Merloni Elettrodomestici

SpA:
The Transit Point
Experiment

Saurabh Dubey
(G09033)
Jaspal Singh (G09062)
Neeraj Agarwal (G09068)
RanjaySingh (G09077)
Santosh Sahoo
(G09084)
Company History
§ Founded in 1930 by Aristide Merloni
§ Started with Weighing Instruments
§ In 1970s consisted of Four separate manufacturing
divisions
§ Domestic Appliances
§ Bath & Heating Products
§ Industrial Products
§ Built-in Kitchen and bath furniture

Company History
 Created “Ariston” brand name for its products
 Total Group Sales in 1984 was 626 billion Lire
 Exports comprised to 60% of Sales
 20% Average increase in Sales from 1980 to 1984



Production
 Served both the Freestanding & built-in appliance
markets
 5 plants -each dedicated to manufacture a single
product line
 1 Central warehouse & 17 Regional warehouses
 Each plant have its own Warehouse for Raw
material, components & finished products

Distribution
 65% of Freestanding product sales through
Company’s Regional warehouse network
 No Built-in appliance distributed through Regional
warehouse
 Each Regional warehouse coupled with Regional
sales office
 Employed 3 independent drivers for daily local
deliveries
Distribution

Regional Warehouse
 Plant
Regional Warehouse

Plant
Regional Warehouse
Central Warehouse
Plant “Fabriano” Regional Warehouse

Regional Warehouse
Plant
Regional Warehouse

Plant Direct Customers Regional Warehouse

Distribution
Retailers
 24-hour delivery from Regional warehouse
 2-6 days if shipped from Central warehouse
 Shipment delay is very common
 Stock out impact more to small retail customer
 Most Retail stores closed in August causing sharp
decline in Sales during that month and then
sharp rise in next month.
Service Centre
 After Sales Services is a Major function within the
company
 Total 145 Service centers
 350 repair Technicians, 230 Vans
 21000 different spare parts
 Total Inventory of 5 million parts
 Guaranteed services within 24 to 48 hours
Analysis
Inventory Policy
1)Decentralized (own stocks goals, informal replenishment method) to
Centralized
2)Classification of SKU into A, B & C class
3)Separate and central inventory target for each SKU as per classification

1) Inventory Inventory
Classification Target
2)
3) A 2 weeks
4) B 4 weeks
C 0 weeks
4) Comprehensive information system – centralized inventory planning
Production Planning &
Control
 Production planning
◦ Eight weeks – four weeks
◦ Distribution resource planning


 Shorter production run

◦ Low set up time


 Better inventory policy and Improvement in

Production planning & Control lead to 74%
invetory reduction
Various level of inventory
Factorie 17
s C R
(5)
D D
C C’
s
12.6 Days 26.2 Days 8.5 Days

Plant Product Inv. at Plant Days Plant Inv. at CDC Days DCD Combined

Albacina Stoves 8,557 22.3 14,094 36.8 59.1

Acerra Refrigerators 3,567 7.7 14,300 31.0 38.7
Melano Frezzers 940 7.0 6,033 44.9 51.8
Comunanza Washers 4,480 6.8 7,830 11.8 18.6
Bonferraro D-Washers 3,506 79.5 1,996 45.3 124.8

Total 21,050 12.5 44,253 26.2 38.7

 Transit Point
Experiment
The Transit Point
 The Transit Point experiment utilizes the concept of
"cross-docking" (X-Dock) and is equivalent to Just In
Time (JIT) in manufacturing.

 In cross-docking, goods are received on one dock and
are immediately shipped through another, without
the need for storage.

 Products arriving on trailers from the central
warehouse and plants would then be transferred
directly to smaller local delivery trucks. 

Distribution

Retailer
 Plant
Retailer

Plant
Retailer
Central Warehouse
Plant “Fabriano” Retailer

Retailer
Plant
Retailer

Plant Direct Customers Retailer

Effects of Transit Point
Effects of Transit Point
Recommendation
 After careful analysis of the primary issue and the critical
factors, the recommendation is not to deploy the transit
point concept across all the regional offices.


 Doing so will increase average product delivery times and

can adversely affect customer satisfaction.


 The cost-savings realized from conversion of warehouses to

transit points may be offset by higher costs of
transportation, costs of modifying the central office, and
cost of lost sales due to customer dissatisfaction.

