1. Information Drivers in Logistics Systems

2. 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) {

3. SOURCES OF UNCERTAINTY Time Quantity Supply Demand Vendor LT Customers Change 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

4. GLOBAL System Approach DEPOT DEALER FINALCUSTOMER DEPOT DEALERFINALCUSTOMER

5. Amplification of Orders Placed on Suppliers Actual Consumer Consumption Consumer Orders on Retailer Orders on Distributor Orders on Barilla DC Orders on Barilla Plant RetailerDistributor Barilla DC Barilla Plant Consumer

6. DRIVERS OF VARIATION in DISTRIBUTION 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

7. Dealing with Demand Peaks TACTICAL TACTICAL: Inventory Back Orders Overtime/Second Shift Subcontracting Hiring/ Lay Off Bargaining with Suppliers and CustomersSTRATEGIC: Product Mix Temporary Labor Arrangements Inventory Targets Influence Demand by Pricing or Promotions

8. 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

9. Margin12.1 18.1 5.0 8.1 4.1 9.7 42.7 Stores Operating Cost Administration Logistics Sales/Purchases Marketing Production Cost ACTUALTARGET 9.8 16.4 4.8 6.2 3.0 8.2 40.8 100100 = Average Retail Price 89.2 Source: Food Marketing Institute and Andersen Consulting (1992) COST STRUCTURE IN THE SUPPLY CHAIN

10. Product Architecture e Shared Platforms e Modularity e Common Components e Ease of Assembly e Postponement Critical for mass customization and Supply Chain Efficiency.