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Running head: STRATEGIC SUPPLY CHAIN MANAGEMENT:BARILLA SPAStrategic Supply Chain Management:Barilla sPADrainville, Julie, Pieris Sherline, Yu Zhewen, Ren Yuan, Okafo EKE, IfeomaESC4710 _010March 27, 2017Table of ContentsCase Study 2: Barilla SpA (4)Company Background (4)Company Origins (4)Figure 1: Trend of Barilla Sales and Italian Price Index (5)Pasta Market Share (6)Figure 2: 1990 Italian Pasta Market by Market Share (6)Figure 3: 1990 European Pasta Market by Market Share (6)Figure 4: 1990 Italian Bakery Market by Market Share (7)Pasta Manufacture (7)Figure 5: Barilla’s Product Divisions (7)Channels of Distribution (8)Figure 6: An illustration of cha racteristic of Barilla’s Products (8)Underlying Drivers and Cause of Fluctuation Demand (8)Figure 7: Weekly Demand of Barilla Dry Products (9)(Hammond, 1994, p.22). (9)Lack of Downstream Visibility (9)The Bullwhip Effect (10)(Chopra & Meindl, 2016) (11)Figure 8: Demand Fluctuation at Different Stages in the Supply Chain (11)Supply Chain Objectives (12)Figure 9: Barilla Distribution Channel (12)Pasta Demand Patterns (12)Impact of Fluctuation Demand (13)Affected Line Items (14)Just in Time Distribution (JITD) and cost reduction (15)Functions of Just in Time Distribution (15)Barilla Implementation of Just in Time Distribution (17)Customer Resistance (18)Customer Persuasion (18)Internal resistance (19)Interpretation of JITD to salespeople (20)Effect on Sales Performance and Customer Satisfaction (20)Effects on Promotions (21)Channel Decisions (22)Downstream Supply Chain Visibility (22)(Weblearnindia 2014) (23)Figure 10: Visualization of a Supply Chain (23)Visibility - Upstream from the Manufacturer (24)References (26)Case Study 2: Barilla SpACompany BackgroundCompany OriginsBarilla is an organization owned by Pietro Barilla, which started out in 1875 as a retailer. The store’s main products included pasta and bread that were produced in a lab next door (Hammond, 1994, p.1). Barilla grew turning into a large pasta manufacturer, experiencing significant growth before it was passed to his sons Pietro and Gianni in the 40’s (Hammond, 1994, p.1). As Barilla’s ownership was passed down through the generations, the company grew and became a vertically integrated corporation (Hammond, 1994, p.1). The growth 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 marketing 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 world’s most sophisticated and technologically advanced pasta plant (Hammond, 1994, p.2). The high investment in building this facility placed huge pressure on Barilla’s finances. In 1971, Barilla ended up being sold to a multinational firm named Grace (Hammond, 1994, p.2).In addition to changes in the organization's business practices, Grace introduced a new line of bakery products called White Mill. The highly regulated Italian economy and Barilla operating environment coupled with difficult economic conditions of the 70’s 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 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 80’s through the international expansion of the Barilla brand, and the acquisition of new businesses (Hammond, 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 ShareFigure 2: 1990 Italian Pasta Market by Market ShareFigure 3: 1990 European Pasta Market by Market Share1990 Italian Bakery Market by MarketShare29%BarillaOthers71%Figure 4: 1990 Italian Bakery Market by Market SharePasta ManufactureThe major processes involved in pasta manufacturing include: mixing, rolling, cutting, heating in 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 dedicated plants including long and short pasta plants.Figure 5: Barilla’s Product DivisionsChannels of DistributionA profile of Barilla’s products, as well as some key features is shown below in Figure6.Figure 6: An illustration of characteristic of Barilla’s ProductsUnderlying Drivers and Cause of Fluctuation 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 chain to be effective resulting in negative effects for both the organization and the customer.(Hammond, 1994, p.22).Figure 7: Weekly Demand of Barilla Dry ProductsIn examining Figure 7 we are able to visualize the extreme fluctuation in customer demand Barilla experiences. The chart displays that 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 the 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 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. This results in supply chain stages being blind of actual customer demand. This results ina distorted demand pattern as it flows downstream through the supply chain. This is reflected in the order patterns Barilla's receive. This creates a difficult environment for supply chain to coordinate efforts.