Homework for Contractdesign and Bullwhip Effectsolutions

Chapter 4 Homework Solutions

1. Supply chain contracts design.xls

2. Ch4 Question 1 in PP 117:

a. Barilla experiences wild fluctuations in pasta demand while variability in end-customer demand is quite small. This amplification in demand variability in the supply chain is known as the bullwhip effect, and it strains Barillas manufacturing and logistics operations. Several factors contribute to this effect:

1. Transportation discounts, which induce distributors to order larger quantities less frequently

2. Trade promotions and volume discounts that create demand fluctuations.

3. Delivery lead times of an average of 10 days from Barilla to the distributors.

4. Product proliferation, which makes forecasting more difficult.

5. Poor communication between parties in the supply chain.

6. Sequential decision-making process in the supply chain, i.e., no collaboration.

The JITD program transfers decision-making authority for determining Barilla-distributor shipments from the distributor to Barilla. Rather than simply filling orders specified by the distributor, Barilla would monitor the flow of its product through the distributors warehouse, and then decide what to ship to the distributor and when to ship it.

This system alleviates many of the problems listed above, and enables Barilla to make manufacturing and logistics decisions that benefit the entire system.

b. The most significant internal barrier to JITD is raised by the sales reps, who feel that JITD would diminish their role in managing inventory and setting up promotions, potentially threatening their job security. Giorgio Maggiali needs to explain and demonstrate to the sales force that the proposed program would in fact increase customer service level by reducing stock-outs, and potentially lead to cost savings. Ultimately, JITD would help the sales reps to manage the orders more efficiently by increasing visibility of the demand process. JITD is not a substitute for the sales force;...