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Barilla SpA (A)

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by

Karin Landva

on 13 March 2013

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Transcript of Barilla SpA (A)

Chen Qing, Matina Jost, Jingze Zhang, Karin Landva, Stefanie Donat, Andrew Storosko, Monique Johnson Barilla SpA (A) History Founded in 1875 by
Pietro Barilla in Parma, Italy
Pasta share 35% in Italy
and 22% in Europe
By 1990 they were the world's
largest pasta producer
75% Dry and 25% Fresh
Shelf life of dry is 18 to 24 months and
shelf life of fresh is 1 to 21 days
Company sells to a wide range of
Italian retailers, primarily through third
party distributors. Underlying Drivers of the Fluctuations Distribution Structure/System
Organizational Deficiencies
Inefficiencies in Operations
Demand Fluctuations How much does it cost to have and order pattern like Exhibit 12? Excess finished goods inventory
Production inefficiency
Loss of customers due to stock-outs and excess storage
Reduction in orders
Perishable products (shelf life)
Product proliferation-marketing too many products leads to economic resources wasted, confused customers and mistakes made in product purchasing
Demand variation put a strain on manufacturing and logistics operations
Transportation cost Why are Barilla's customers so resistant to JITD? Decisions on distribution are transferred to Barilla
Analyze distributor shipment data
Barilla logistics would forecast and deliver the appropriate quantities at specific times
Better able to accurately and efficiently meet demand Just-In-Time Distribution proposal as a mechanism for reducing costs is a good idea Expected Benefits Manufacturers:
Decreases inventory and carrying costs
Improves service levels
Increased supply chain visibility
Reduced manufacturing cost
High bargaining power over distributors
Distributors:
High service level with additional services to retailers without extra cost
Quick response to orders
Reduced inventory carrying cost
Distributors are skeptical of benefits, need to be educated
Loss of authority and control of ordering and inventory decisions
Perceived power transfer to Barilla
Fear of stockouts
Distributors and Barilla's Sales Representatives fear job cuts Recommendations Bullwhip Effect Increasing fluctuations in orders that often occurs as orders move through the supply chain
Occurs as orders are relayed from retailers to distributors, to wholesalers, to manufactures

Causes of Bullwhip:
Inaccuracies in demand forecasting
Long order lead times
Order batching
Price fluctuation due to promotional sales
Inflated orders in high estimated demand scenarios Consistent promotions to reduce demand fluctuations
Establish order minimums and maximums
Reduce SKU numbers
Organizational communication
Computer simulation of long term cost reduction
Develop trust between Barilla and distributors
Convert CDCs to Pass through facilities
Get sales representatives on-board with JITD What are the underlying drivers of the fluctuations
we see in Exhibit 12? Lack of sophisticated forecasting techniques
Excessive promotional activities
Volume discount
No limit in order quantities from distributors
Transportation discounts
Poor customer service rates and communication
No minimum or maximum order quantities
Expanding products Cause of Demand Fluctuations Barilla Distribution Patterns Culture and attitude: Grand Distributors' (GD) small sales force rarely visited the GD warehouse
Sales representative feared reduction in responsibilities
Sales levels flattening and declining
Employee concern of shipment flexibility
Skepticism about cost reduction
Poor communication between Barilla and its sales staff
Push Strategy
Sales Incentives Organizational Deficiencies Operation Inefficiency High number of "dry" packaged SKUs
Distributors and retailers were carrying too much inventory
Occurrences of stock-outs: where demand is greater than supply
Lack of infrastructure to handle JITD Sales, Stock-outs, and Inventory
Levels
Full transcript