Barilla SOOT Analysis Case Study
In the asses, due to the big investment for pasta plant, Barilla Nas in huge debt and was sold to WAR Grace (a multi national firm).
Followed in 1979, the Barilla brother had enough money repurchased the company. In the asses, Barilla is one of the largest and most successful pasta manufactures in the world and dominates the European market. 2.
Analysis Barilla SOOT Analysis will be shown as below table Strength: * Long history on producing flour-based products * Cutting-edge manufacture facilities * High brand equity * Invest heavily on Promotion / Advertising * Wide range of products I Weakness: * Barilla is Barilla and retailer lack of communication, * Inefficient information flow, * Ineffective distribution system I Opportunity: * Just In Time Distribution system * Develop internal striation system * Make use of the rapid growing export market I Threat: * Italian food’s market is flat * Customer’s preference is wobbly * CITED in need of high reach and intense training I Table 1.
SOOT Analysis of Barilla Barilla has two main distribution systems which are dedicated for dry and fresh pasta product, the difference due to its product shelf life.
Dry pasta will have much longer shelf life than fresh pasta. 65% of the product will be shipped from the Barilla plants to Barilla core distribution centers, and then forwarded by Grandee Distributional (GO) and Distributions Organize (DO) to the chain supermarkets and independent supermarkets.
The rest 35% will be shipped from the Barilla plants to the Barilla Run depots then from depots, it will be shipped to the chain supermarkets, independent supermarkets and Signora Maria Shops. Meanwhile fresh products were purchased from the two CDC by independent agents who then distribute the products through 70 regional warehouses located throughout Italy. Each of these warehouses held about three days of fresh product in inventory.
3. 1 . Value Chain Analysis
Burial’s value chain can be analyses to seven main parts; new product’s stage, raw material sourcing, product manufacturing, CDC/Burial’s run deports, truck shipment consolidation, retailer, and retailers’ feedback for Barilla ‘s company to manage its own supply and demand. Walsh (2011) discussed about Porter’s value chain model that contains primary activities and supportive activities. This model was used to analyses each department’s donations.
S art Witt primary activities, they were organized by five departments, including inbound logistics, operations, outbound logistics, marketing and sales and services. First, Burial’s inbound logistics set up its extensive network of plants located throughout Italy and factories site were chosen to be located near the raw material sources. The rationalization is to reduce the transportation cost for raw material sourcing.
Secondly, Burial’s organization structure was highly vertical integrated, “hen Burial’s headquarters made the decisions, it would be implemented by dry products and fresh products departments which had their own set of value chain activities. In terms of outbound logistics, 55% of total products were handled by GO ND DO which served as the two external distributors, while 45% products were distributed by Barilla-run depots. Because during the process, 65% would be sent to CDC while the rest would be sent to Barilla-Run deports.
Then, CDC would distribute 90% of products to GO and DO, the rest would be delivered to Barilla-Run deports. Thirdly, Burial’s marketing strategy was both focuses on the advertising activities that utilized well-known athletes or celebrities to improve the brand and to support the sales activity, trade promotions cover sales discounts on promo period ND volume discounts as a reward for distributors. Lastly, in terms of service provided, Burial’s sales representatives major support DO. For example, they spent most of their time to help DO to set up promotions and weekly order.
In contrast, the communication with GO was established to communication technology such as telephone or fax.
In regards of supportive activities that included procurement, HRS management, technology department and infrastructure. Although, the case did not specifically mention about procurement and technological issues, as one of the top firms in Italy, Arial SPA attracts potential resources all over Italy. Additionally Barilla also acquired Enroll-class manufacturing system equipped with cutting-edge facilities to support the Burial’s high demand. 3.
Problem Identification Barilla faces several issues back in the late asses.
Bullwhip effect on its supply chain is one of the biggest challenges for Barilla has to deal with during that period of time. Bullwhip effect defines as the trend of larger and larger swings of order quantity in response of changes in demand (Lee, 1997). Understanding the cause of bullwhip affect can be the basis to come with the solutions. First the reason why Barilla experience bullwhip effect on its supply chain system is because Barilla does not have the standard sales forecasting model during the time.
