Question: Barilla Case Study: Giorgio Maggiali was becoming increasingly frustrated. As director of logistics for the world’s largest pasta producer, Barilla SpA
01 Dec 2022,10:39 PM
Barilla Case Study
Giorgio Maggiali was becoming increasingly frustrated. As director of logistics for the world’s largest pasta producer, Barilla SpA (Societa per Aziont translates as “Society for Stockholders” and is interpreted as “Inc.”), Maggiali was acutely aware of the growing burden that demand fluctuations imposed on the company’s manufacturing and distribution system. Since his appointment as Director of Logistics, he had been trying to make headway on an innovative idea proposed by Brando Vitali, who had served as Barilla’s director of logistics before Maggiali. The idea, which Vitali called just-in-time distribution (JITD), was modelled after the popular “just-in-time” manufacturing concept. In essence, Vitali proposed that, rather than follow the traditional practice of delivering product to Barilla’s distributors on the basis of whatever orders those distributors placed with the company, Barilla’s own logistics organization would instead specify the “appropriate” delivery quantities—those that would more effectively meet the end consumer’s needs yet also would distribute the workload on Barilla’s manufacturing and logistics systems more evenly.
For two years Maggiali, a strong supporter of Vitali’s proposal, had tried to implement the idea, but now, little progress had been made. It seemed that Barilla’s customers were simply unwilling to give up their authority to place orders as they pleased; some were even reluctant to provide the detailed sales data upon which Barilla could make delivery decisions and improve its demand forecasts. Perhaps more disconcerting was the internal resistance from Barilla’s own sales and marketing organizations, which saw the concept as infeasible or dangerous, or both. Perhaps it was time to discard the idea as simply unworkable. If not, how might Maggiali increase the chances that the idea would be accepted?
COMPANY BACKGROUND
Barilla was founded in 1875 when Pietro Barilla opened a small shop in Parma, Italy, on Via Vittorio Emanuele. Adjoining the shop was the small “laboratory” Pietro used to make the pasta and bread products he sold in his store. Pietro’s son Ricardo led the company through a significant period of growth and, in the 1940s, passed the company to his own sons, Pietro and Gianni. Over time Barilla evolved from its modest beginnings into a large, vertically integrated corporation with flour mills, pasta plants, and bakery-product factories located throughout Italy.
In a crowded field of more than 2,000 Italian pasta manufacturers, Pietro and Gianni Barilla differentiated their company with a high-quality product supported by innovative marketing programs. In 1968, to support the double- digit sales growth the company had experienced during the 1960s, Pietro and Gianni Barilla began construction of a 0.25-million-square-meter state-of-the-art pasta plant in Pedrignano, a rural town 5 km outside Parma. However, the cost of this massive facility—the largest and most technologically advanced pasta plant in the world drove the Barillas deeply into debt. But later through capital investments and organizational changes, combined with improving market conditions, helped the company to grow. During the 1980s, Barilla enjoyed an annual growth rate of over 21 percent (see Table 5-1). Growth was realized through the expansion of existing businesses, both in Italy and other European countries, as well as through acquisition of new, related businesses.
In 1990, Barilla was the largest pasta manufacturer in the world, making 35% of all pasta sold in Italy and 22% of all pasta sold in Europe. In Italy, Barilla offered pasta products under three brands: the traditional Barilla brand represented 32% of the market and 3% of market share was divided between its Voiello brand (a traditional Neapolitan pasta competing in the high-priced segment of the semolina pasta market) and its Braibanti brand (a high-quality, traditional Parmesan pasta made from eggs and semolina). About half of Barilla’s pasta was sold in northern Italy and half in the south, where Barilla held a smaller share of the market than in the north but where the market was larger. In addition, Barilla held a 29% share of the Italian bakery-products market. Barilla was organized into seven divisions: three pasta divisions (Barilla, Voiello, and Braibanti), the Bakery Products Division (manufacturing medium-to long-shelf-life bakery products), the Fresh Bread Division (manufacturing very-short- shelf-life bakery products), the Catering Division (distributing cakes and frozen croissants to bars and pastry shops), and the International Division. Barilla’s corporate headquarters were located adjacent to the Pedrignano pasta plant.
INDUSTRY BACKGROUND
The origins of pasta are unknown. Some believe it originated in China and was first brought to Italy by Marco Polo in the 13th century. Others claim that pasta’s origins were rooted in Italy, citing as proof a bas relief on a third- century tomb located near Rome that depicts a pasta roller and cutter. “Regardless of its origins,” Barilla marketing literature pronounced, “since time immemorial, Italians have adored pasta.” Per capita pasta consumption in Italy averaged nearly 18 kilos per year, greatly exceeding that of other western European countries (see Table 5-2). There was limited seasonality in pasta demand—for example, special pasta types were used for pasta salads in the summer while egg pasta and lasagna were very popular for Easter meals.
In the late 1980s the Italian pasta market as a whole was relatively flat, growing less than 1 per-cent per year. By 1990 the Italian pasta market was estimated at 3.5 trillion lire. Semolina pasta and fresh pasta were the only growth segments of the Italian pasta market. In contrast, the export market was experiencing record growth; pasta exports from Italy to other European countries were expected to rise as much as 20 to 25 percent per year in the early 1990s. Barilla’s management estimated that two-thirds of this increase would be attributed to the new flow of exported pasta to east-ern European countries seeking low-priced basic food products. Barilla managers viewed the eastern European market as an excellent export opportunity, with the potential to encompass a full range of pasta products.
PRODUCTION/PLANT NETWORK
Barilla owned and operated an extensive network of plants located throughout Italy (see Table 5-3 and Figure 5- 1), including large flour mills, pasta plants, and fresh bread plants, as well as plants producing specialty products such as panettone (Christmas cake) and croissants. Barilla maintained state-of-the-art research and development (R&D) facilities and a pilot production plant in Pedrignano for developing and testing new products and pro-duction processes.
Pasta manufacturing
The pasta-making process is similar to the process by which paper is made. In Barilla plants, flour and water (and for some products, eggs and/or spinach meal) were mixed to form dough, which was then rolled into a long, thin continuous sheet by sequential pairs of rollers set at increasingly closer tolerances. After being rolled to the desired thickness, the dough sheet was forced through a bronze extruding die screen; the die’s design gave the pasta its distinctive shape. After passing through the extruder, Barilla workers cut the pasta to a specified length. The cut pieces were then hung over dowels (or placed onto trays) and moved slowly through a long tunnel kiln that snaked across the factory floor. The temperature and humidity in the kiln were precisely specified for each size and shape of pasta and had to be tightly controlled to ensure a high-quality product. To keep changeover costs low and product quality high, Barilla followed a carefully chosen production sequence that minimized the incremental changes in kiln temperature and humidity between pasta shapes. After completing the four-hour drying process, the pasta was weighed and packaged.
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