Types of Pasta
2
Durum wheat flour pasta: Traditional pasta made with durum wheat (grano duro)
Special pasta: Pasta made out of flours that contain other permitted ingredients such as vegetables, greens, malt & various fillings
Egg pasta: The egg pasta is a smooth mixture of flour and eggs (grano tenero)
Wholemeal pasta: prepared with wheat bran and fibre to guarantee a higher fibre content
Fresh pasta: Fresh Hot Pasta e.g. ravioli. The fresh pastas reign the world of Italian cuisine!
5
Barilla Spa
World’s largest Pasta manufacturer 35% market share in Italy 22% market share in Europe Products offered in 100,000 retail outlets in Italy
75% sales through “dry” products & 25% through “fresh products”
Separate distribution systems for dry & fresh products due to differences in perishability
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Advertising & Promotion
Heavily advertised. Celebrity endorsements
Trade Promotions – promotional discounts ranged from 1.4% to 10%
Sales reps helped merchandise Barilla product and set up in-store promotions
7
Distribution
A typical distributor warehouse held a 2-week supply of Barilla dry products in inventory
Distributors typically carried 7000 - 1000 SKUs
Many supermarkets places orders with distributors daily. Orders were serviced in 24 to 48 hours after receipt of order
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Distribution
•Most distributors (GDs and DOs) checked their inventory levels and placed order once per week.
•Lead time – 8 to 14 days. Average 10 days.•Varying distributor’s sales volume ▫Small distributor: 1 truckload / week.▫Large distributor: 5 truckloads / week.
•Only a few used forecasting systems or sophisticated analytical tools for determining order quantity
Diagnosis
Large variety of pasta- 200 total. Large variety of packaging- 470
total. Long setup time.
Long lead time- 10 days avg.
Extreme demand variability.
Large inventory at CDC, GD & DO
= Inventory costs.
Diagnosis - Problems
5.5% average stock outs
= Loss of income.
Resistance to JITD system: Sales & Marketing Barilla
personnel. Distributors & Retailers.
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Distribution NetworkBarilla Dry
Product Factories
Barilla CDC’s
Grande Distribuzio
ne
Distribuzione
Organizzata
Barilla Run Depots
Signora Maria Shops
Chain Supermark
ets
Independent
Supermarkets
65% 35%
90%
10%
13
Proposed Solution - JITD
The idea – Rather than send products to the
distributors according to their planning process, Barilla would look at all the distributors’ shipment data and send what was needed at the stores.
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Decision by Barilla Mgmt JITD must be implemented to
improve order fulfillment. Production has to be based on
demand prediction and not on orders.
Information on demand should be collected and used.
recruit support of all parties.
ROI
15
Decision by Barilla Mgmt
“Sell” the idea to a single distributor.
Build a prediction module based on past shipment data from distributors.
Simulate the use of the JITD on the passed year.
Run a ”pilot”. Calculate the savings to all parties.
( Show that it is a WIN-WIN situation) Expand JITD system with other
distributors.
Orders From Cortese DC To CDC 1989
0
10
20
30
40
50
60
70
80
90
100
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49
Weeks
To
ne
Average – 30 ToneStandard deviation – 22tone
Analysis
AnalysisOrders at Cortese DC
0
10
20
30
40
50
60
70
80
90
100
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46
Weeks
To
ne
Predicted Orderswith Move AverageOrders
Moving average 6 weeksAverage – 31 ToneStandard deviation – 3 tone
37 Tone = Only one trailer per week
Average – 30 ToneStandard deviation – 22 tone