The North West Company

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Table of Contents

Executive Summary                                                3

Issue Identification                                                4

Alternatives and Options                                        7

Recommendations                                                9

Implementation                                                11

Monitor and Control                                                13

Exhibits                                                        14

Executive Summary

Blah blah blah in our opinion Barilla should do this blah blah blah.

Issue Identification

The company currently is experiencing a “push” strategy with the category managers at headquarters analyzing trends, placing orders and allocating products to stores. It brings a lot issues.

• The inventory management issue –-- the inventory turns has been never over 2.2 times range for the past of six years.
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OPERATING ENVIRONMENT

• Highly competitive pasta environment and continual growth of the pasta market internationally.
• Italian government intervenes by capping retail pasta prices and also restricts issuing of operating license to supermarket to protect small shops.
• Highly controlled manufacturing process to achieve high pasta quality. Specific temperature and humidity for specific sizes and shapes.
• Operate an extensive network of plants with state of the art research and development facilities. Different pasta sizes necessitate having multiple facilities because of the different sizes of equipment needed.
• Product destined for supermarket chain are distributed through the chain’s own distribution network and this accounts for 70% of products meant for supermarkets.

ROOT CAUSE ANALYSIS

The drive for Just-In-Time Delivery was to address inventory problems Barilla was facing. A SWOT Analysis (Strengths, Weaknesses, Opportunities and Threats) is done below to further analyze the root cause:

Strengths

• High investment in advertisement to create a niche and a name for Barilla as high quality pasta producing company.
• Use of highly superior raw material for production.
• Provision of trade promotion as incentive to boost sales.
• Sales representatives serving Organized Distributors (DO) were consistently present at store level to help in the sale of products, data gathering and problem resolution.
• Consistent lead time for delivery.
• Utilization of 18 Barilla owned depot to service all small store owners.

Weaknesses

• No visibility of sales data from all nodes in the supply chain.
• Tight production specification for high quality pasta manufacturing.
• Lack of persistent Sales Representative presence at Grande Distribuzione’s level.
• Length of lead time for delivery.
• Too many SKUs of the same product.
• Sales Representatives and Distributors resistance to Just-In-Time Delivery.

Opportunities

• Presence of Sales Representatives at store level can bring about increase in sales.
• Reduction in lead time reduces inventory holding period.
• Minimum order quantity can be introduced which can serve as a baseline for amount of inventory held at all times.
• Introduction of postponement strategy in production will allow more inventory to be held in work in progress rather than having all inventory has finished material.

Threats

• Fluctuating demand could lead to huge loss and increase debt for both Barilla and distributors.
• Lack of information flow in the entire supply chain can lead to the collapse of the chain.
• Trade promotions which push reduction in price but not followed by high demand of product due to lack of inventory will cause financial strain.
• Persistent stock out will lead to loss in brand loyalty by customers.
• Competitors will be able to push their product through to customers in the absence of Barilla products.
• Government could decide to further modify laws to strengthen Signora Maria Shops.

Alternatives and Options

1. Just in time delivery test run at Barilla owned depot. Increased participation of Barilla owned depot to distribute will allow the implementation of just in time delivery (See Exhibit 3). Barilla owned depot will have sales data and order pattern of stores it serves. The depots can be set up to have electronic data interchange with corporate office to facilitate flow of information and assist in accurate forecasting
2. Eliminated independent distributors and chain distributors. Have more Barilla owned depot serving has distributors to ease implementation of Just-In-Time Delivery. (See Exhibit 4)
3. Immediate implementation of Sales and Operation meeting to get the buy in Sales department. Use of sales representative serving DO for vendor managed inventory strategy. Bar codes and other tools can be introduced at these stores and managed by Barilla’s sales representatives to send point of sale information to assist in the implementation of just in time delivery.
4. Collaborative Planning, Forecasting and Replenishment. Strategic analysis of which distributor can be used as sole distributor. The strategic relationship will implement data sharing and create visibility to combat swings in demand. Economic reorder point can be introduced to the distributor which will always trigger when to place replenishment orders to avoid stock out. Also the use of minimum order quantity will help in inventory control. Have an incentive program included in relationship contract (example profit sharing, end of year rebate).

PROS AND CONS