Merloni Case

Topics: Inventory, Warehouse, Transport Pages: 8 (2819 words) Published: August 21, 2013
Case Analysis On Merloni Elettrodomestici Spa Economics Essay Merloni Elettrodomestici SpA is an Italian company based in Fabriano and is one of Europe’s biggest makers of home appliances. In February 2005, Merloni Elettrodomestici was renamed Indesit Company, Indesit being the best known of the Group’s brands outside Italy. The Company was also operating under its “historic” brand, Ariston, and the regional brands Hotpoint, Scholtes and Stinol. During the perio from 1984 to 1986, Merloni undertook a number of initiatives to improve efficiency in inventory control and logistics. One such initiative was the transit point experiment where in the Milano region, regional distribution centre was eliminated in favour of tranit points which held zero inventory. The following is an analysis of the Transit Point Experiment conducted by Merloni: Cost saving in terms of infrastructure cost of regional warehouses and their maintenance. The company would require lesser amounts of overall inventory to be maintained. As regional warehouses would be closed there would be lesser labor requirements. Transit Point methodology works similar to JIT where-in the required amount of goods are shipped at the required time. Since it works more on the Pull from the customer and due to elimination of regional warehouses, the effect of bullwhip should be lower. Because the regional warehouses will be eliminated, the capacity storage of the central warehouses should be expanded to meet the requirements of the extra Cycle inventory. This would come as an additional cost to the company. Intensive planning of daily shipment should be done. It is not only required to calculate the exact amount of goods to be shipped but also the arrangement of the goods (to eliminate time in loading/unloading activities). Because of this intensive planning more skilled administration staff would be required. If the customer does not order wihin 3pm, the delivery of the product would happen only after the second day. This can lower customer satisfaction. Since no inventory is maintained in near-by locations (as all goods come from central warehouse) if there is any excess demand or out of stock condition (for retailers), the goods will have to be fetched from central warehouse which would take a lot of time. This can lead to loss of goodwill with retailers especially those serving the rural markets. Demand variability is not easily supported by employing Transit Point methodology. If there is an urgent demand for goods in excess of truckload capacity then it can lead to huge additional cost. Another important point which is not mentioned in the case is the importance of the transportation medium. If any of the vehicles breaks-down it could lead to huge delays and pile up of demand. Merloni needs to keep some extra vehicle for a backup. It also needs to maintain the vehicles in good condition. The cost of this has not been accounted for. Since the experiment was carried out only in Milano a relatively smaller numbers of trucks (1 Trailer truck and 3 Small trucks) were required. If the Transit Point methodology is applied through-out Italy, Merloni will need to build up infrastructure and teams to coordinate the the movement of trucks and their transactions. In Merloni, it is the responsibility of the warehouse manager to manage and develop the customer relationship. If the warehouses are eliminated Merloni would still need additional office space for the warehouse managers who also act as Customer Relationship Managers. Another important question is where would Merloni keep the spare parts required for its service personnel. If these too are kept at the central warehouse it could lead to delay thus have a negative impact on the quality of service. The Merloni experiment was conducted when the weather was good. If the weather is bad near the central warehouse but alright in other areas where there is demand, then it can lead to delays. The cost of such delays would be large as...
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