Question 2 :- Should Merloni replace its network of regional warehouses with transit

points? if so, what contigency plans and support systems are necessary to support
the new logistics network? if not, what changes, if any, would you recommend
Merloni make to its distribution system?
Ans:From the cost benefit analysis we get Merloni Transit system is doing good
operational cost has been reduced to 20%.The same should replicated throughout
Italy.
But when it is replicated other regions Transportation cost will Increase.
There are three regions to be covered
Region 1 Northern Italy (Torino,Milano,Bolzano,Bolongna,Genova,Padova and Udi)
Region 2 Central Italy (Ancona,Firenze,Roma,Pescara,Cagilari)
Region 3 Southern Italy (Napoli,Bari,Catanzaro,Plermo,Catania)
Avg Daily demand are 525,571,604 respectively.
This would require 12 small truck for region 1 and 13 for 2 and 13 small truck for
region 3 daily.
Contingency plan is to have two warehouse section one at Milano for serving
Northern and three north central cities in region two(Ancona,Firenze and Roma) and
second at Napoli serving(Cagiliari,Psecara and Region 3.
Average distance for serving region comes out be 207 km in northern and southern
region and 520 km for region in between.
Thus 19 small truck ware house 1 and 19 small truck region for Warehouse 2.
Transportation cost 207 km distance( 2.4+2.6)=5 million lire daily
cost 520 km =3.38 million lire daily
i.e 8.38 million lire daily
Factory to ware house 500km 14 large trucks cost 9.8
Total cost 18.1 million lire.
Current short haul cost 5 million lire thus both are same.
But there will be significant rise in the service levels and decrease in lead time at
the same cost.