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. This 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 wholesaler’s order to manufacturer we can see 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 ChainIt is apparent that Barilla is currently 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.Supply Chain ObjectivesThe image below in Figure 9 is a graphical representat ion of Barilla’s 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 ChannelThe overarching 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 (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 don’t consider the potential consequences this may generate in the long term for the supply chain. This decentralized decision-making results in high and unpredictable fluctuations in demand.Pasta Demand PatternsDemand patterns for pasta have been rela tively stable throughout history. In 1980’s it was shown that “Italian pasta market as a whole was relatively flat, growing lessthan 1% per year. It is estimated that the average in 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 summer (Hammond, 1994, p.2) Over the years, pasta sales have kept pace with inflation; however in the 90’s 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 seen 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 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 of reactionary inventory, sales and marketing decisions. This creates a detrimental impact on the performance of the supply chain’s 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 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 implemented 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 unexpectedly 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 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 increase 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 Line ItemsThere 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 also reduces profitability When 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 flowJust in Time Distribution (JITD) and cost reductionJITD 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 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 didn’t have to respond to the 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 to 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 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 the 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 profitability (Chopra & Meindl, 2016, p 249).Functions of Just in Time DistributionA more transparent supply chain allows the organization to have a better understanding of the overall customer demand. A more accurate depiction ofcustomer demands will lead to better information and coordination between 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 information 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. R educing the organization’s stock out percentage and decreasing the replenishment lead time needed to meet orders for their customer. 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 reduce 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 finished 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 inventory-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 decrease 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 Time 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 their 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 percentage. The decrease in stock out percentages increases the organization's customer satisfaction throughout the supply chain.Barilla is located at the back end of the supply chain and in turn feels the effect of fluctuating demand the most as seen in Figure 8 on page 9. It is important that the information flows from the end consumer through to the manufacturer to optimize the total effect of JITD. The proposed solution is based on a vendor managed inventory (VMI); which holds the supplier/manufacturer responsible for inventory levels throughout the supply chain (Chopra & Meindl, 2016, p 261). This allows the manufacturer to have a better depiction of demand and increase inventory management capabilities throughout the supply chain, increasing the supply chain surplus. As Barilla is the manufacturer it is important that they, to optimize the implementation of the JITD program, manage product sequence. The VMI has the ability to “allow a manufacturer to increase its profits - as well as the profits of for the entire supply chain - if both retailer and manufacturer margins are considered when making inventory decisions” (Chop ra & Meindl, 2016, p 261). Barilla would be able to better fill the gaps in forecasting for the entire supply chain allows all stages to reduce cost and increase customer satisfaction.Customer ResistanceBarilla is experiencing customer resistance in the implementation of the JITD idea. There are multiple factors that contribute to Barilla customer resistance. Primarily their customers blame them, Barilla for the fluctuation in demand. Customers stated that “managing inventory is my job; I don’t need y ou to see my warehouse or my figures. I could improve my inventory and service levels myself if you would deliver my orders more quickly” (Hammond, 1994, p.9). This creates more resistance towards their customer. It is apparent