INDIAN INSTITUTE OF

MANAGEMENT INDORE

PGP-1
Marketing Management II Group 6
(H)
Case Analysis- Barilla SpA

Group 6

Akash Deep
Bhavya Jaggi
Dharini S
Pallav Jindal
Rishi Baijal
Vanam Siri Lahiri
Vivek Kumar
Company Background
Started as a small shop in 1875, Barilla SpA grew to become the largest pasta
producer in the world with one-of-a-kind pasta plant in Pedrignano. Re-purchased by
the original owners, Barilla held a market share of 35% in Italy and 22% in Europe.
Its point-of-sale outlets included small independent shops, supermarket chains and
independent supermarkets. In addition to the family of pastas, it also manufactures
bread, cookies and biscuits etc.
Identification of the problem
Barilla was facing extreme fluctuations in demand with orders for dry products often
swinging wildly from week to week which strained its manufacturing and logistics
operations.
There were also inefficiencies on the part of distributors with respect to their service
levels to retailers owing to the levels of inventory.
The margins of the retailers/distributors stand lessened.
Also, holding sufficient finished goods inventories to meet distributors order
requirements was also costing the company a lot.
Situational Analysis
The fluctuation in demand was a result of multiple factors.
The trade promotion schemes such as transportation incentives and volume
discounts were being used as a push strategy with no consistent pull being
experienced.
The shorter shelf-life and specific sequence of production of pasta made it difficult to
fulfil supply in a short period of time i.e. longer lead times.
There was no threshold on the minimum quantity that the distributors should order
with orders being placed only after the inventory levels were checked only after the
end of the week.
Lack of forecasting systems and sophisticated analytical tools on the part of Barilla,
distributors, grocers etc. aggravated the inconsistency in the demand.
Just-in time Distribution (JITD)
There were manifold apprehensions with respect to JITD which meant that the
Barilla own logistics organization would specify the appropriate delivery quantities-
those that would more effectively meet end-consumers needs yet would also more
evenly distribute the workload on Barillas manufacturing and logistics systems.
The sales and marketing personnel of Barilla felt that the sales level would flatten.
There was a risk of not being able to adjust our shipments sufficiently quickly to
changes in selling patterns or increased promotions. Also, if space was freed up in
our distributors warehouses, there is a risk of giving competitors more of the shelf
space. Additionally, there were hesitations regarding ambiguities about cost
reductions and effectiveness of trade promotions.

Recommendation
Company can use the following majors to implement JITD smoothly:
1. Postpone the application of packaging labels to a later stage to produce the
various SKUs efficiently. This will make the process more flexible.
2. Regarding the SKU complexity, the company can apply 80/20 Pareto principle
to keep the complexity at a manageable level.
3. Technology has to be sophisticated enough to bring retail demand information
to the manufacturers so as to enable them to predict customer demand
efficiently. This will lead to large initial investment by Barilla. Moreover,
employees would need to be trained to work on the new system.
4. The organization structure needs to be revised to better align the sales and
logistic departments. For JITD to be successful for the company, there has to
be free flow of information between the two groups.

Conclusion
Overall, JITD is going to work for Barilla since it addresses a large part of major
issues in the existing supply chain of the company. The cost savings achieved by
Barilla can propel it into an even stronger industry leading position in the price driven
market.
Apart from this, following issues would still remain unaddressed by JITD:
JITD wouldnt be able to eliminate the existing SKU complexity unless other
measures are also taken. Unless some real improvement is observed by this new
distribution method, all stakeholders of the company cant be brought on Board for
implementation of JITD on a bigger scale. Earlier incentive system for the sales
person may not be applicable with JITD.