QuestionQuestion

Case Study: Barilla SpA

Hammond, J. H., 2008, Barilla SpA (A), Harvard Business Publishing (Case No. 9-694-046).

The following are some of the questions that should be addressed in your report:
1. Refer to Exhibit 12. What exactly is causing the distributor’s order pattern to look this way? What are the underlying drivers of the fluctuations we see in the exhibit?
2. What does the underlying consumer demand pattern for pasta look like in Italy?
3. What is the impact of the fluctuation seen in Exhibit 12? How much does it cost to have an order pattern like this? (What line items would be affected?)
4. What do you think of Brando Vitali’s JITD proposal as a mechanism for reducing costs?
5. Why should this work? How does it work? What makes Barilla think it can do a better job of determining a good product delivery sequence than its distributors?
6. Why are Barilla’s customers so resistant to the JITD idea? How might Maggiali be more successful in persuading customers to at least try the JITD program?
7. Why is there so much internal resistance to what seems, in concept, to be an effective idea for Barilla?
8. How would you interpret what Barilla’s salespeople are really saying?
9. In general, if one party is to make channel decisions, who should it be? Why is it Barilla who is making the decision? Why doesn’t Barilla pass information to the distributor and let the distributor make the “system-optimal” decision?

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Barilla SpA Case Study

Q1. Refer to Exhibit 12. What exactly is causing the distributor’s order pattern to look this way? What are the underlying drivers of the fluctuations we see in the exhibit?

As noted in the provided case, a DO (Organized Distributor) acted as a centralized buying organization for a large number of independent supermarkets. When observing Exhibit 12, a high fluctuation could be noted with the orders of Cortese's Northeast Distribution Center. There are several underlying drivers of this fluctuation that are pointed out through the description of the Sales, Marketing and Distribution processes. They are:

● Different transportation and volume discount (incentives of 2% to 3% for orders in full truck-load quantities, 4% discount for three truck loads)
● Dynamics of promotional activities (each year is divided into 10 or 12 “canvass” periods, typically four to five weeks in length, and each corresponding to a different (or similar) promotional program)
● No minimum or maximum order quantities established
● Product proliferation (many variations of the same product)
● Long order lead times (order was delivered between eight and fourteenth day from order placement, which represents a 10 days lead time on average)
● Poor customer service rates (as indicated, “customers were simply unwilling to give up their authority to place orders as they pleased and some of them didn’t want to provide the detailed sales data upon which Barilla could make delivery decisions and improve demand forecasts”)
● Poor communication between participants in the supply chain.
● Lack of forecasting system.

Q2. What does the underlying consumer demand pattern for pasta look like in Italy?

As shown in Exhibit 12, the extreme fluctuation is evident when one considers the underlying aggregate demand for pasta in Italy. This is especially highlighted for the dry products, and orders for this group of products are significantly different from one week to another. As a result, this is having negative consequences on manufacturing and logistics operations and processes. By having several different factors (as indicated in the previous questions), that could significantly influence on demand forecasting. It is becoming very hard to model any trends, forecast demand for some period of time and...

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