Barills Spa (a) Report on Supply Chain Management Issues
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Barilla Spa (A)Report on Supply Chain Management IssuesTable of ContentsExecutive SummaryIssue IdentificationRoot Case AnalysisAlternatives and OptionsRecommendationsImplementationMonitor and ControlExhibitsExecutive SummaryGiorgio Maggiali, director of logistics of Barilla SpA stated the the growing burden that demand fluctuations imposed on the companys manufacturing and distribution system. The solution was proposed as Just In Time Distribution Program. Due to specific Barillas supply chain system it is not quite simple. Barilla needs to improve their own forecasting system and need to develop a set of decision rules.They need to re-group and decide where to go with JITD. For this purpose the main issues where identified and and recommendations were made. The implementation plan is filled with immediate and short run activities.Barilla enjoys a strong brand image in Italy. It was driven by success as the highest quality pasta for every Italian family – “Where is Barilla, there is a home”. Timely distribution of quality products is a strategic mission Barilla SpA and the recommendations made can be used to reflect and strengthen this mission.Issue IdentificationThe following are the list of issues that must be addressed:Too many different types of distribution centresLong inventory timeSmall product variety in storesNo minimum or maximum  order quantitiesLong lead timeRoot Case AnalysisToo many different types of distribution centresMost Barilla products were shipped from the plants to one of two Barilla central distribution centres (CDCs) from where they were distributed through three types of retail outlets: small independent grocers, supermarket chains and independent supermarkets. Approximately 35% of Barillas dry products (30% in the north of Italy and 40% in the south) were distributed from Barillas internally-owned regional warehouses to small independent shops. The remaining dry products were distributed through outside distributors to supermarkets – 70% to supermarket chains and 30% to independent supermarkets. Dry products destined for a supermarket chain were distributed through the chains own distribution organization (Large distributor) – GD. Those destined for an independent supermarket were channeled through a distributor (Organized Distributor) – DO.      Long inventory timeEach CDC held about a months worth of dry product inventory. Small independent shops typically held over 2 weeks of inventory at the store level. Supermarkets typically held from 10 to twelve days of dry-grocery inventory within the stores. A distributors warehouse typically held a two-week supply of Barilla dry products in inventory.Small product variety in storesAlthough Barilla offered many pasta products in multiple package types, most retailers would carry the product in inly one (and most two) packaging options. Distributors typically carried from 7,000 to 10,000 SKUs in total.
No minimum or maximum  order quantitiesDistributors sales volumes varied; small distributors might order only one truckload per week whereas the largest warranted deliveries of as many as five truckloads per week.Long lead timeMost distributors – Gds and Dos checked their inventory levels and placed orders with Barilla once per week. Barilla product wold then been shipped to the distributor over the course of the week that started eight days after the order was placed and ended fourteen days after the order was placed – the average lead time was ten calendar days.Alternatives and OptionsOptionProConAlternativeDistribution CentresEach for every type of storeNo centralizationOne distribution centre handles all types of storesInventory timeProducts ready for distribution to the storesBig C2C; less fresh/new productsKeep less products in the stores and distribution centreProduct varietyOnly most popular products orderedCustomers dont see new products that might gain even more popularityKeep less inventory of popular products, distribute more variety of different types of products.Orders quantitiesOrders are made as neededNo stability; Barilla never knows how much to produce: for distributors it is very difficult to forecast the inventoryThere should be minimum order quantity for the distributor, for example one truckload. Orders should be made once per week.Long Lead timeBarilla has enough time to get the order ready and ship to distributorDistributors have to keep large inventory not to run out of products before the shipment comesLead time – 3 days.RecommendationsThe following is a summary of my recommendations:1. Set one central Dry Products Distribution Centre (DPDC) which will sell products to all types of retail outlets: small independent grocers, supermarket chains, and independent supermarkets. It will have few departments to deal with different types of outlets.2. Shorten inventory time in distribution centre and in the stores accordingly due to more often orders and less lead time.3. With every order send new types of products to try and see how they go, imply discount system for the try products.4. Set minimum order quantity for distribution centre. Continue to use volume incentives of 2% to 3% for orders in full truckloads depending on quantity.5. Shorten lead time to 3 days.ImplementationRecom-mendationActivityWho-PrimaryGM – General Manager BarillaM – Manufacturing BarillaOp – operationsHO– head office staffL – logisticsD – Distribution centre/distributorsCDC – central distribution centreV – V. BattistiniWho-SupportGM – General Manager BarillaM – Manufacturing BarillaOp – operationsHO– head office staffL – logisticsD – Distribution centre/distributorsCDC – central distribution centreV – V. BattistiniWhenImmediateShort runMediumLong run1Find space for Dry Products Distribution Centre (DPDC)OpI1Find and hire distributors for DPDCHOI1Set divisions within DPDCHOOpI1Meet with distributors and declare the incentives and minimum quantitiesGMHOS2Set maximum inventory within the DPDCLDS-M3Train distributors to provide info about new productsOpHOS-M3Declare discounts range for the new productsGMHOM4Meet with stores representatives to discuss their needs and future orders forecast.GMD,VM4Declare incentives for full truckloadsGMDI5Meet with store representatives to set the orders regularityDL,VI5Contact the DPDC to discuss orders minimum and maximum quantityM, CDCL,VI-M5Organize efficient transportation systemLDM5Start providing data from of sold products to  CDC and HODLI5Start making replenishments decisionsCDC, DVI