Barilla Spa (a)

Table of Context

Title Page        Page 1

Table of Context        Page 2

Executive Summary        Page 3

Issue Identification        Page 4

Environmental and Root Cause Analysis        Page 5

Alternatives and/or Options        Page 6

Recommendation and Implementation        Page 7

Monitor and Control        Page 8

Executive Summary

        I have looked at the problem Barilla Spa is facing and have noticed that an enormous Bull-Whip effect is present. There is also an incentive portion that doesn't work well. The sales team is pushing product to the distributor as they get bonuses on sales and distributor get incentives for purchasing FTL, or multiple truck loads of products, so they end over buying. This approach creates and artificially increased demand of product, which only contributes to the bull-whip effect. There is also of a non-transparent relationship between Barilla and the distributor not wanting to release sales information. There are too many uncertainties to accurately forecast production demand.

        It is therefore my recommendation to establish a better relationship with the DC owned by the Supermarkets Chains as their account of 70% of the dry food sold and show them the benefit of allowing insight of weekly sales figures. Second is to create an IT infrastructure that provides 360° transparency to all parties involved. Eliminate the current sales team and establish our own distribution network consisting of owner operated routes and a network of District Sales Managers assigned to multiple operators to provide strategic support and new customer acquisition. This new approach will give us more vertical integration and control over out entire operation and eliminate the Bull-Whip effect.

Issue Identification

        Barilla Spa wants to implement a JITD system from their factory to their distribution centers to fight off the "Bullwhip Effect". There are many factors that cause or contribute to the bullwhip effect; there is an evident disorganization between each supply chain link; with ordering larger or smaller amounts of a product than is needed due to an over or under reaction to sales and irregular order practices by the distributors. Barilla is facing a lot of pushback from the Distributors as they don't want to share their sales and inventory data, which is essential to make the JITD system work. Despite the fact that all distributors are in control of their orders, (with the assistants of Barilla Sales Rep) they are still consistently running out of product which creates regular stock-out at the store level, again causing a Bull Whip effect. Barilla Spa produces a large variety of product in their factories. There are a variety of dry pastas that needs different temperature and moisture content in the Kiln to be properly cured. JITD delivery is one issue, but the Kiln process is a big bottleneck that prevents them from quickly adjusting the manufacturing needs, again causing a bull whip effect. The issue of limited transparency between the production department and the distributors and a lack of control on their ordering practises is not helping the situation.