Barilla Spa - Executive Summary

1110 words 5 pages
Barilla SpA, world’s largest manufacturer of pasta based in Italy is experiencing extreme demand variability resulting to operational inefficiency and increased cost. To combat the key issues stated my decision is to implement the Just In Time Distribution (JITD). This new system, contrary to current system Barilla has will eliminate Bullwhip effect and stock outs by having centralized information, there will be data transparency between Barilla and distributors. Distributors will provide actual sales data which will be the basis of forecasting and production thus increasing in efficiency in operation and alleviating stock out among distributors. JITD will lead to improved supplier-customer relationship which in the long
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Barilla is the largest manufacturer of pasta in the world, making 35% of all pasta sold in Italy and 22% of all pasta sold in Europe. However, Barilla suffers from Bullwhip effect due to huge variability in demand that resulted to operational inefficiencies such as increased cost on transportation, distribution & inventory. & stock out (see exhibit 1). On the production itself the set up are very specific, the company is incapable of meeting fluctuating demand because they consider sequential production to avoid huge set up cost. When demand fluctuates manufacturing and distribution team experience too much pressure. Barilla has complex distribution; presence of multiple intermediaries slows down the delivery lead time to ultimate customer. Carrying too much variety on dry products, 800 SKUs also leads to long production lead-time because they maintain sequence of production based on size and shape of pasta to reduce set up cost.
Stock out occurs due to the fact that distributors maintain only 2 weeks inventory and delivery lead time from CDC is 8-14days. On table below it is evident that stock can happen in DC/DO level because 2 weeks delivery lead-time