Merloni Tansit Case Summary

Merloni Transit Point Experiment Case

Executive Summary

Merloni’s business has got lot to deal with inventory management. The balance between the supply and demand needs to be delicately handled by taking the time of delivery, quality assurance and also the quantity to be supplied into consideration. The company’s current distribution system is consisted of three types of inventory management warehouses. Plant warehouses are closer to production plants, taking care of raw materials required for production. A central ware house where the finished goods are initially stored for further distribution and many regional warehouses located at strategic locations which are supplied from central warehouse for further distribution to retailers. The main advantage of this system is the one time investment needed to set up all these warehouses which can be used for a long time. There won’t be any problem in dealing with any scale of inventory that needs to be supplied to retailers as warehouses have great storage capacities. The cost of inventory management will be fixed for a considerable period of time and there will always be an opportunity to choose among the best feasible regional warehouses for every delivery. Contrary to warehouse based distribution system the transit-point system will offer great deal of flexibility in choosing strategic locations for getting inventory supplies from central warehouse. The cost of operating transit points will be lesser.

The company faced lot of constraints in terms of time and distance to be conceived, and also rise in cost of transportation when one of the warehouses was temporarily unavailable for operations. Operations from Genova warehouse which is 120 Km away and from Bologna warehouse which is 240 Km away will certainly impact the time and cost of delivery. This is the problem of having a non-flexible distribution system. Compared to this the transit-point based distribution system will offer lot of flexibility as it...