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Barilla Sp A Harvard Business Case Analysis

1952 words - 8 pages

Overview:Industry* Mature product by 1990. Little or no growth domestically (Italy)* Export market experiencing large growth (20-25% per yr in European countries)Expect 2/3 of new demand from Eastern European market. Demand is high because they wanted low-priced basic food products* Limited or no seasonal demand* Highly competitive domestically over 2000 pasta manufacturers in Italy. Declining margins.* Pasta market is extremely price sensitive.* Barilla is the market leader in Italy and is the industry's largest manufacturer.* Supply chain represents approximately 55-58 calendar DOH of dry goods (30 in the CDC, 14 at the Distributor, 11-14 at the Supermarket or Independent Shops)Competitive Strategy* Barilla is the largest pasta manufacturer in the world (35% of market in Italy and 22% of market in Europe)* Also 29% of the Italian bakery product market* Vertically integrated - owned mills, pasta/bread plants, and distribution network* High quality product* Largest and most advanced manufacturing facility (Pedrignano plant)Focus is on developing most efficient production methods for existing and new products.* Will increase focus on export opportunities.* Creative marketing campaignsLarge scale advertising programs promotions. Also, selling in cardboard box with a recognizable color pattern created strong brand name recognition and image for their pasta.Enjoyed a strong brand image in Italy* Product mixFresh products - 21 day shelf lifeDry products - long shelf life 18-24 months, medium shelf life 10-12 weeks (75% of Barilla's sales)800 dry SKU's; 470 pasta SKU's from 200 pasta shapes.Pasta SKU differentiation by packaging.* Plans to exploit new market opportunities in Eastern Europe.* Focus on high volume manufacturing.Distribution NetworkBarilla Manufacturing PlantsToBarilla CDC or Barilla depotsToDistributors (GD's or DO's)ToSupermarkets, Small Independent Shops1. What do you think are the main causes for large fluctuations in orders observed at the Pedrignano CDC?We believe the primary reason for the huge fluctuations in demand is because of Barilla's trade promotions and the frequency in which they occur (10 - 12 Canvass periods per year, each 4-5 weeks). These trade promotions create incentive conflicts by causing customers to purchase in quantities that do not reflect their immediate needs (forward buying) but instead focus their stocking decisions on acquisition price. They buy in bigger quantities and 'stock-up' which takes them out of their natural demand based ordering patterns. Normal reordering does not happen until the product has either been depleted to the normal reorder point or another pricing incentive has been offered. This is especially true for products with long shelf lives (i.e. Dry Products). Therefore, at the end of each canvass period orders are artificially inflated and total supply chain inventories are out of balance.Other factors that cause fluctuations in orders are:* The combination of weekly orders and lead time...

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