1

“Barilla Spa - Case Study”

Shekhar Mehlawat – (2112341)

University Canada West

OPMT 620 (Campus-fall22-12): Operations Management

Professor Salamatinia Babak

18th November 2022

Table of content

Introduction----------------------------------------------------------------------------------------------------

Why they implement JITD-----------------------------------------------------------------------------------3

Distribution channel-------------------------------------------------------------------------------------------

Sales and marketing-------------------------------------------------------------------------------------------5

JITD Program--------------------------------------------------------------------------------------------------5

Internal issues--------------------------------------------------------------------------------------------------6

As one of the customers of Barilla--------------------------------------------------------------------------7

JITD Effectiveness--------------------------------------------------------------------------------------------7

Material requirement planning-------------------------------------------------------------------------------

Optimized production technologies-------------------------------------------------------------------------9

Conclusion-----------------------------------------------------------------------------------------------------9

References----------------------------------------------------------------------------------------------------10
 3

Introduction

Barilla was one of the most predominant pasta brands that Pietro Barilla founded in 1875

in Parma, Italy, via Vittorio Emanuele. They started with a small shop making bread and pasta

for their nearby places. Later during the period of 1940, he passed the company to his sons Pietro

and Gianni. They changed the shape of the company and put it in fast-track mode, and evolved

as a manufacturer of flour mills, pasta plants and bakery products throughout the country.

It is always tough to compete in a competitive and with a very tight profit-making

margin, where there are other 2000 Italian pasta manufacturers, and the product is used so much

that a slight difference in the quality and price could suddenly impact the organisation. So, to

make their product stand out, Barilla used cardboard boxes with similar colour patterns and

invested a lot in large-scale advertising programs. Later in the 1960s, they opened their first 1.25

million square meters state-of-the-art pasta facility in Pedrignano, around 5km from Parma. After

trying hard brothers were still not able to hold with the pace of society and got themselves in

colossal debt; therefore, they had to sell it off to another American multinational firm “W.R.

Grace. Inc”. Further, in 1979, Pietro Barilla took over the company again by paying off all his

dept and relaunching the organisation with the 21% annual rate of return. By 1990, it became the

largest pasta manufacturer in the world, accounting for 35 % of pasta sold in Italy and 22%

around Europe. To tackle the demand, it distributed its system into seven divisions: three pasta

divisions, bakery, fresh bread, catering, and international divisions (Hammond, 2008).
 4

Why they implement Just-in-time distribution (JITD)

There are many reasons Brando Vitali comes up with the idea of a just-in-time

distribution system. He proposed that they should start gathering information directly from the

vendors so that they may have better forecasting and inventory management. On the other hand,

the organisation had to face many problems with their customers as they were not very much

unsatisfied with the interference from the organisation in their inventory management. It is not

just about the vendors. The internal department is also very curious as they feel they could lose

their jobs or their work will be less relevant for the organisation, especially to the sales and

market departments.

Distribution Channel

To tackle the demand, Barilla distributed their product line in two categories, dry and

fresh, representing 75 % and 25%, respectively. Dry products include cookies, biscuits, bread

sticks and dry toasts with an estimated shelf life of 18 to 24 months. Pasta and dried toasts have a

medium shelf life of 10 to 12 weeks, but they are going wrong because they offer their products

in around 800 different types of SKUs made in 200 different shapes and sizes. At the same time,

fresh pasta products have a shelf life of 21 days (Hammond, 2008).

Fresh products are usually purchased from central purchased products (CDCs) through

the seventy different warehouses located throughout Italy. Therefore around 35% of Barilla dry

products are distributed through their own operated warehouses to their small independent shops

and are held in inventory for two weeks. There are two supermarket distributor types: Grande

Distribuzione (Large distributor), known as GD, and Distribuzione Organizzata (Organized

distributer), known as DO. Most of the distribution is carried by a chain of supermarkets, around
 5

70% of which are taken care of by GD, and the other 30% of orders from the independent

supermarket are taken care of by the DO. Making the deliveries for all the orders takes around

24-48 hours after the order has been received at the distribution centre (Hammond, 2008).

