Barilla SpA Harvard Case Solution & Analysis

Barilla SpA Case Study Solution

Problem Statement:

The problem that has been faced by the company in the given scenario is increased demand fluctuation due to which the increased variation in order patterns of distributors is faced by the corporation, the inefficiency in the operations of the company leads to high manufacturing and holding costs. The firm is also facing difficulties in managing the production lead time due to the perishable nature of the products. The bullwhip effect is the reason of deterioration in the supply chain.

SituationAnalysis:

The explanation of bullwhip effect is required, when supply chain is taken away from the customers who have caused the demand variability and complexity, this phenomenon is called bullwhip effect.

The company has faced complex situations in dealing with the variability in the order pattern from different distributors, the reasons that are responsible for the mismanagement of the supply chain has led to the inappropriate inventory levels for the company, as a result, the increasing cost of production and all the costs associated with the handling and transferring of the inventory has increased. The following are the factors responsible for the problems of the company:

Increased number of SKU’s: the pasta company offered their dry products to more than 800 SKU’s. The packaging offered is also of different denominations, this has created complexity.

Distributor’s behavior: the distributors have retained the authority of ordering the quantities, by having full control on buying behavior, this had caused demand variation.

Forecasting methods: the forecasting methods used by distributors are not up to the mark. The tools used for forecasting are not sophisticated.

The sales representative’s tactics: Compensation system used by the company to reward sales representatives is not good. They are rewarded additional bonuses for selling the product to distributors. Their selling patterns are not uniform, more sales during the promotional period and fewer sales during the non-promotional period which has led to demand fluctuation.

Inappropriate sales strategy: the sales strategy comprises of offering additional discounts during promotional periods, these discounts are offered during different periods in the business year. The demand showed variability due to this practice of the company.

Lead time: the lead time of the company is long, when the lead time is long, it creates the in stability in the production and supply patterns.

No inventory defined levels: the minimum and maximum order quantities are not defined to the distributors, it shows alack of inventory handling at the company. The sudden increase and decrease in orders causes the false demand assessment.

The issues mentioned above and the lack of ascertained demand have put the company to face the following consequences:

Barilla SpA Harvard Case Solution & Analysis

 

 

The production cost of the company has drastically increased, because of the fluctuating demand, moreover, the company has faced scheduling difficulties, the requirement of labor and material is not defined, which resulted in the increase of production in maintenance cost. Transportation cost is also increased due to the number of trucks that are required during high demand period. The company also has faced cash flow difficulties......................

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