Supply Chain Management

Case Report
On
Merloni Elettrodomestici SpA
: The Transit Point Experiment

PGP 2014-16 Batch

IIM, Bangalore

Submitted By:
1.Rahul Kumar
2. Pawan Kumar
3. Himanshu Singh
4. Kapil Verma

1. Objective of the case:

Through this case analysis we will be able to know about the advantage and disadvantage cross
docking technique in supply chain management. This analysis will also give us the insight on
comparative advantage of cross docking over other measure of lead-time reduction in production
planning and inventory reduction.
Also we will learn about the viability of cross docking in wider geographical distribution channel
and its effectiveness in efficiency improvement and cost reduction.
2. Introduction to the company: Merloni Elettrodomestici
Merloni Elettrodomestici SpA is a subsidiary of Merloni group of companies established in 1930.
Merloni group has four manufacturing subsidiary in which Merloni Elettrodomestici being the
largest by the sales revenue and contributing to 75% of total sales (as in year1984).
Merloni Elettrodomestici being the domestic appliances manufacturing division produced five
products in five different plants in Italy.
Besides above palnts, merloni has one centralized warehouse and seventeen regional warehouses
to support the outbound logistics of the company to deliver the finished goods to retailer and end
customers.
3. Current distribution system:
Main facts under the current distribution system are as follows:
1. It was a centralized inventory planning system where all regional warehouses were
electronically connected to central warehouse, allowing real time monitoring of orders.
2. It had A-B-C inventory classification in which inventory goals for each SKU were
calculated on daily basis to meet the companys goal of inventory level for each A, B and
C item i.e. 2, 4 and 0 week respectively at the regional warehouse level.
3. It also had manual override function that was introduced on request of warehouse
mangers.
4. It also helped in assessing each warehouse managers performance through calculation of
parameters related to desired inventory goals.
5. In order to save on logistics expense customers were offered 4000 Lire discount in case of
full truckload order.
Advantages:
1. Inventory level dropped by 75% at every regional warehouse from earlier level.
2. It resulted in reduction of production planning horizon from 4 months to 3 with one-month
plans fixed prior to production (reduced from earlier level of 2 months).
Transit point based system:
The facts about transit point based system are as follows:
1. It was based on cross docking using efficient transportation facility and order
management.
2. Every day orders were taken up to 3 PM and after aggregation of orders and routing
decisions were made for the local delivery trucks, which used to deliver orders to retailer
on following day.
3. At 5 PM, order and routing information were transmitted to headquarter only after which
product picking and trailer loading processes were completed.
4. Next morning at 7:30 AM, trailer used to be unloaded into 3 local trucks that used to
deliver orders to individual retailers.

5. As the order quantity used to fluctuate. Sometime, it used to get very high and one trailer
was not enough to deliver. In such cases, individual retailer were called and requested to
accept late delivery.