Merloni Elettrodomestici SpA:

The Transit Point Experiment

SCM -2 Group 12 Sangeeth Ashokan - 1911309
Monesh Manoj - 1911117 Kirandev P - 1911201
Thanga Tamizh Amudhu -1911374 Mainaosri Basumatari - 1911311
Dharnesh B R - 1911310 Tanya Goley -1911097

www.24slides.com 1
Question 1
What are the costs and benefits of Merloni's current distribution system? Of a
transit-point based system?

Current Distribution System Transit point-based system

Cost
• Transportation and inventory management for
seventeen regional warehouses
• Higher inventory maintenance for buffer demand at
region needing more than one day journey
• Shipment sent only after orders accumulated for full
truckload – increase delivery time
• High operational cost in distribution system of
warehouse
Benefit
• Warehouse managers are effective customer
relationship management
Cost
• Increased cost on everyday planning of cross docking
strategy
• Fall in customer satisfaction in trial period
• Increase in inventory at central warehouse
Benefit
• Reduction of total operating cost by 80% from
previous distribution system via suspension of
warehouse payment lease and employees
• Increased location flexibility and reduced inventory
at regional warehouse
• No additional strain on production facility

www.24slides.com 2
 Question 2 - Assumptions

20
• Should Merloni replace its Average working days
network of regional warehouses per month
with transit points?
• To focus your thoughts, consider
the RDCs at Roma and 50%
Catanzaro. Which (or both) of Roma Safety stock and
these RDCs would you replace Catanzaro remaining cycle
this with a transit-point system
stock
(assume that Roma is 175 km
and Catanzaro is 600 km from
the CDC). 1378Lire
Inventory cost at Central
warehouse
(Average of Roma and
Catanzaro)

www.24slides.com 3
 Costs incurred in Traditional method
(in Lire per piece sold)

Operating cost Inventory cost Transportation Transportation

cost (Short haul) cost (Long haul)

Roma 1397 401 4300 2939

Catanzaro 2208 1143 4700 7666

www.24slides.com 4
 Costs incurred in Transit point method
(in Lire per piece sold)

Operating cost Inventory cost Transportation Transportation Inventory cost

(at RW) cost (Short haul) cost (Long haul) (at CW)

Roma 279 0 4300 3295 198

Catanzaro 442 0 4700 15332 198

www.24slides.com 5
 Transit point for ROMA – Financial impact

9038Lire 8072Lire 966Lire

Per piece sold Per piece sold Per piece sold

Sum of costs that will Cost savings

Sum of costs incurred It is recommended to
be incurred if transit convert Roma into a transit
in traditional supply
point as the cost savings
chain point is implemented turns out to be positive

www.24slides.com 6
 Transit point for CATANZARO – Financial impact

15718 20672 -4954

Lire Lire Lire
Per piece sold Per piece sold Per piece sold

Sum of costs that will Cost incurred

Sum of costs incurred It is not recommended to
be incurred if transit convert Catanzaro into a
in traditional supply
transit point as there will
chain point is implemented be losses incurred if
implemented

www.24slides.com 7
 Thank You

www.24slides.com 8