Privately held Italian food company Barilla, which started life almost 150 years ago in the northern Italian city of Parma, is today the world’s leading pasta maker – having almost 25% of the Italian market and producing the beloved food staple in 160 different shapes and sizes.
Along with several leading pasta brands, it produces a wide range of breads and other cereal-based products, via production plants throughout Europe, as well as North and South America. Naturally, the current environment is posing challenges the likes of which it has not experienced before.
Here, we talk to Luigi Ganazzoli, vice president of purchasing, about some of those challenges and what he and his team are doing to mitigate them.
PL: Could you share a little bit of insight about your procurement team structure, strengths and challenges?
LG: We are a team of 75 buyers globally, with 30 people in a central service centre. We are organised in a matrix across categories and countries, with the service centre supporting the transactional activities.
I think our strengths are, first, our competences – we bring people into procurement after they’ve gained technical experience. For example, before becoming a machinery buyer, a candidate must spend a significant period of time in the technical team.
Second, we are a lean organisation – we have a maximum of three organisational layers, which leads to faster decisions. Third, the passion of our people is a strength and they tend to stay for a long time.
Our challenges are linked to digitalisation, risk management and inflation. We have a three-year plan to switch or develop new digital solutions across e-sourcing, catalogues, vendor planning, collaboration, spend analysis and scorecards, etc. With risk management, we are revising our buying policies and introducing a digital risk management suite that covers all our risk dimensions – supply, financial, quality, ethical, and so on.
We are in the midst of a period of rampant inflation – what are you doing differently to manage this environment?
We are increasing the size of the supply base, rebalancing short-term hedging versus long-term, reinforcing the financial hedging and revising some specifications.
When it comes to our supply base, specifically for packaging materials and some ingredients, we have added new suppliers into the mix. As an example, we have now qualified Far East suppliers for board given scarcity in Europe.
Regarding financial hedging, we have deepened the collaboration with our treasury team to hedge gas and power through financial futures, as an example. We have also pushed the technical teams to adjust the specifications of some ingredients to allow sourcing from additional suppliers without being constrained to a single source.
Shortages of key agricultural commodities must be extremely challenging for Barilla to plan for. What methods are you using to ensure security of supply?
Specifically, more diversification in sourcing geographies, increasing long-term agreements and enhancing digital risk-monitoring tools. As an example, we are challenging our marketing teams about existing constraints regarding origin claims.
We have also increased supply agreements with strategic suppliers to three to five years to ensure supply availability while maintaining transparency on costs to allow Barilla to remain competitive.
What new capabilities are you looking to build/grow/develop in your team to help you navigate this period of volatility?
Digital, risk management and relationship-building skills.
How important are supplier relationships to you in achieving your goals, especially during times of crisis? Why are they so important?
Strategic supplier relationships are crucial because they are oriented on the long term and overcome the risk of being caught in speculative traps.