Innovative Marketing
cardboard boxes, large scale advertising
By 1990, Largest Pasta Manufacturer in World
State of the Art R&D facility and Pilot Production
Plant
Vertically integrated - flour mills, pasta plants and bakeryproduct factories
Barilla The Company
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Fresh Product
Fresh pasta - 21 dshelf life
Fresh bread 1 dshelf life
25% of sales
Dry Product
Dry pasta & toasts -18 24 m shelf life
Cookies - 10 -12 wshelf life
75% of Sales
Product Type
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Distribution System
Fresh products from CDC to 70 Regional Warehouses by independent agents
Dry product mostly from CDC to Supermarket through Distributors own warehouse
3 Types of Retail Outlets Small Independent Groceries, Supermarket Chains &Independent Supermarket
Distributors Warehouse keeps 2 week Supply
Stores order daily with 24-48 hours lead time
Average Lead Time 10 days between Barilla and Distributors
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Sales and Promotion
Promotion based Sales Strategy
Use of Trade Promotion to Push Products
4-5 weeks Canvas Period where Distributor can buy asmuch as wish
Volume Discount also offered
Sales & Marketing Division has incentive
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Reasons For Increase in Variability
Demand is Distributor order driven
No sophisticated forecasting System
Simple periodic inventory review System
No system of POS data from retailer
Price fluctuations Sales promotions
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Coping with variability
Better SC communication (mainly in outbound logistic) such as PoS data
Centralized demand information
More accurate forecast mechanisms
Curb promotion & trade discount
Lead time reduction i.e. Reduce the no. of SKUs if so possible
Vendor Managed Inventory
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Impact of transferring demand
information across SC
Improved sales planning & forecasting
Reduced variability in SC
Improvedcoordination betweenmanufacturing , distribution & retail systems
Lead time reductions
Rapid resolution of supply problems
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VMI strategy to solve operational
problems of Barilla
Lets manufacturer maintain inventory at retailer outlet
Better coordination & information flow in supply chain
Able to get PoS data at retail level
Reduce operational issues
Reduced bullwhip effect
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Dealing with conflicting goals of
Partners and Facilities
Short term phenomenon sincepush sale will stop
Will vanish in the long runconsidering pull from retailers
Concern: Saleslevels will flatten
Distributors will have a minimumsafety stock for contingency
A longer strike can affect presentsupply level as well
Concern: Strikeor other
disturbances
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Dealing with conflicting goals of
Partners and Facilities
Short term issue
Trend analysis of different distributors will ensureadequate supply
Concern: Supply isnot flexible
JITD will not lead to free space since distributorswill rather get rid of over stocking
Cost saved through JITD can be used for marketing
Barilla - biggest player with 35% share of pastamarket in Italy
Concern:Competitors will
use up distributors
free space
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Dealing with conflicting goals of
Partners and Facilities
Order delivery will be faster when exactmarket demand known and productiondone accordingly
Concern:Instead of JITD,
focus on fast
order delivery
JITD will reduce distributors cost as well,since barilla will not ask distributors toover-stock
Barilla may pass on a portion of savedcost to the distributors
Concern: Whywould
distributors helpBarilla reduce itscost
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