1、Strategic Supply Chain Management:Barilla sPADrainville, Julie, Pieris Sherline, Yu Zhewen, Ren Yuan, Okafo EKE, IfeomaESC4710 _010March 27, 2017Table of ContentsCase Study 2: Barilla SpA3Company Background3Company Origins3Figure 1: Trend of Barilla Sales and Italian Price Index4Pasta Market Share5F

2、igure 2: 1990 Italian Pasta Market by Market Share5Figure 3: 1990 European Pasta Market by Market Share5Figure 4: 1990 Italian Bakery Market by Market Share6Pasta Manufacture6Figure 5: Barillas Product Divisions6Channels of Distribution7Figure 6: An illustration of characteristic of Barillas Product

3、s7Underlying Drivers and Cause of Fluctuation Demand7Figure 7: Weekly Demand of Barilla Dry Products8(Hammond, 1994, p.22).8Lack of Downstream Visibility8The Bullwhip Effect9(Chopra & Meindl, 2016)10Figure 8: Demand Fluctuation at Different Stages in the Supply Chain10Supply Chain Objectives11Figure

4、 9: Barilla Distribution Channel11Pasta Demand Patterns11Impact of Fluctuation Demand12Affected Line Items13Just in Time Distribution (JITD) and cost reduction14Functions of Just in Time Distribution14Barilla Implementation of Just in Time Distribution16Customer Resistance17Customer Persuasion17Inte

5、rnal resistance18Interpretation of JITD to salespeople19Effect on Sales Performance and Customer Satisfaction19Effects on Promotions20Channel Decisions21Downstream Supply Chain Visibility21(Weblearnindia 2014)22Figure 10: Visualization of a Supply Chain22Visibility - Upstream from the Manufacturer23

6、References25Case Study 2: Barilla SpACompany BackgroundCompany OriginsBarilla is an organization owned by Pietro Barilla, which started out in 1875 as a retailer. The stores main products included pasta and bread that were produced in a lab next door (Hammond, 1994, p.1). Barilla grew turning into a

7、 large pasta manufacturer, experiencing significant growth before it was passed to his sons Pietro and Gianni in the 40s (Hammond, 1994, p.1). As Barillas ownership was passed down through the generations, the company grew and became a vertically integrated corporation (Hammond, 1994, p.1). The grow

8、th resulted the organization being compromised of flourmills, pasta plants and bakery-product factories geographically dispersed throughout Italy (Hammond, 1994, p.2).Barilla was able to grow its market share of the pasta industry through their manufacture of high quality products, innovative market

9、ing techniques and practices and by creating a strong brand within Italy. These strategies resulted in double digit growth. Barilla made bold strides and began to construct the worlds most sophisticated and technologically advanced pasta plant (Hammond, 1994, p.2). The high investment in building th

10、is facility placed huge pressure on Barillas finances. In 1971, Barilla ended up being sold to a multinational firm named Grace (Hammond, 1994, p.2).In addition to changes in the organizations business practices, Grace introduced a new line of bakery products called White Mill. The highly regulated

11、Italian economy and Barilla operating environment coupled with difficult economic conditions of the 70s made it difficult to operate Barilla remain profitably (Hammond, 1994, p.2). This led to the re-sale of Barilla to its original owner Pietro Barilla in 1979 (Hammond, 1994, p.2).With new infusion

12、of capital coupled with the organizational changes instituted by Grace, Pietro was able to return Barilla to its former glory as depicted in Figure 1. A growth rate of 21% was made possible in the 80s through the international expansion of the Barilla brand, and the acquisition of new businesses (Ha

13、mmond, 1994, p.2). Barilla maintained a research and development facility and pilot production plant for developing and testing new products and production processes for their organization. Figure 1: Trend of Barilla Sales and Italian Price IndexPasta Market Share The following data was extracted fr

14、om the Barilla case study. Figure 2: 1990 Italian Pasta Market by Market Share Figure 3: 1990 European Pasta Market by Market Share Figure 4: 1990 Italian Bakery Market by Market Share Pasta Manufacture The major processes involved in pasta manufacturing include: mixing, rolling, cutting, heating in

15、 a kiln, drying and packaging. Barilla employed a tightly controlled production sequence to minimize change over costs in spite of producing a wide variety of pasta creating a very inflexible manufacturing environment (Hammond, 1994, p.3). Some plants produced different varieties; others were dedica

16、ted plants including long and short pasta plants. Figure 5: Barillas Product DivisionsChannels of DistributionA profile of Barillas products, as well as some key features is shown below in Figure 6.Figure 6: An illustration of characteristic of Barillas ProductsUnderlying Drivers and Cause of Fluctu

17、ation DemandBarilla is currently experiencing a high rate of fluctuation in the demand generated from their customer, as displayed in Figure 7 below. There are multiple underlying factors that contribute to this sporadic demand pattern. This fluctuation creates a difficult environment for a supply c

