Barilla SpA Case Study
Statement of the problem
Barilla SpA is a leading manufacturer of Italian pasta that has revolutionized the market by strong marketing, branding and competitive advantage. In 1988, the company had a change of guard at the office of the Director of Logistics which saw Giorgio Maggiali take the seat earlier held by Brando Vitali. The company is facing challenges in their distribution channel which have seen the company face fluctuations in demands and distribution systems. This is a problem whose solution was Just-in-Time Distribution model proposed as by Brando Vitali, the former director. The new director is committed to solving recurrent logistical problems that have faced the company. He adopts the proposed JIT System but the problem is the implementation.
The inability of establishing a working JIT distribution model is leading to the emergence of organizational problems of supplies and delivery. The purpose of the communication of the case study report is to describe the issues that the company is facing. To solve these problems presented by the challenges, Barilla SpA is contemplating developing new distribution channel for their product through out the world. The company is currently adapted to the conventional distribution strategies. This was the reason for the proposal by the Brando Vitali to introduce the Just In Time distribution channel. The case study report will explore the solution and the problem to present the dynamics behind the JIT distribution channel.
Summary and Conclusions
The report will discuss urgent issues and the importance of the solution to the root causes. In further discussion, the report will discus alternatives and options that will connect with the issues identified and the root cause of the problems and pros and cons of each alternative. The paper will also incorporate implementation of the solution and the monitoring and control of the implementation process.
The company is organized into seven divisions that shape their corporate structure. Three divisions are set for pasta and the bakery bread division. The catering division is responsible for distributing their frozen and short-shelf life products. The company has it headquarters located near it Pedrignano plant and has several production tastes and division. In terms of network of production, the company has an extensive and varied network of plants spread all over Italy. However, the head quarters and the adjacent plant have been set with the right technology as well as production processes.
The company has a two-tier product line dry product category and the fresh product category. The dry product category accounts of 75% of the company while fresh product category represented 25% of the company products. The dry products line incorporates pasta and products with longer shelf life while fresh products incorporate products with shorter shelf life. Because of these descriptions, these products have different distribution lines. Therefore, in order to understand the dynamics of each distribution channel, it is important to understand the factors that affect each of the product categories. This has made the company to enjoy a diverse product lines and revenue lines.
Current Distribution Channels
The company has conventional distribution lines. These are small independent shops, supermarkets and sales representative. Different product lines have different distribution channels due to the shelf life of each of the lines. The impact of the distribution channels is the presence of the company`s pasta products in the Italian and European market.
Sales and Marketing
The company maintains a strong brand promotion with a robust sales and marketing teams. The advertising made the difference between the company`s pasta brands with the rest in the market. The company engages in trade promotions, sales representatives, and advertising to achieve it marketing. Because of this, the company enjoyed robust market and was able to dominate the pasta market in the Italian market.
Environmental and Root Case Analysis
The urgent issue in the case is the distribution channels that need to be changed and new ones adopted. The company should not only revise their product distribution lines but also implement more cost effective distribution styles. The company has a starting line in the new Just in Time distribution channel proposed by the former director of logistics.
Another rout cause of the distribution problem is the lack of a clear implementation procedure for a new system. It is evident that there is not motivation by the company`s staff and human resource to implement the Just in time distribution strategy. This means that the change of distribution channel for the company`s products will be a difficult plan to implement.
Additionally, the company has management problems where there is no continuity of office. As part of the management coordination, when one manager or director in a department of a division leaves, there should be a clear continuous operation in the office. This is important especially when the division or the department being handled is a significant part of the company`s operations. The logistics division that experienced the change of guard is a significant operational part of the company that should be handled carefully.
There is also inefficiency in implementing new plans and operational overhauls by the company. For instance the JIT system was proposed by the former director of logistics and yet it did not succeed. Additionally, the current director of logistics has tried the same but the implementation process seems to stall. This may impact negatively on any other plan or project that the company may plan to achieve in future.
Finally, there is a problem of working with partners in business. This is evident by the challenges that the company has to convince suppliers and customers to continue with business after the adoption of the Just In Time system. This is because many customers were unwilling even to provide some of their data that could help the company establish their trends for the implementations of the JIT system.
Discussion of Importance
The new idea by the former director of logistics is a good plan for the company`s distribution channels. The plan will help the company reduce important costs that are associated with the distribution of their products. These costs include the cost of capital held up by the stock and inventory. The opportunity cost of the capital tied up in the distribution channel is the main gain from the system.
Secondly, the Just In Time system will enable the company relieve it employees from the tedious full time ordering, buying and selling enquiries. In stead, they will concentrate on improving the quality of service and new customers. This is because the customer will provide all his or her details to the company such that the company will establish his stock levels. Through the provision of sales patterns and the recommended stock requisition levels, the company can know when the customer will require more stock almost automatically.
Thirdly, the Just In Time system will enable the company to concentrate on production on demand and therefore avoid organizational burden of holding finished products. The company will successfully avoid the burden of warehousing and costs of holding excessive raw materials. Therefore the company can concentrate on making the processes more efficient and effective. The company will therefore establish higher standard products whose quality is improved and is done.
The main root cause of the identified problems is poor planning in terms of capacity and capability to handle the production. The management of the company does not plan ahead well on how to distribute their increasing product lines. In an ideal operational organization, every new market and customers, there should be a corresponding plan on the way to expand the distribution channels. The problem being experienced by the company in terms of implementing a new system of distribution is as a result of poor planning of the adoption of the system.
Another root cause of the problem or issues in logistics is lack of consistency in the management policy. The management received a proposal from the former director of logistics but the company did not adapt a consistent policy for implementing the proposed Just In Time system. After the change of management and the new director of logistics took over, the new manager had to implement Just In Time system from the ideology of the former director. This way, the company tried the system but after two years of implementation, the system could not work. Fro such a system to work, there should be a consistent management policy where all divisions get committed to achieve the system.
