Merloni Case Point Distribution

The transit point distribution system presents tangible benefits with manageable risks. Merloni can implement the transit-point distribution system but not without some modifications to it. Implementing the transit point distribution would help Merloni get rid of a complex distribution network. There are also some realistic risks attached to the proposal but with careful planning and by building in some slack in the system to account for variation in demand they can be mitigated. Following are the benefits and risks of the implementation.

Benefits

1. The new method provides an opportunity to significantly reduce operating costs by reducing the employee headcount and infrastructural expenses like lease and rents.

2. The inventory at regional warehouses will be reduced thereby reducing cost of storage.

3. The new system is lean and flexible which will allow Merloni to quickly respond to change in market demands.

4. This will allow the production process to be flexible as well and lead to reduced set up times and shorter run sizes.

Risks

1. In case of a stock out at the central warehouse service will be severely affected as there will not be any buffer inventory at the regional warehouse.

2. In case of delay in transportation due to external factors like weather or vehicle malfunction etc. there will be a break in the distribution network. This method is vulnerable to failure due to failure in any part of the distribution chain.

3. In case of peak sales seasons i.e. before and after the month of August there can be unexpectedly high demand and no stock inventory at the regional warehouse would put a lot of pressure on the central warehouse.

4. In case the customer does not collect the goods from the transit point the goods are left there to be collected later. This system is prone to incidents of theft and intentional damage and should be taken care of before implementing the system company wide.

5. In case the delivery trucks...