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Barilla Supply Chain: Communication in Strategic and Operational Phases

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Kim Piquet

on 22 February 2013

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Transcript of Barilla Supply Chain: Communication in Strategic and Operational Phases

- Barilla is a multinational Italian company founded in 1877
- Barilla offers 1000 products for every occasion, exported to more than 100 countries
- Barilla owns 42 production facilities in 9 countries where more than 2,300,000 tons of food are produced every year. - The Group employs more than 13,000 people
- Barilla leads in the segments of oven-baked products, pasta and ready-made sauces
- 2011 net sales more than 3,9 billion Euros. Every year Barilla launches approximately 50 new products. There is a long journey from wheat producer to consumer. The pasta, sauces and bakery products finally arrive at the end consumer, that can then enjoy the great quality of Barilla! The products are then
distributed to distributors,
which can be Barilla owned
or independent.
These distributors are the ones who feed the big and small markets with the stock necessary
to meet demand. Barilla buys wheat,
eggs, tomatoes and
other raw materials
from all over the
world, from qualified
and carefully selected (reliable)
suppliers. Barilla has its own
mills and production facilities around the world, including Italy, US, Sweden and
Mexico. Barilla`s Vertical Supply Chain The selection process starts with the choice of wheat to be grown based on specific supply chain objectives that will make the sale of the new variety possible
(8-10 years to breed a new variety of wheat).

Barilla is "out in the fields”, checking that the parameters agreed with the farmers are correctly applied. Even the "design” stage of the raw material e.g. durum wheat, is closely followed by Barilla in collaboration with highly specialised bodies. Purchasing Engineering Operations &
Manufacturing Logistics Barilla Internal Structure
regarding SC Management Contributes to Barilla`s growth by:

- Selecting and contracting reliable suppliers.

- Establishing an enduring competitive advantage with respect to costs, quality, service and social responsibility with the Supply Chain actors. Network Design,
Planning & Sourcing Contributes to Barilla`s growth by:

- Setting direction, objectives, goals and operating priorities through the development of common planning and order to delivery processes, organization, competences and capabilities, IT systems and KPIs. Unit inside Barilla responsible for:

- Packaging design.

- Industrial equipments development & installation in compliance with product standards and safety specifications.

- Setting of technical guidelines. Responsible for:

- Defining common manufacturing guidelines, goals, processes, competences, systems and KPI.

- Optimizing overall invested capital. Responsible for:

- Setting Logistic Strategy for Barilla Group (managing group outsourcing for Third Party Logistics (3PL), setting strategies, objectives, directions, processes, organization, competencies, IT system and KPI).
- Operational Phases: Purchasing
- Strategic Phases: Coordination of production and order cycle.

- Good communication practices related to this example include: Monitoring of consumer's needs, Face-to-face Communication (visits) with suppliers, collaborative coordination of information and physical flows of the purchasing process. Barilla's control of wheat supplies Barilla`s good examples
of communication usage
in the operational and
strategic phases According to Samir K. Srivastava, “Green supply-chain management has its roots in both environment management and supply-chain management. Adding the 'green' component to supply-chain management involves addressing the influence and the relationships between supply-chain management and the natural environment […] It is not just about being environment friendly, it is about good business sense.”

A sustainable, integrated food SC not only ensures the quality of the products, but also the development of all those involved in the processes, as well as all the areas impacted today and in the future.
Unlike the classical linear structure with a cascade sequence of supply chain operators, the Barilla model is CIRCULAR so as to involve the various players with collaboration projects: from the production of raw materials to projects with customers and the relationship with People. In its day-to-day activities, Barilla is committed to make its SC more sustainable through projects and activities. - Operational phases: Sourcing, Purchasing and Production Planning and Control.
- Strategic Phases: Logistic network design, Logistic systems and Processes Integration, Production planning, forecasting and replenishment, Coordination of production and order cycle.

- Good communication practices related to this example include: Training (functional and educational communication), face-to-face meetings (relational communication), monitoring of supplier's actions (fine-tuning communication), coordination of information and physical flows between companies
(value based communication), Sustainable and Integrated Supply Chain Bad Example: Barilla Distribution Problems Barilla had problems with its complex distribution network. GREAT
PLANTS Barilla’s strategy back then:

- Strongly based on promotions. Sales representatives were rewarded based on sales, so they sold more during promotional periods and less between the promotions, leading to wide variation in demand.

- Distributors were responsible for product orders, didn’t share any data with Barilla organization and there was no forecasting system.

- Too much variety: 200 pasta shapes and sizes, sold in over 470 different packaged SKU's. This strategy led to:

- Lack of communication and collaboration.

- Operational inefficiency.

- Increased manufacturing, inventory and distribution costs. Just-In-time Distribution system (JITD) was proposed to counter the demand variation problem. This meant a radical change in the SC setup.

The system requires distributors to share their data with Barilla, who forecasts and delivers appropriate amounts of products to the distributors at the right time to meet demand effectively. Positive changes
in the SC strategy: Communication between all
levels of SC enables
Barilla to control the
distribution and sales
situation and to
forecast the demand. Restructuring the logistics network results in more efficient logistics and decrease in inventory time. Strategic partnership between SC partners. Collaboration instead of focusing only on own business. Change in all levels of
SC means better communication, spreading company values and strategy and “uniting” the SC for the first time as a crucial part of the
Barilla Group. Communication played an important role in Barilla's structural change.

Use of face-to-face communication with suppliers was the first step taken to improve relationships with them.

A creation of an internet/intranet database made the existing SC more agile and able to attend market's needs more efficiently.

Better communication also meant a better flow of information, either through direct communication or media (internet) communication. Phases affected: Strategic Phases:
Logistic network design
Production planning, forecasting and replenishment
Coordination of production and order cycle

Operational Phases:
Stock and inventory
Shipment and transportation Information taken from:

- www.barilla.it
- www.barillagroup.com
- books.google.it - Cadeias de Suprimentos Projeto E Gestao
- Scribd.com - Barilla and the JITD System
- ukessays.com - Operations & Supply Chain Management
- Green supply-chain management: A state-of-the-art literature review. International Journal of Management Reviews (2007), Samir K. Srivastava Group:
Emma Koitola
Francesca Ajelli
Francisco Piquet
Lian Robinson Increasing circulation of information and training in Barilla’s Sustainable Management Model throughout the SC to increase the involvement of farmers, public administration and business associations. Implementing the project to improve the sustainability of other raw materials and packaging, providing the relevant investments. Evaluating the potential inclusion of biodiversity issues in the management of strategic SC (growing specifications). EXAMPLES: Conclusion: Barilla has been making clear efforts toward enforcing the communication activities between the company and its suppliers. It has realized the importance communication plays on its strategic and operational phases within the SC.

Due to this enforcement Barilla was able to improve relationships with suppliers, creating agreements regarding sustainable matters, improving its distribution channels and finally recognizing the importance of the SC as a value creator in the business.

The company's new view on communication has been an important aggregator of value in its SC. It's enabled the company to tap into different forms of communication in its daily activities, the most important being: educational Communication, value-based communication, relational communication and functional communication.

It has enabled the company to improve SC performance in all dimensions. As seen in the examples provided the main focus has been on Managerial Dimension (strategic vision e.g. sustainable supply chain ), Relational Dimensions (collaborative development e.g. design stage of Durum wheat), Competitive Dimension (process efficiency e.g. Implementation of JITD) and Knowledge dimension (cultural sedimentation e.g. changing distributors mind-sets).
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