MBA CASE STUDY
Barilla SPA, an Italy based company, is the world’s largest Pasta manufacturer. They make 35 percent of market share in Italy and 22 percent market share in Europe. In addition to the family of pastas (macaroni, spaghetti, fusilli, etc.) it also manufactures bread, cookies, biscuits, rusks, sauces, breadsticks, etc.
Barilla has a very complex distribution network consisting of Grand Distributors (owned by large Supermarket chains), Organized Distributors (independent third party distributors) in addition to its own depots, it is also worth mentioning that they have frequent promotions campaign and use of canvas period of time.
Barilla supply chain
In Barilla’s supply chain, Barilla’s CDCs (centre distribution centre) and the production factory locate at the positions with the most variability in the supply chain. The distributors such as GD(grand distributor), DO(organized distributor) and BD (i.e. Barilla-run Depots) receives orders from the supermarkets and shops, and places orders to Barilla CDCs who then forward production orders to the factory. GD, DO and BD must forecast the supermarket and shop’s demand. But they used only simple periodic review inventory systems, which may inaccurately determining order quantities. With limited information of customer’s demand data, they must use orders placed by the supermarkets and shops to perform their forecasting that fluctuated so widely. The same effect applies to the Barilla CDCs, plus the CDCs are forced to carry more safety stock than their distributors to maintain a higher level of capacity in order to meet the service level to the distributors.
These become pressures to the factory in manufacturing in terms of its production lead-time and perish ability of product. The orders lead time (weekly orders) as well as delivery lead time (average of 10 days) is also important factor that contributes to the increase variability in Barilla’s supply chain....