Merloni Elettrodomestici Spa
Problem/Situation
Merloni Elettrodomestici SpA (Merloni) is a major Italian manufacturer of built-in and freestanding Home appliances. Merloni's distribution network consists of five manufacturing plants, a centralized warehouse, and seventeen regional warehouses. During the past few years, Merloni has been successful in implementing programs that have significantly reduced production-planning lead times and decreased inventory levels. Particularly, with the implementation of an A-B-C inventory classification program and institution of a centralized inventory planning system (Refer to Figure 1 - Appendix 1), they were able to reduce inventory levels and shorten production planning cycles at the regional offices by 75%. Merloni was able to achieve a reduction from four to three months in the production planning time horizon while the required lead-time to firm orders was reduced from two months to one.
In their efforts to further reduce inventory and enhance production efficiency, management is evaluating a proposal to replace regional warehouses with "transit-points" (Refer to Figure 2 - Appendix 1). At these transit points, products arriving on trailers from the central warehouse and plants would then be transferred directly to smaller local delivery trucks.
The primary issue that is being assessed is the feasibility of the transit point solution and its effectiveness in improving efficiency, reducing operating and transport costs, reducing inventory requirement and improving customer service. The secondary issue is the provision of an exhibition center in the Milano area without significant risks to product delivery.
Analysis of the Situation and Issues
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 at one place and are immediately shipped to another location, without the need for storage. In order to assess the pros and cons of this
Merloni Elettrodomestici SpA (Merloni) is a major Italian manufacturer of built-in and freestanding Home appliances. Merloni's distribution network consists of five manufacturing plants, a centralized warehouse, and seventeen regional warehouses. During the past few years, Merloni has been successful in implementing programs that have significantly reduced production-planning lead times and decreased inventory levels. Particularly, with the implementation of an A-B-C inventory classification program and institution of a centralized inventory planning system (Refer to Figure 1 - Appendix 1), they were able to reduce inventory levels and shorten production planning cycles at the regional offices by 75%. Merloni was able to achieve a reduction from four to three months in the production planning time horizon while the required lead-time to firm orders was reduced from two months to one.
In their efforts to further reduce inventory and enhance production efficiency, management is evaluating a proposal to replace regional warehouses with "transit-points" (Refer to Figure 2 - Appendix 1). At these transit points, products arriving on trailers from the central warehouse and plants would then be transferred directly to smaller local delivery trucks.
The primary issue that is being assessed is the feasibility of the transit point solution and its effectiveness in improving efficiency, reducing operating and transport costs, reducing inventory requirement and improving customer service. The secondary issue is the provision of an exhibition center in the Milano area without significant risks to product delivery.
Analysis of the Situation and Issues
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 at one place and are immediately shipped to another location, without the need for storage. In order to assess the pros and cons of this