Lack of organizational unity and coordination is another root cause of the issues and problems that the company is facing. The implementation of the new system could have been done by the rest of the divisions and departments despite the vacant directorship in the logistics department. Due to the lack of coordinated organization, the department had to wait fore a new director for the whole organization to implement the already proposed system. This is due to the lack of a clear organizational structure that is well coordinated to support what each other in implementation of policies and plans.
The implementation of the system was further hampered by lack of coordination and acceptance by the sales and marketing staff. This means that they contributed to the failure of the new system since they did not support it implementation. Staff at the organization perceived the new system as a dangerous plan or an infeasible concept to implement in the organization. This is a result of poor organizational training and induction program to the new system. The organization did not implement all the steps of establishing new systems in an organization. This is because lack of training is what led to the resentment of Just In Time system by some employees.
Alternatives and Options
There should be proper planning and establishment of a planning committee for the implementation of the new system. Every organization should embrace proper planning tools for implementation of any new strategy or proposal. Setting up a committee for planning will not only solve the current problem but will also ensure better implementation of future plans and organizational strategies. When an organization has an independent planning division, then such problems will be foreseen early in advance through research and evaluation of proposed plans and systems before they are implemented. This way, the company will solve both the current problem and the future implementation issues.
The management should carry out organizational structure overhaul that will ensure coordination in management. The organizational structure should be simple to coordinate between the departments where each department will be supportive of the proposals and decisions of the other. If the company had a robust organizational structure, the Just In Time system proposed by the former director of logistics could not have taken long to implement. It is the management`s responsibility to ensure consistency in the structure that will implement any management policy. Proper management structure will also dictate the chain of command where all directors and organizational staff will know what will be expected of them at any time. Therefore, in case one party to a program or system is missing, the program will be continued by those who are responsible according to the chain of command.
The company should also consider establishing a research and evaluation committee that will be responsible to research new organizational plans. Such a committee will identify the problems that the company is facing and also research on ways of solving it. The company should be committed on quantitative and qualitative approach to solving issues and implementing strategies. Such approach can only be implemented if there is a special arm of the company that will be responsible for identifying and working on quantitative aspects of every problem as well as future plans. The committee could have identified several issues on the implementation of the Just In Time plan and system of distribution. This will avert problems that are associated with implementation of any new system or plans.
The company should adopt a proper training program that will be responsible for inducting employees on new organizational plans. This should be responsible for training the staff on the benefits of the new plan and the challenges to be faced during the implementation program. The company should be well informed to be able to use the benefits for organizational gain and also learn how to handle the challenges of the new system. The company should be able to work on training even the current customers on the benefits of the new distribution channel to help them appreciate what the company is doing. This way, they will be able to give all their information that will enable the company to smoothly implement the Just In Time system.
The company should adopt two f the above alternatives with first priority. The first implementation is to establish the research and evaluation committee that will identify problems and solutions. The establishment of this committee will offer a proper work related information on the extent of failure the project has reached. Secondly, the committee will provide up to date quantitative and qualitative data that will be used for decision making. The management needs to make a decision on whether to continue with the Just in Time system of distribution or to drop it. They should also decide on whether to adopt a new system or revert to the previous distribution channel.
The management should adapt a complete program of implementing the system by involving the training team. This alternative will give the management a chance to instill the informational details established by the research and evaluation committee. This way, both the staff at the company and customers will be aware of the new dynamics and their role in the success of the plan.
The chief executive officer should first form a project implementation oversight committee. This committee will be responsible for appointing new officers to run the new program and evaluate the current team. The committee should be headed by the logistics Director and will be meeting on weekly basis.
The team that will be in charge of this project involves the key leaders in charge of all the departments that will be affected by the new system. Major decisions on the project will be made by a project management committee that will sit every week to plan and review the progress of the week. Overall project team will comprise of four teams responsible for specific roles. These include system development team, hardware installation team, accounting team and the training team. Each of these teams will be headed by a supervisor who will sit on the project oversight committee.
During the implementation, the committee will adopt several methods of passing information as well as tools of data sharing among the team members and to the users. The management will print a Gantt chart for the project to indicate progress and use a timescale to enable the Gantt chart to fit on a single page. The chart will then be pasted in a PowerPoint or a printed slide for easy presentation. The management will also print a `To-do List` information sheet for all the team members to ensure that every team member understands his or her role. Then the project manager will prepare a `Who Does What” information document that will present all the roles and people responsible to facilitate coordination amongst the team players.
Monitoring and Control
Consistent monitoring of the implementation of the new system will be crucial for identification of issues early. This will enable correction of problems early enough to avoid failure of the project. Continuous update will be done to the communication plan as appropriate and will be reviewed during the regular project status meetings weekly. It is in these forums that monitoring and evaluation reports will be tabled, discussed and changes proposed. However, the company`s CEO and the logistics director will approve all changes that will be made to the plan during the meetings.
Project evaluation should be done on weekly basis but daily assessments will be carried out to review the progress of project. There should be no break in-between the implementation period to avoid delays to the implementation plan. The committee should vote on the expected completion dates from those recommended by the project management committee.
The company has experienced problems in the implementation for the Just in Time plan. The main issues facing the implementation process are the diverse product line of the company, use of conventional distribution channels. Lack of coordination and appropriate management structures also affects the implementation of the system as well as the current marketing and distribution functions. However, this does not mean the project cannot be successful since, there is a coordinated set of alternatives that the company should adopt. In the first priority, the company should implement the research and evaluation committee and a training program. This way, the company can work to establish an operational distribution function for the current system and for the future.