Merloni Elettrodomestici SpA: The Transit Point Experiment

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Case Study: Merloni Elettrodomestici SpA: The Transit Point Experiment

The Organization

Merloni Elettrodomestici SpA (Merloni), is a major Italian manufacturer of freestanding and built-in appliances. Merloni's distribution network consists of five manufacturing plants, a centralized warehouse, and seventeen regional warehouses.

During the past few years, Merloni has implemented programs that have successfully shortened production-planning lead times and decreased inventory levels. In particular, with the help of a centralized inventory planning system and implementation of an A-B-C inventory classification program, they were able to reduce inventory levels at the regional offices by 75%. The production planning time horizon was reduced…show more content…
Higher stress levels among the administration staff could also increase turnover and associated costs.

Transportation: Low demand-variance and relatively close distribution distances are critical success factors for cross docking. For example, Wal-Mart is able to benefit from cross docking for distributing some of its non-staple products that have very stable demands throughout its retail stores in a small region. The demand for Merloni's products however, are quire variable. For example, the average demand for the free-standing products can jump from about 1,000 units in August to over 12,000 in September. Not only this presents serious obstacles to planning and coordinating shipments, the peak in demand could result in serious service disruptions. Also, since units must be shipped to regions on a daily bases, regardless of the quantity ordered, significant inefficiencies result if the trailer is not filled to maximum capacity.

Another significant concern with the transit point proposal is the length of time that transportation would add to product delivery lead times (please refer to the Customer Service issue for further explanation).

Customer Service: Currently, over 65% of products are delivered within 24 hours, directly from the regional warehouses. Only 35% of products are shipped from the central warehouse with a two to six day delivery
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