barilla ppt
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BarillaTRANSCRIPT
Barilla SpA
Group No : 8
Himadri, Rishi, Tarun, Manish, Vikas
Introduction
Started in 1875 as a small shop in Parma, Italy By 1990, Barilla SPA - World’s largest pasta producer Pasta Share - 35% in Italy and 22% in Europe 2 Product Categories – 75% Dry and 25% Fresh Fresh Products had 21 day Shelf Lives Dry Products had Long ( 18 to 24 Months) or Medium(10 to 12
weeks) Shelf Lives 800 SKUs of Dry Products Retail Outlets – Small independent shops and Supermarkets
(Chain and Independent)
Distribution System
PLANT
CDC’s
GD’s DO’s
“Signora Maria” ShopsIndependent supermarkets
Chain supermarkets
Customers Customers Customers
Barilla run depots
Flo
w o
f In
form
atio
n
CDC = Central Distribution CentreGD = Grand DistributorsDO = Organized Distributors
65%35%
Sales & Marketing
Heavy Advertising, Brand positioning Steffi Graf, Stefan Edberg promoted the “Barilla” brand
Frequent Trade Promotion to push product into distribution network
Volume Discount
Use of Sales Representative Merchandise Barilla Product Set up In-Store promotion Took note of Competitor’s price, stockouts, new product introductions Worked out ordering strategies for retailer
Issues Faced Extreme demand fluctuations (Since 1980)- week to week variation
in distributors’ order patterns
Pressures to manufacturing in terms of production lead-time and perishability of product
High Inventory Carrying Cost & manufacturing cost due operational inefficiencies
Unacceptable Cycle Service Levels (CSL) – inadequate product availability
Distributors’ inability to carry large number of SKUs
Demand Fluctuation
Reasons
Excessive Promotional activities
Volume Discount
No limit in order quantities from distributors
Product proliferations
Lack of sophisticated forecasting techniques.
Demand Fluctuation
Exhibit 12
Demand Fluctuation
Methods adopted to curb fluctuation
Excess FG inventory to meet Distributors’ demand Additional inventory at Distributors warehouses
Impact
Overburdened Manufacturing and Logistic operation Poor product delivery Thinning of retailers/distributors margin Increased inventory carrying cost Unanticipated demand Bullwhip effect
Bullwhip EffectVariation in Demand caused Bullwhip effect in the entire supply chain
DistributorPlant Retailer
Order TransferOrder Transfer
Magnified Variation in Order
Bullwhip Effect
Causes of Bullwhip Effect
Inaccuracies in Demand Forecasting Long Lead Times Price fluctuation due to Promotional activities Order batching
To reduce ordering Cost To take advantage of Transportation economics such as full truck load Sales incentive Forward buying due to promotional activities to get benefit from lower
price
Just-In-Time-Distribution (JITD)
Vendor Managed Inventory Concept
Treats end customer data as the input
Final authority to determine shipments is Barilla SpA
Barilla would decide what to ship to distributors and when to ship it
Distributors will provide POS data of different SKUs.
Why JITD ?
Expected benefits for Manufacturer
Reduced Manufacturing Cost Increased Supply Chain visibility High bargaining power over Distributors Reduced inventory cycle A planned production planning is possible
Expected benefits for Distributors
Improved fill rates to Retail store- Quick response High service level – additional services to retailers without extra cost Reduced inventory carrying cost
JITD- Resistance
Internal
Sales representative feared reduction in responsibilities Inability to quick shipment may lead to Stock-out Inability to run Trade Promotion Lack of sophisticated infrastructure to handle JITD Skepticism about cost reduction
External
Unconvinced distributors Perceived power transfer to Barilla Distributors were skeptical about the effectiveness of the system
Experiments at Dry Product depots
Barilla spa ran first JITD experiment at its Florence depot
Top management was actively involved
During the very first month of the program Inventory dropped from 10.1 days to 3.6 days Service level to retail stores increased from 98.9% to 99.8%
Depot’s staff was not comfortable working with such low inventory levels Inventory levels finally allowed to increase to 5 days
JITD next tried at Milan Depot Similar performance improvement as Florence
These experiments established the credibility of JITD system
Implementation Result
Implementation Result
Implementation at D.O Cortese Barilla decided to implement JITD in Marchese DC of Cortese It involved
Director of Logistics, EVP of Sales and Manager responsible for JITD implementation from Barilla
Nine managers including MD, Logistic manager for Marchese DC of Cortese.
Consultant Ferozzi- a neutral party trusted by both groups
For six months, Barilla team analyzed daily shipment data of the DC Created the data base of DC’s historical demand pattern
Finally implementation brought phenomenal result
Prior to JITD Stock out rate : 2 to 5% ( Occasionally as high as 10 to 13%)
After JITD Negligible stock out rate of less than.25%(Never exceeded 1%) Average inventory level also dropped
Implementation at D.O Cortese
Implementation at D.O Cortese
Implementation at D.O Cortese
Adaptation with other Distributors
Barilla approached other customers with confidence.
Developed a protocol which could be used to communicate with all customers
Each SKU identified with three different product codes Barilla’s code Customer’s code EAN (European article numbering system) barcode – Most common
barcode standard in Europe
Advantages of the coding system Information can be received through any code Improved data sharing
By 1993, all customers were linked electronically with the Barilla Headquarter.
Communication with CustomersDistributors each day sent following information to Barilla Electronically
1. Customer code number to identify customer
2. Inventory for each SKU carried by DC
3. Previous day’s “sell through”-All shipments of Barilla products out of DC to consumers on the previous day
4. Stock outs on previous day for every Barilla SKU carried by DC
5. An advance order for any promotions that the customer planned to run in the future
6. Preferred delivery carton size
Group reflections/Takeaway
Better demand forecasting using sophisticated tools ensures a robust supply chain
Excessive fluctuation(SD) leads to increased Average Inventory Level, poor USL and frequent stock-out.
Information centralization reduces Bullwhip Effect and enhances inventory management system
Decision needs to be taken amongst “Pull based” and “Push based” systems
To succeed in a new initiative, involvement of Top management is important
Credibility needs to be gained before enforcing any idea to others
Customers need to be convinced with the win-win concept
Thank You
Pasta is Delicious !