Ninth the lack of standard forecasting model, Barilla experienced the overburdened logistic and manufacturing operation.
Second reason is because the price fluctuation due to its own promotion. Barilla applies multistage discount scheme to its customer. For example volume discount, a discount scheme offered by Barilla to their customers nun order in a tulle truck load quantity can be combined Witt other promotion that offered during the time. This will lead to forward buying activities from Burial’s customer to get benefit from lower price offered.
The variation of order experienced by Barilla was excessive, thus Giorgio Magical who is the Logistic Manager for Barilla SPA, proposed Just In Time Distribution IDIOT) in the hope to control the effect of bullwhip effect faced by Barilla. CITED concept is basically apply the Vendor Managed Inventory (VIM) concept where Barilla will have the final decision on how many and “hen to the deliver its product to the customer.
Burial’s customers only need to revived their POS data of each SKU for Barilla.
Then Barilla will process those data as input to make the delivery decision. The advantages of CITED system are covered several area of supply chain management. First with CITED system, the information flow between Barilla and its customers will be smoother. Second, CITED expected to reduce the inventory rate for both, Barilla and its customer.
This will impact to reduce the inventory carrying cost for Barilla and its customer. Next, CITED also will help Barilla to have better production planning thus will reduce its manufacturing cost. Lastly, CITED
Nil help Barilla and its customer to increase their service level since they have better product availability and inventory rate. However, the implementation of CITED system is not as convincing as it sound. Barilla, particularly Magical, faced two main issues prior to implement CITED system in its supply chain management.
First, Magical has to deal with the resistance both from Internal Burial’s organization as well as from distributor side. Secondly, technological Issue that covers insufficient information system also add the challenge to Magical in order to execute Just In Time Distribution. Recommendation Based on the previous analysis the Barilla group is mainly facing two problems, trust and technology issues with CITED implementation. Considering the trust issues, it can be derived from two aspects, the internal and external resistances. In terms of the internal resistance, the barrier is basically coming from the organization inside marketing and sales team.
Because of CITED, it is probably leading to be deprived their responsibility or even Job. Therefore, the resistance results from the instability from the top to the low level of the whole team. E recommendations are focusing to ensure the whole team’s Job security. First by first, Barilla may offer stuff training program, in order to assist the original marketing and sales team to acknowledge the concept of CITED program. For who are able to accept this program, Barilla may offer them new positions according to the needs of the new program. On the other hand for the stuff who may hardly accept the new program after training, the company may transfer them to other department, in case of avoiding the spread of unwanted mood.
Another solution may relocate them into he new established department, which is dealing with collecting data from distributors or warehouse and making forecast of the future supply decisions. In this process they feel their own value being realized and the benefit of the CITED. In order to address the external trust issue, persuading the distributors to participate in the supply program and abandon their order right, under the situation that no enough facts to prove the actually benefits from CITED, comes to be the priority of the head quarter.
Therefore, the following recommendations can be suggested to the company. Firstly Barilla may implement the CITED inside the organization first.
Specifically, Barilla may implement CITED with Burial’s depot, so as to make other distributors realize the benefit of the program, such as avoiding bullwhip effect and keeping appropriate storage supply, increasing the production and transportation efficiency, decreasing the operational cost for both sides, etc. Secondly Barilla is suggested to launch the new program in a lower level first among distributors. The data sharing are crucial in the whole CITED system.
Barilla may commence sharing data with distributors, so as to veal the benefits of data sharing to the productivity of the whole supply chain. Finally the company is able to provide exclusive discount price and promise the priority of the supply to the distributor, who is willing to be involved in the CITED initially. This can stimulate the distributors’ initiative considerably Due to this case happened in early asses, the technology limitation the data sharing cannot be effective as nowadays.
Thus the telephone conference, telegraphic message and routine meeting may be the potential solution. References Coyly, Bard’, Langley 2003.