Sales and marketing

They usually focus a lot on the promotion of the product. So, they can reach a broad

audience, make a global image, and position themselves as high-quality and sophisticated pasta

product available in the market. They try to impress their consumer by having statements that

can differentiate them from the crowd, like “Barilla a great collection of premium Italian pasta”,

which can generate a sense of eating something premium. Other strategies they try to collaborate

or provide sponsorships to celebrities that reach a broader audience in different parts of the

world, not just Europe. Like Steffi Graf to promote products in Germany and Stefan Edberg for

the Scandinavian countries (Hammond, 2008).

It is not only limited to just promotions, sponsorships and collaboration. Instead, they

also focus on providing trade options and special offers on orders. Instead of using months as a

timeframe, they have distributed their Calendar in 10-12 canvas, typically ranging from 4-5

weeks. During the different cavass they try to offer various offers to their customers. Typically,

the discount is as follows: 1.4% on semolina pasta, 4% on egg pasta/ biscuits and 8% and 10%

on sauces and breadsticks, respectively. They also provide promotions based on volume too.

Incentives like an additional 2-3% off on a full truck or 1000 litres carton discounts if a buyer

buys three trucks together (Hammond, 2008).

JITD Program

The program was launched to tackle the random fluctuating demand for products. Most

of the rapid fluctuation can be seen in the dry products, where a significant difference can be

seen in the market for products weekly. That makes it hard for the organisation to forecast the

demand. Sometimes, it leads to overstocking products in the inventory and takes much time to

clear the list and the manufacturing process if affected. Therefore holding an extensive list is

very expensive for the customers and the organisation to fulfil the ransom demand of the market.

Consequently, they require accurate data so that barilla can analyse and predict the demand

trends and manage their plant accordingly. Some distributors suggested they could stock

additional inventory to support the fluctuating demand, but that is not how it should be processed

(Hammond, 2008).

The other issue is that the organisation is developing many new products regularly, which

can create a shortage of store shelves. Already they have a lot of different sizes of packs for the

products, which is giving them a hard time to tackle with the fluctuating demand, and having a

high number of products is making it hard for the distributor and the organisation to manage the

inventory and adding new products regularly is going to give a tough time to the organisation

and the distributor both. They are already suffering from a skinny profit margin.

Vitali suggested that the organisation should look at the distributor data. So, they can

fulfil the actual demand that is needed no more or less. This way, they can reduce their

distribution cost and inventory level and manage the production facility according to the volatile

demand pattern (Hammond, 2008).

Internal issues

The system creates a kind of insecurity among the workers that their responsibilities

would diminish if this system came into action. As they no longer have a significant role to play

in the organisation. Another issue that can arise if we use this strategy, it could lead to free

spaces in the stores that can generate opportunities for our competitor to fill those empty shelves

—giving them the advantage to take the lead. JITD is not a system to replace a part of an

organisation; instead, it is just a selling tool to gather information so that the organisation can

forecast the demand in advance and be prepared (Hammond, 2008).

On the other hand, the distributor sees that the organisation wants to take over their

inventory storage as a threat and says that they don’t need anyone to look into their warehouse.

Still instead, it is to help them manage their inventory more preciously and effectively use their

storage space. Getting the data from the distributor can help the organisation plan the

manufacturing of the products before they hit a sudden demand.

As one of the customers of the barilla

There are always points to consider, the customer’s and the organisation’s perspectives.

Not all customers have the advanced technologies to monitor the demand or the tools to forecast

the most accurate market shortly. So, the customers could have advantages from using RFID tags

and bar codes to track the inventory better rather than doing it physically. But this could also lead

to specific problems that the warehouses focus on the organisation, which could sometimes go a

bit negative in terms of customers’ perspectives because sometimes they could be overstocked or

understocked. They could lose their potential customers from their competition or their hunger

for expanding and reaching new customers.

