Merloni Case Study

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Case | HBS Case Collection | February 1990 (Revised August 2001)

Merloni Elettrodomestici SpA: The Transit Point Experiment

by Janice H. Hammond and Maura G Kelly

Abstract

Merloni Elettrodomestici is a leading Italian manufacturer of domestic appliances. In 1986, an exposition for Merloni customers is scheduled at its Milano regional warehouse. During the two-month period preceding the event, when the warehouse must be free of inventory, the company conducts a "transit point" experiment. Each day, a truckload of products from the company's central warehouse is sent to Milano, where it is immediately transferred to small trucks for local delivery. At the conclusion of the experiment, the company is considering the replacement of its 17 regional warehouses with transit points. Students are asked to evaluate this proposal and recommend a configuration for Merloni's distribution network. Issues to be considered in the analysis of the case include the impact of different network configurations on customer service and on inventory, labor, operating, and transport costs.

Keywords: Logistics; Marketing Channels; Planning; Time Management; Distribution Channels; Competitive Advantage; Customer Relationship Management; Information Technology; Consumer Products Industry; Italy;

Should Enroll replace Its network of regional warehouses with transit points? If so, what contingency plans and support systems are necessary to support the new logistics network? If not, what changes, If any, would you recommend Enroll make to Its dilutions system? Answer 2: The company should go for selective Cross docking. Cross docking should be done for retail outlets which have had low inventory costs as well as low backlog cost in the past. It should also be done for comparatively shorter distances from the central warehouses where co-ordination will be comparatively easier.

It will better to follow cross docking for closer locations since replenishment will be comparatively faster. Moreover, as seen in the case it will help save around 80% of warehouse cost as seen in the case of Milan. Thus contributing to operational efficiency and giving a strategic advantage in the long run. Advantages of Cross Docking * Reduces material handling. * Reduces need to store products In warehouse. No need for large warehouse areas Reduced labor costs (no packaging and storing). Reduced time to reach customer.

Transportation has fuller loads for each trip therefore a saving in transportation costs while also being more environmentally friendly. * Products are moved more quickly through a cross dock. * Easier to screen product quality. * Elimination of processes such as ‘pick-location’ and ‘order picking’ * Cross docking terminals are less expensive to construct than your average warehouse. * High turnover of products with everything moving quickly through the cross docking terminal. Products usually spend less than 24 hours here. Products destined for similar end point can be transported as a full load, reducing overall dilutions cost. Support Systems required for new logistics network: * Highly accurate retailers demand due to the fact that there is very less scope to store the product at transit point. * Minimal infrastructure at transit points to store left over and protect them from various issues such as theft, rain etc. * Smaller trucks will lead to better Economies of scale as well as economic order quantity. Number of trucks can be assigned for a region based on past data of retailers demand. Merlin Scm Case Study By summit back

Should Merlin replace its network of regional warehouses with transit points? If so, what contingency plans and support systems are necessary to support the new logistics network? If not, what changes, if any, would you recommend Merlin make to its distribution system? Answer 2: * Reduces need to store products in warehouse. * No need for large warehouse areas * Reduced labor costs (no packaging and storing). * Reduced time to reach customer. * Elimination of processes such as ‘pick-location’ and ‘order picking * Cross a similar end point can be transported as a full load, reducing overall distribution

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