Operational Managment

Topics: Inventory, Warehouse, Cost Pages: 2 (701 words) Published: April 5, 2013
Merloni Elettrodomestici - five plants each manufacturing a separate product line (stoves, refrigerators, freezers, dish washers and washing machines). •These appliances are further divided into two categories, the freestanding appliances and the built-in appliances. •Finished goods are sent from the regional warehouses to the central warehouse •Merloni implemented programs shortened its production planning time and decreased the inventory levels. •With the help of ABC inventory management system and by integrating the inventory monitoring systems of all the regional warehouses with the central warehouse, Merloni had been able to bring down the inventory by 75% Cost

The current distribution system has several costs related to it. Starting with inventory costs, it can been observed that even though the inventory levels were reduced by 75%, the fact that Merloni stores inventory at 17 regional warehouses, 5 plant warehouses and 1 central warehouse, means that its inventory carrying costs must be extremely high. •Related inventory carrying is the cost such inventories- Warehouse costs, inventory handling labor costs, and insurance costs are a few significant costs related to such an inventory system Following are also the cost of having long delivery times.

Such delays in delivery can be detrimental for the company goodwill development with its customers. Especially for retailers in the rural areas, the delivery time’s cantend to be very high if a close regional warehouse is out of stock. •This leads us to the next cost related to this type of a distribution system, stock out costs. Stock out costs seem to be quite high in the current scenario. •There are instances when a regional warehouse is out of stock and at times even the central warehouse is found out of stock. This has led to high Stockout costs for Merloni Benefit

Following are benefits which can be attributed to the current distribution system. •Due to having a vast network of...
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