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DCSN 210 Case 1

Merloni Elettrodomestici SpA:
The Transit Point Experiment

By:
Khalil, Samer
Mouallem, Mohammad
Sawaya, Rony

Table of Contents

Introduction and History ………………………………………………………………………………………………… 3 Merloni Elettrodomestici ……………………………………………………………………………………………….. 3 Vision and Objective ………………………………………………………………………………………………………. 5 Transit Point Trial …………………………………………………………………………………………………………… 6 Analysis ………………………………………………………………………………………………………………………….. Recommendations ………………………………………………………………………………………………………….

Introdution and History
Merloni Elettrodomestici was founded in 1930 by Aristide Merloni which initially produced weighing products. In the 1950s the company expanded its product line which included for example electric water heaters and gas stoves. In the period between the 1960s and 1970s the company created the Ariston brand and expanded its product line even further to include kitchen and bath appliances to become a major brand in Italy and Europe. In the 1970s, as a result of its expansion and the diversity of products it produced and the markets it served, the company decided to become the Merloni Group. The Merloni Group consisted of three separate domestic manufacturing divisions which were Merloni Elettrodomestici (manufactured domestic appliances), Merloni Ignienico Sanitari (manufactured bath and heating products), Merloni Casa ( designed and manufactured built-in kitchen and bath furniture). In addition, Merloni Progetti was an engineering company that was responsible for overseeing the construction of plants in different countries to produce Merloni products. The company had a vision to be socially responsible towards the environment and limited the size of plants to manufacture a single product line. Even though Merloni focused on decentralized operations, it had a reputation for innovation and quality. Merloni Elettrodomestici

The focus of the case is on Merloni Elettrodomestici. This division of the Merloni Group served both the freestanding and the built- in appliance markets. Freestanding products were sold to retailers of different sizes where some kept sufficient inventory, while others were rural and small scaled and as a result they ordered products from Merloni as needed. The receipt of products was generally 24-hour delivery as it was shipped from the closest regional warehouse. However, the lead time could range between two and six days when it was required to be shipped from the central warehouse to the regional warehouse and then to the retailer. Shipment delays occurred occasionally for a number of reasons including a production problem at the plant, unexpected high demand, transportation trailers getting disabled or adverse weather conditions. As a result, stockouts at both the regional warehouse and the central warehouse occurred from time to time which had a greater impact on small retailers than it had on the larger ones which hold inventory. Built-in products were sold to more sophisticated customers, such as architects and designers, that ordered in large volumes and therefore their orders were shipped directly from the central warehouse. There were five plants for producing domestic appliances two of which were located close to the central warehouse. The distribution system consisted of three levels which were plant warehouses, central warehouse, and 17 regional warehouses across Italy. Plant warehouses stored raw materials and components as well as finished goods. Storing raw materials and components indicates that the company is responsive to produce when additional quantities are requested. Finished goods are shipped from the plant warehouse to the central warehouse in Fabriano where they are stored. Upon the reception of an order, products are shipped either to one of the 17 regional warehouses or to customers that order full-truckloads. Each regional warehouse had a regional sales office. After the sale was made, responsibility is transferred...
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