Executive Summary

EXECUTIVE SUMMARY

Barilla Spa differentiates itself from its competitors by manufacturing a large variety of high quality products and controlling a large share of the pasta market through its highly effective marketing programs.

In order to remain sustainable and increase profitability, it was identified that implementing the Just-in-Time Distribution (JITD) program would be highly beneficial to the company.

Based on the issues identified within the case, it is recommended to focus first and foremost on dampening the volatility in Barilla’s customer demand patterns. Recommendation to proceed with the JITD program within Barilla’s Supply Chain is coupled with several other recommendations that Barilla would be required to implement to fully realize the huge potential of following a tightly integrated distribution system. Some of these recommendations include elimination of trade promotions, re-modelling of sales incentives, providing financial incentives to distributors to stock quantities recommended by Barilla, implement everyday-low pricing concept, etc.

The implementation of the program is recommended to be phased with initial experiments and pilot programs at Barilla’s own depots and distributor (i.e. GD) which are currently pushing over 50% of Barilla’s dry products into the retail market. Because of ease of implementation due to direct access to end-consumer demand and oversight over the Barilla’s own channels, the company can quickly realize the huge benefits associated with a JITD program. Successful implantation of the program at its own depots, Barilla can market the results to its customers to adopt the JITD program.

Comparing a VMI channel with a non-VMI channel, it can be concluded that an integrated VMI channel may provide more benefits, since it is easier for the firm to optimize its cost along its own supply chain. Differentiated (i.e. non-VMI) channel generally have the problem of optimization because it is harder to coordinate between the firms.

Another important thing to note is that Barilla would not only maximize its own profits but also supply chain profits in a tightly integrated VMI system.

TABLE OF CONTENTS

EXECUTIVE SUMMARY        1

CASE CONTEXT        3

ISSUE IDENTIFICATION        3

ENVIRONMENTAL ANALYSIS        4

ROOT CAUSE ANALYSIS        5

ALTERNATIVE EVALUATION        7

RECOMMENDATION        8

IMPLEMENTATION        10

MONITOR AND CONTROL        10

CASE CONTEXT

Barilla SpA is a vertically integrated corporation with flour mills, pasta plants, and bakery-product factories with locations all over Italy. In terms of product differentiation, the company positions itself uniquely by producing high quality products and through innovative marketing programs. Barilla SpA’s business flourished through expansion of existing product lines, as well as through acquisition of new and related businesses.