Information Drivers in Logistics Systems

LOGISTICS SYSTEMS

Important Issues:

• Complex relationships between agents at different levels

Cooperation• A variety of mechanisms for: Coordination

Control

• Many Products and Many Locations

• Uncertainty in Demand (Over Time and Space)

{

SOURCES OF UNCERTAINTY

Time

Quantity

Supply Demand

Vendor LT

CustomersChange

Due Dates

Yield Forecast

* For Demand Uncertainty Freeze Periods

* For Yield Uncertainty Quality Improvement

* For Vendor Unreliability Vendor Management

* For Cycle Time Variability Lead Time Analysis

* For Human Error Education/Discipline

GLOBAL System Approach

DEPOT

DEALER

DEALER

FINAL FINAL CUSTOMERCUSTOMER

DEPOT

DEALER

FINALFINALCUSTOMERCUSTOMER

Amplification of Orders Placed on Suppliers

ActualConsumer

Consumption

ConsumerOrders onRetailer

RetailerOrders onDistributor

DistributorOrders onBarilla DC

Barilla DCOrders on

Barilla Plant

RetailerDistributorBarilla

DCBarilla Plant

Consumer

DRIVERS OF VARIATION in DRIVERS OF VARIATION in DISTRIBUTION SYSTEMSDISTRIBUTION SYSTEMS

Transportation Discounts Volume Discounts Promotional Activity No Minimum or Maximum Order Quantities Product Proliferation Long Order Fulfillment Lead Times Poor Customer Service Sales Compensation System Poor Communication

Dealing with Demand Peaks

TACTICALTACTICAL:

Inventory

Back Orders

Overtime/Second Shift

Subcontracting

Hiring/ Lay Off

Bargaining with Suppliers and Customers

STRATEGIC:STRATEGIC:

Product Mix

Temporary Labor Arrangements

Inventory Targets

Influence Demand by Pricing or Promotions

INTER-FIRM INTEGRATION

EFFICIENT CONSUMER RESPONSE:

Program searching for a close Coordination and Cooperation among participants of the Supply Chain

The final Objective is the satisfaction of the CONSUMER

Cooperation is obtained through:

* Optimization of flows (e.g., sharing data, transport, packaging)

* Effective coordination of promotions and negotiations * Effective selection of existing products

* Effective introduction of new products

Margin 12.1

18.1

5.08.1

4.1

9.7

42.7

StoresOperating Cost

Administration

LogisticsSales/Purchases

Marketing

ProductionCost

ACTUAL TARGET

9.8

16.4

4.8

6.23.08.2

40.8

100 100 = Average Retail Price

89.2

Source: Food Marketing Institute and Andersen Consulting (1992)

COST STRUCTURE IN THE SUPPLY CHAIN

Product Architecture

Shared Platforms

Modularity

Common Components

Ease of Assembly

Postponement

Critical for mass customization and Supply Chain Efficiency.