18、hain to be effective resulting in negative effects for both the organization and the customer. Figure 7: Weekly Demand of Barilla Dry Products (Hammond, 1994, p.22). In examining Figure 7 we are able to visualize the extreme fluctuation in customer demand Barilla experiences. The chart displays that

19、 Barilla dry products mean is 300 quintals and a standard deviation of 227 quintals. The standard deviation value is close to the mean, which showing high variations. This demonstrates that the distribution pattern has extreme fluctuation. The maximum order number is approximately 900 quintals and t

20、he minimum order number of approximately 50 quintals; such a large gap shows the unpredictability Barilla currently faces. This is a result of customers placing orders in reaction to demand. This type of pattern is usually a result of orders being placed due to panic or over ordering in anticipation

21、 for customer demand. The demand pattern displayed in Figure 7 creates higher cost for the entire supply chain.Lack of Downstream VisibilityBarilla and its customers currently do not have infrastructure that allows them to enable information sharing of customer demand throughout the supply chain. Th

22、is results in supply chain stages being blind of actual customer demand. This results in a distorted demand pattern as it flows downstream through the supply chain. This is reflected in the order patterns Barillas receive. This creates a difficult environment for supply chain to coordinate efforts.

23、The Bullwhip EffectThe order patterns, shown in Figure 7 are a direct result of the bullwhip effect. The bullwhip effect identified in the demand patterns of the supply chain. Orders sent throughout the supply chain become larger in variance in comparison to the actual demand of the end customers. T

24、his effect is generated by a lack of supply chain coordination and information sharing throughout the supply chain (Chopra & Meindl, 2016). Figure 8 is a pictorial representation of how the bullwhip effect looks through the supply chain. When looking at the wholesalers order to manufacturer we can s

25、ee similarities in Barilla demand patterns. Figure 8 displays a product with steady demand however as it travels throughout the supply chain high demand fluctuation occurs. (Chopra & Meindl, 2016) Figure 8: Demand Fluctuation at Different Stages in the Supply Chain It is apparent that Barilla is cur

26、rently experiencing the bullwhip effect due to their current relationship with their customers. Each phase in the supply chain is currently operating in silos. This is a result of each stage focusing on different objectives without the consideration of the overall effect it has on its supplier. Supp

27、ly Chain ObjectivesThe image below in Figure 9 is a graphical representation of Barillas distribution channel. This displays the various stages within the supply chain. Dry products must go through multiple channels before reaching the end customer. Figure 9: Barilla Distribution Channel The overarc

28、hing problem lies with efficient supply chain coordination. This includes a lack of forecasting system and communication to ensure that demand needs are met. It is apparent that there is lack of coordination of objectives and demand between central distribution center (CDC) and the grand distributor

29、 (GD). For instance, the distributor purchases dry products in higher volumes when a promotion or discount in given to decrease their inventory purchasing cost. They dont consider the potential consequences this may generate in the long term for the supply chain. This decentralized decision-making r

30、esults in high and unpredictable fluctuations in demand. Pasta Demand Patterns Demand patterns for pasta have been relatively stable throughout history. In 1980s it was shown that “Italian pasta market as a whole was relatively flat, growing less than 1% per year. It is estimated that the average in

31、 1990 “per capita pasta consumption in Italy averaged nearly 18 kilos per year” (Hammond, 1994, p.2). Pasta is a staple consumed in large quantities when compared to other European countries. Pasta also exhibits limited seasonality in demand with special types of Pasta popular in the Easter and summ

32、er (Hammond, 1994, p.2) Over the years, pasta sales have kept pace with inflation; however in the 90s when the market remained flat, sales were boosted by exports. This shows that the demand patterns for Barilla are not accurate to the actual consumption of pasta in Italy. The graph in Figure 1 as s

33、een on page 3 is representative of Barilla sales, which has kept track with the Italian wholesale price index. We can use this index as a measure the inflation in the Italian economy. The profile of the graph suggests that sales have kept pace with inflation. According to this data inferences can be

34、 made that demand has remained stable. Impact of Fluctuation DemandThe high fluctuation in customer demand is known as the bullwhip effect. This is a consequence of ineffective coordination and information sharing in Barilla supply chain. This lack of coordination has resulted to the implementation

35、of reactionary inventory, sales and marketing decisions. This creates a detrimental impact on the performance of the supply chains ability to meet changing demands and customer needs. The fluctuation demand has a high impact of the organization ability to meet fluctuating fulfill rates subsequently

36、leading to stock outs. In an attempt to minimize these occurrences Barilla tries to maintain high inventory levels of finished goods. It is difficult for the organization to response to fluctuation demand patterns, as there manufacturing process has limited flexibility. The production sequence imple

37、mented to keep change over cost low and product quality high has decreased their ability to deal with unexpected periods of high demand fluctuation. The manufacturing process inability to response well to high demand fluctuations results in a higher cost for the organization. In periods of unexpecte

