Barilla Spa - Executive Summary Essay

Global statistics. Since the mid-twentieth century, the spa industry has grown significantly around the world. In 2013, the market size of the global wellness industry grew up more than 3.4 trillion U.S. dollars. According to “The Global Spa & Wellness Economy Monitor Report”, the global spa industry generated $94 billion last year. Thermal/mineral springs sector of wellness industry generated $50 billion worldwide. But wellness tourism (or travel associated with maintaining or enhancing health or wellbeing) was the fastest-growing part of the industry for the past few years. The amount of the earning of this part of the industry was equal to 494 billion. For period from 2012 to 2013 number of people that had taking wellness trips grew by 12% according to U.S. spa industry revenue report for 2013 (“ Statistics and facts”, n.d.).

The timing of capacity changes also needs to be taken into consideration to achieve maximum efficenty given that demands of their products varies with seasonal changes. The ability to react to market demand changes quickly will determine manufacturers flexibility in keeping up with these demands. Manufacturers needs facilities to produce, whether warehouses to store its raw materials or finished goods, or manufacturing plants to produce their products. Services facilities are needed by certain manufacturing industries such as consumer electronics to cater for returns. Distribution centres also determine the efficenty of production distribution and un-nesessary inventory holding will result in higher holding cost. Such facilities require large investments and are integral of the manufacturer’s supply chain strategy and thus proper planning is needed when making these decisions regardong the size, location which affect the overall operations. How manufacturers run their productions also determine how successful will they be in terms of productivity and quality levels. Different types of equipment and processes also affect the cost and output of the manufacturing plant. Information systems that flow both upstream and downstream affects the forecasting, planning, inventory and production levels, they must be robust to ensure the manufacturing firm is able to react accordingly to changing demands and variations. In addition to their internal environment,

distributors would have to submit their Stock Keeping Unit (SKU) so that Barilla can control it.

Barilla, the leading pasta manufacturer in Italy, faces increasing problems related to demand fluctuation. Their distributors also suffer from high inventory holding costs and low service levels on the other hand. This report explains, why the company and their distributors are troubled with this situation and how Barilla intends to solve it. The problem Barilla experiences is called the “Bullwhip Effect”, i.e. that demand variability increases when moving up the supply chain. Several factors enforce this Bullwhip Effect, e.g. high lead times, poor demand forecasting, and batch ordering. In this report we will point out, that exactly those aspects can be identified as the underlying reasons for Barilla’s problems. In a

During the game, I realized that wide gaps in orders of every role in the supply chain such as factory, distributor and retailer create inventory management challenges. For example, distributor records 0units between week1-week 4 compared to retailer within the same period. The retailer records 3units, 5units, 2units and 2units between weeks 1- week 4. The same applies to factory with 0units from weeks 2-4. Addressing inventory management problems requires developing an average unit level to avoid disappointing customers when demand

Looking at the fluctuation in Exhibit 12, one could expect that poor coordination in the supply chain would increase costs. Provide a discussion for the cost of poor coordination in Barilla’s supply chain. Items to consider here include production changeovers or setups, inventory levels, facility utilization, transportation costs, quantity discounts and promotions, canvas periods etc.

Planning and Forecasting is a vital function of management especially as it is related to inventory management. Planning has four processes associated with it. They are establishing goals, formulating strategies, implementing the plan and evaluating its success. The planning process of inventory will assist the organization choose the correct inventory system resulting in reduced costs and increased efficiency. For any business, having large amounts of inventory could prove to be expensive. In most company’s the management team will forecast sales on a monthly basis in order to keep enough inventories to fill customer orders in a timely fashion but not have an overflow of stock. There are various types of

One of the underlying causes of the difficulties that the JITD program was created to solve was the effects of inconsistent demand that came from Barilla’s distributors. The extreme demand variation strained Barillas manufacturing and logistics, and made very hard for Barilla to meet that demand. For example, as noted on the case “the specific sequence of pasta production necessitated by the tight heat and humidity specifications in the tunnel kiln made it difficult to quickly produce a particular pasta that had been sold out due