that they do not comprehend the underlying contribution to the fluctuation in demand. With blame being passed from stage to stage in the supply chain, there is no focus to eliminate the root cause. Barilla customers are currently focused on optimizing their organization and do not have any regard at how it may negatively impact others in their supply chain. This shows the customer does not fully understand the benefits of implementing the JITD program throughout their supply chain. Currently Barilla customers, experience multiple sales incentives during the year. The change in the relationship makes their customers feel as if they will no longer be able to take advantage of those situations in turn resulting in higher cost for them.Customer PersuasionMaggiali persuaded customers to at least try the JITD program. “JITD should be considered a selling tool. We’re offering the customer additional service at no extra cost” (Hammond, 1994, p 8). In order properly to persuade customers to implement the JITD program, it is important that Maggiali has a strong understanding of his customer’s needs and desires. It is important that Maggiali ensure that their proposition show that their customer goals and are aligned with Barilla. Proper incentives should be generated throughout the supply chain during the implementation process (Chopra & Meindl, 2016, p 256).Maggiali must find a way to express the benefits that will be felt by their customers once the JITD program is implemented. It is important to communicate stakeholderconsortium based on a real-time vendor managed inventory system. To aggregate demands from all distributors and offset the demand changes of different market places.The relationships between Barilla and the distributors will be improved rather than harmed. Currently they have one customer who is willing to try the JITD program; therefore it is important that records of all improvements are made. This will allow then using the implementation as a display to other customers the benefits for their customers. This will create a stronger argument when talking to other clients about making big changes in their relationship.Internal resistanceThe level of scepticism and resistance faced by the salespeople is an indicator that Barilla failed to establish an effective change management strategy. Change management is defined as a “professional discipline, which focuses on supporting organizations on their way to successful transition for a less than ideal status quo to a desired future state” (Vedenik & Leber,2015). In order to have a successful transition to JITD, Barillas change management strategy should consider the following:•The level of stress imposed on the salespeople from the organizational change throughout the implementation phase•The impact of salespeople resistance on the success the organizational change• A plan of action to counteract resistance through proper communication channels and resources•Consideration of the micro and macro effects of the proposed solution•Impact of JITD on the day-to-day business and its company structure•Understand how to communicate and motivate the employees into accepting the organizational change aheadIn order to increase the success of JITD, change management strategies must be developed to keep the struggles of implementation in mid.An overall shift in Barilla’s company culture may be necessary to successfully implement changes. As stated by Clardy in the Improve the Process of Managing Change “creating an organizational culture and workforce that is appreciat ive of the need for change, improvement, learning, growth, and innovation” (Clardy A., 2013). Judging by the salespersons’ feedback, it appears they view the organization change in conflict with their beliefs of Barillas value. In order to change that view, management must ensure that the salespeople feel empowered by the change and are given the support needed throughout the implementation phase by establishing clear communication lines.Interpretation of JITD to salespeopleThe sales representatives are focused on meeting sales goals. They currently operate with a view on optimizing their contribution to the organization and do not focus on how this affects other aspects of the organization. They viewed JITD as not only imposing on their sales performance, but enforce guidelines that place restrictions and monitor their performance. It appears the sales group is resistant to change. Although the JITD is a great concept, they failed to understand the magnitude of operation efficiency it will present to the entire supply chain. Instead, they were sceptic about the overall cost reduction and viewed the infrastructure as unstable. In essence it seems as they prefer having a supply chain with no forecasting visibility or system in place to monitor the effects of their sale patterns.Effect on Sales Performance and Customer SatisfactionSalespeople concern to implement JITD systems are in relation to the potential change in their positions. A salesperson worries about sales levels as they have performance-based compensation which can be reduced with JITD. The following quotes are concerns that salespeople in the organization have voiced.