38、dly high demand, the desired quality of the product may be jeopardized due to stress of the manufacturing process to produce orders faster. When stocks out occur a higher replenishment lead-time is expected due to their incapability to increase capacity. The impact is felt by an increase in overall

39、cost and a negative effect on customer relationships. Unexpected variations of demand at the distribution levels results to high inventory holding cost, distribution cost, stock out cost, transportation cost, labour cost, product availability and risk of a negative customer relationship. The increas

40、e in inventory holding in order to meet demand exposes it to a higher risk of pilferage and obsolescence. Without a plan to change the methods of coordination within the supply chain, the organization will continue to increase its cost in trying to meet high fluctuating demand patterns. Affected Lin

41、e Items There is a significant financial impact of order fluctuation for Barilla. When orders are higher than expected this leads to: Change in production sequence and additional costs of production which reduces margin and affects (lowers) profit When production is not met it is a lost sale which a

42、lso reduces profitabilityWhen orders are lower than expected: When there is overproduction and the manufacturer increase its finished goods inventory resulting in higher holding cost and generated a need for more space within the warehouse Asset in the balance will be increased it affects cash flow

43、Just in Time Distribution (JITD) and cost reduction JITD is a mechanism to create a more streamlined supply chain through an increase in information sharing, and coordination of supply chains for Barilla. The requested change demands for a major change in the relationships between Barilla and their

44、customer. The overall implementation of JITD is said to have direct impact on cost for the organization. In 1988 Vitali stated one of the main contributions to cost in their supply chain was; “distribution cost, inventory levels and ultimately our manufacturing costs if we didnt have to respond to t

45、he volatile demand patterns of the distributors” (Hammond, 1994, p.7). The proposed change in their supply chain is said to reduce cost by creating a more accurate depiction of demand through better information sharing and overall coordination. The implementation of JITD would give cost reductions t

46、o the organization by allowing them to better forecast demand and manage their overall inventory levels. Currently the organization is reacting to demand that is inflated as a result of the bullwhip effect. In order to try and match demand the organization attempts to absorb the uncertainty through

47、high levels of inventory. This creates higher cost for the entire organization and can have negative impact on product availability and customer relationships as they have an inability to forecast actual demand. With an increase in coordination and information sharing, the supply chain would gain th

48、e ability to decrease its cost and increase customer satisfaction. Better forecasting enables the organization ability to have a more accurate product availability, more stable lead times due to a decrease in stock outs, an overall increase in positive customer relationships and an increase in profi

49、tability (Chopra & Meindl, 2016, p 249). Functions of Just in Time Distribution A more transparent supply chain allows the organization to have a better understanding of the overall customer demand. A more accurate depiction of customer demands will lead to better information and coordination betwee

50、n Barilla and its customers. A JITD implementation should have direct effect on the organization ability to reduce manufacturing, inventory, transportation and labour cost; a reduction in replenishment lead time, and in increase in product availability and customer relationships. The increase in inf

51、ormation sharing will allow the organization to create a more accurate forecast of demand throughout the supply chain. This results in a better management of inventory. Reducing the organizations stock out percentage and decreasing the replenishment lead time needed to meet orders for their customer

52、. As the information flows through the supply chain every stage will a more accurate picture of demand, decreasing the amount of orders in the supply chain that are bought through panic and over ordering (Chopra & Meindl, 2016). The more stable demand would allow all stages of the supply chain to re

53、duce their overall cost of operation and increase profitability.A decrease in manufacturing cost would be generated with an accurate forecast, as production schedule would reflect actual consumer consumption. A decrease in the purchase of raw materials and a decrease in the overproduction of finishe

54、d goods inventory contribute to the decrease of manufacturing cost. With the reduction in finished goods and raw material inventory the organization has the ability to decrease its overall inventory cost. As less material is needed because of steady demand the organization would in turn have less in

55、ventory-holding cost and can decrease the amount of space necessary to store both raw and finished goods.With the ability to better understand customer demand Barilla would gain the ability to make more efficient transportation schedules to their distribution centers and their customers. The decreas

56、e in fluctuating demand allows the organization to better plan efficient methods of transportations. This would decrease overall labour cost throughout the supply chain and decrease bottlenecks at shipping and receiving during periods of high demand fluctuation. Barilla Implementation of Just in Tim

57、e DistributionBarilla wants to implement JITD throughout their supply chain by gaining access to customer information. Barilla believes that they should have the ability to determine the product delivery sequence. The implementations of the JITD program would allow the organization to streamline the

58、ir supply chain processes and stabilize cost in the supply chain. Steady demand gives every stage of the supply chain the ability to plan capacity and cost associated with meeting customer demand more accurately. This results in higher product availability and fast replenishment lead-time. A more predictable demand allows the organization to create a more responsive supply chain and decreases the overall stock out