By taking a more collaborative approach, major improvement could be made. One way is by embracing the concept of “Collaborative Planning, Forecasting and Replenishment” (CPFR) which have been developed and successfully employed by leading food retailers. It foresees that data is shared and discussed actively between retailers and suppliers, e.g. by producing joint forecast on annual production volumes, also considering foreseeable flunctuations. With a better understanding of the mutual dependencies, the planning basisi could be improve and complexity reduced. On the short term planning basis, making aviable sales data collected in-store 9from the scanner-equipped cash registers) to suppliers in real time allows suppliers to produce more accuratelty to the actual demand, and thus reducing cost for buffers and excess inventory (Trebilcock 006). Of course, Aldi will have to receive a certain share of these benefits. Going one step further would be to add ”Category Management” to Aldi’s supplier collaboration approach to optimise assortment towards the end of customer needs.

In September there was another offer of a $1.00 cash refund, with the proof of purchase for two 5 lb. boxes, which lead to an increase in gross sales of RBS, too. The $2 cash refund for the purchase of RBS plus four additional Household Division brands in January 2006 increased the gross sales even by more than 100% from $9.3mio to $20.6mio, a total net incremental contribution of $619,562. These coupons were advertised in women’s magazines, in a Sunday newspaper supplement, on the company website, and in point-of- purchase material the latter of which has a relatively high response rate of 2%. The event in June, that included a shrink wrapped twin pack of the 1 lb. boxes and a $1.00 cash refund inside the pack with proof of purchase from two 1 lb. boxes encouraged consumers to keep one box in the fridge and one in the bathroom, so that most of them bought two boxes of RBS which led to rising sales volumes Considering the significant increase in sales, RBS should focus on investing in print and online advertisement by increasing their budgets by 10% in this sector. To conclude and thinking long-term, budgets for consumer promotion should be raised by 10% to ensure that RBS continues selling high volumes. Due to missing information of the response rate of advertising in TV, RBS should maintain the budget in this sector constant.

According to Exhibit 8, the profile of the customers retained had changed. The brand image was not as strong for the newer customers (first visited in the year prior to date of exhibit) as it was for established customers

Barilla’s products are divided into Fresh products and Dry products. The demand for these two distinct kinds of products is quite different, and the order, shipment and delivery methods for them are also various.

Starbucks advertises two essential mission statements. First and foremost, it strives to “establish [ourselves] as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while [we] grow(s).” (Starbucks) Reflective of its mission, Starbucks bases its strategic campaign and communications on six indispensable philosophies; structuring a pleasant work environment in which employees are treated with “respect and dignity,” incorporating diversity in all business aspects, purchasing, roasting and delivering fresh coffee, retaining satisfied customers, giving back to the community and environment, and developing

The overarching problem is distributors base their actions off of retail demand on the one side and Barilla sales incentives on the other with no means to reconcile the two. GD’s and DO’s use a variety of inventory systems, but for the most part these systems are based on a simple periodic review. They take a weekly inventory of their stock and place orders accordingly. There are no forecasting systems in place to determine future retail demand on which to base orders. With a lead time of 10-14 days between order placement and delivery and a reactionary ordering system, high costs due to cycles of stockouts and bullwhip effects will continue.

The AAA region was hit by a period of economic uncertainty caused by the slowdown of Chinese growth, instability of Middle East and economic recession in Russia. The Barilla brand market share in value terms increased in all of the key markets in this area: confirmed position as leading competitor at national level in Russia, market leader in Turkey, and further expansion in Middle East and Israel markets with an aggressive dedicated strategy. The substantial investment in the Solnecnogorsk (Russia) for pasta manufacturing will significantly improve flexibility and profitability in this area (Barilla,