•“Our sales level would flatten if we put this program in place” (Hammond, 1994, p.8)•“We run the risk of not being able to adjust our shipments sufficiently quickly to changes in selling patterns or increased promotion” (Hammond, 1994, p.8)The expectation is that with JITD in place, sales will be level. A restructuring of the compensation structure that will not only reward the salesforce for effort, but provide rewards when sales levels increase, will motivate the sales force. In addition, it will also encourage them to put their support behind the JITD initiative.Implementation of JITD will improve logistics. Salespeople will also be more productive when they adopt the JITD tool. They will reduce cost with better planning of transportation. JITD helps forecasting be more accurate, which increases the gross profit. There is a belief that JITD will lead to unanticipated changes in demand, which Barilla is unprepared for. However attributing change in shipments to selling patterns and increased promotions in a JITD scenario reveals a lack of understanding of the impact of JITD. The point of JITD is to have more predictable demand, which precludes the need to adjust shipments or offer promotions.Effects on PromotionsCurrently the sales people have difficulty understanding the in-depth relationship that JITD creates. The promotions are currently derived from the stock quantities of each stage in the supply chain. The following quotes are some concerns of the salespeople within the organization.•“We wouldn’t be able to run trade promotions, with JITD. How can we get the trade to push Barilla products if retailers if we don’t offer some sort of incentive” (Hammond, 1994, p.8)•“It’s not clear that cost would even be reduced. If a DO decreases its stock, we at Barilla may have to increase our own inventory of those products for which we can’t change production schedules due to our lack of manufact uring flexibility” (Hammond, 1994, p.8)The salespeople view the implementation of JITD as threat. They see this implementation as threatening their abilities to increase their sales especially when it comes to promotions. It is important to communicate to the salespeople that promotions can now be determined with their customers. This is conducted during the sales and operations planning stage. This ensures that all stages in the supply chain are aware of when promotions are expected. This results in allowing the entire supply chain to plan for the capacity needed during peak periods of demand due to promotion. This type of relationship with the customer will allow the organization to decrease their stock out rates and ensure that customer satisfaction is met throughout the supply chain.Channel DecisionsAs we have established, the major problem with the Barilla is closely related to the bullwhip effect resulting from a lack of visibility in the supply chain. This means that a relatively stable demand by the end customer results in highly unpredictable demand as you go downstream through the supply chain. The most affected stage in the supply chain is the manufacturer; as displayed in Figure 8 as seen on page 9. In order to ensure that information flows throughout all stages it is therefore important that the manufacturer has the ability to make channel decisions.Downstream Supply Chain VisibilityAccording to the Supply Chain 247 article titled “Supply Chain Visibility and the Bottom-line”, Gartner in 2016 defined supply chain visibility as, “p roviding controlled access and transparency to accurate, timely and complete plans, events and data –transactions, content and relevant supply chain information” (Synchrono, 2016). Supply chain visibility provides the supply chain with information on demand patterns at each stage of the chain. In other words, a warehouse will have the latest information on the sales activity at the retailer end. This will enable the warehouse to plan capacity and inventory levels allowing them the ability to。
案例1 巴里勒公司（Barilla SpA）（A）①玛吉利（Maggiali）变得越来越困惑了。
身为世界上ᴰ大的通心面食生产商巴里勒公司[Barilla SpA （Socitalper Aziont翻译为“股东社团”，可理解为“公司”）]的物流主任，玛吉利敏锐地认识到需求波动给公司的制造和销售系统施加的负担越来越重。
自从1988年担任物流主任以来，玛吉利一直在努力发展前任物流主任布兰都·维持利（Brando Vitali）提出的一个创新思想。
这个思想，维特利称之为适时制销售（JITD），模仿了流行的“适时制”制造概念。
实质上，维特利提议巴里勒的物流组织不应遵从传统的做法，根据分销商向公司发出的定单来向其发送产品，相反应该指定合适的交货数量，这样将更有效地满足ᴰ终顾客的需要，而且又能把工作量在巴里勒公司的制造和物流系统中进行更为平衡的分配。
作为维特利提议的强烈支持者，两年来玛吉利一直在努力实施这个想法，但现在已是1990年的春季了，这个计划仍没有取得什么进展。
似乎巴里勒的客户不愿意放弃随心所欲的订货权力；一些客户甚至不愿意提供可供巴里勒作交货决策和改善需求预测的详细销售数据。
也许使计划失败的更大阻力来自于巴里勒自身的销售和营销组织内部，这些组织认为这个想法是不可行的或是危险的，或者是既不可行又很危险的。
也许该放弃这个想法了，仅仅因为它行不通。
如果不放弃，玛吉利如何才能使这个计划被人接受呢?公司背景巴里勒成立于1875年，当时皮切尔·巴里勒（Pietro Barilla）在意大利的帕尔玛开了一个小商店。
靠近小店的是一个小“作坊”，皮切尔在这里制作他在商店出售的通心粉和面包。
皮切尔的儿子里卡多（Ricardo）领导公司经历了快速成长的时期，在20世纪40年代里卡多又把公司传给自己的儿子皮切尔（Pietro）和吉安尼（Gianni）。
随着时间的发展，巴里勒从ᴰ初的小店发展成为一个大型的、在整个意大利各地具有面粉加工厂、通心面制造厂、面包工厂的纵向一体化公司。
