SUPPLY CHAIN CONSULTING

MERLONI Case Report

PGPM 2019-2020
Group 4

Member Name FT Number

Joydip Sarkar FT202036
Avinash R Gaharwal FT202020
Rahul Kumar FT204104
Agnideep Bhowmick FT203006
Arkadyuti Bandyopadhyay FT201018

5th Feb, 2020

Q 1. What are the costs and benefits of Merloni’s current distribution system?
Of a transit-point distribution system? Assume that the total costs consist of
operating, inventory, short- and long-haul transportation costs. How does the
proposal impact each of these costs?

Analysis:
DISTRIBUTION SYSTEM WITH TRANSIT POINT

BENEFITS – COSTS –

 No stock-outs in the  Limited number of Orders

warehouse. So, reduction
in Inventory Holding Cost.
 Reduction in operating cost
by 20%.
 No Warehouse Lease
payments.
 Reduction of wage
expenses due to discharge
of Warehouse employees.
per day (Orders Till
3.00pm)
 Forecasting accuracy must
be high to realize the
uncertainties of demand
for the future events.
 High Transportation cost
 Frequent Loading and
unloading may lead to
damage to appliances.

5th Feb, 2020

CURRENT DISTRIBUTION WITHOUT TRANSIT POINT

BENEFITS – COSTS –

 Huge Inventory holding cost

lead to decrease in profit
margin.
 Warehouse Lease payments
 Warehouse maintenance
cost
 Warehouse Employee cost

Q2 - Should Merloni replace its network of regional warehouses with transit

points? If so, what contingency 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?

Analysis:
Yes, but Merloni should not replace the whole network of regional networks
with transit points. The locations which have lower demand can be replaced
with transit points first. The locations which have high demand like Milano,
Napoli, Bari and Roma should not be replaced with transit points unless the
lower demand areas are successfully tested.
But for lower demand areas, it can be replaced because of the following
benefits tested:
1. Improved cost
2. Higher agility
3. Better efficiency
4. Reduced workforce

5th Feb, 2020

Contingency plan and support systems required:
1. IT support system for better visibility of supply chain
2. Standardized processes
3. The Warehouse manager and other staff should be vigilant enough to track
a fault in the system and quickly correct it
4. The whole network should be agile enough to quickly move back to the
traditional system if the TP system comes out be inefficient in any case
5. For the above point, Merloni will require huge capital investment if they
give up the warehouse and have to move back to the traditional system
6. So, for point 5 and other contingencies such as Local transportation break
down or unavailability, Merloni needs highly liquid contingency fund.

5th Feb, 2020