JITD effectiveness

While considering the situation during the time of 1990. I think it is a kind of appropriate

plan to take into consideration. Still, they have tried to reach there in a different or much more

polite way by first explaining the system’s advantages to them rather than just imposing on them.

It generates a kind of insecurity among the customers towards the brand. Later, things started to

work in favour of the organisation and the ability to work efficiently (Hammond, 2008).

They have been still relying on intermediates a lot. Therefore, they could also have

started to engage directly with the supermarket chains, providing the organisation with a much

better and more accurate demand from the consumer’s perspective. Therefore, that could have

led the organisation in a much more beneficial face or revenue-generating because they will be

able to remove one of the intermediate and both the organisation and the customers can have

better profit margins. It will also add a plus point to the organisation that they can get accurate

consumer demand data.

The organisation should reach their distributor differently, which I think is slow—starting

with doing the meeting, taking the review and feedback and considering their viewpoints too. So,

that can build better trust between the customer and the organisation, and the customers can feel

their voices are also heard. They should also make a growth plan with their customers and how

much they want to expand their network soon. So the organisation can have a better forecast for

the expansion of the distributor warehouses. They should have explained the process of JITD and

the advantages it will bring to the customers, like the modernization of their warehouses

(Hammond, 2008).

Material requirement planning

JITD is not the only best option the company could have looked into. Instead, they could

have looked into the MRP. It is one of the first computer-based inventory management systems.

That focuses mainly on customer satisfaction, which focuses on making the plan for the

production of inventories and how much material will get used. The only con of this process is

that it relies on the accurate data that will be provided by its customers (Kenton, 2022). So. The

organisation can combine this system with the modernization of their warehouses as they will

receive accurate customer data, and the organizations will have better forecasting of the demand.

In this way, the organisation will be able to manage their plant much more effectively and never

overstock or understock the inventories of their products.

Optimized production technologies

It is a kind of process that focuses on removing bottlenecks and making production much

more efficient and focuses on achieving the lean process. With the implementation of this

system, the organisation should be able to find the gap in their operation process and maybe

tackle it in a different approach rather than not only focusing on just-in-time delivery or perhaps

the removal of some of the intermediates and directly dealing with the larger supermarket chains

(Management by the Constraints, 2020).

Conclusion

There have been a lot of hard times from the start of the Barilla. From the very beginning,

they started with a small shop, and later, their sons expanded their business to a global level.

Where in between, they have to sell the organisation because of financial issues and later acquire

it back. Therefore, they are facing many problems with the management of the inventory.

Furthermore, they devise a plan to implement the just-in-the-time distribution system, which is
 10

booming. Still, it creates many problems within the organisation and outside too. The marketing

and sales department is starting to get complex, and they might lose their jobs because of this

system, but the plan is to support them. So, they can make a better judgement for future orders

and requirements. On the other hand, the customers become curious that the organisation wants

to take over their warehouses, and they might be able to lose control. Still, the organisation wants

its warehouse to be modernized, enabling them with RFID tags and bar codes. So, the

organisation can start gathering information from them, make a better production plan, and meet

the demands. Another system could also be considered the material requirement planning and

optimized production technologies.

References

All Answers Ltd. (2022, July 29). An Over View Of The JITD Program.

https://www.ukessays.com/essays/marketing/an-over-view-of-the-jitd-program-

marketing-essay.php

Hammond, J. (2008, March 25). Barilla Spa (A). Harvard Business Publishing Education.

https://hbsp.harvard.edu/download?url=%2Fcourses%2F971656%2Fitems%2F694046-

PDF-ENG%2Fcontent

Kenton, will. (2022, August 25). Material Requirements Planning (MRP): How It Works, Pros

and Cons. Investopedia. https://www.investopedia.com/terms/m/mrp.asp

Management by the constraints. (2020, February 3). Simcore. https://www.simcore.fr/en/flow-

management/management-by-the-constraints/

MRP, JIT, OPT, FMS? (2014, August 1). Harvard Business Review.

https://hbr.org/1985/09/mrp-jit-opt-fms
11