Merloni Eletroddomestici SpA: The Transit Point Experiment Harvard Case Solution & Analysis

Map of Product Flows at Merloni Electtrodomesticii

            Merloni Electtrodomesticii has a total number of about five plants and each of the plants manufactures a different product such as refrigerators, stoves, washing machines, dishwashers and freezers. All of these appliances are further divided into two other categories, which are appliances and freestanding appliances. All the freestanding appliances of the company are sold through the regional and the urban retailers.

The urban retailers keep a very high level of inventory and the rural retailers keep a low level of inventory of the company. These retailers are part of the logistics system of the company because when stock is available at the regional warehouses it is shipped to these retailers depending upon the proximity of the regional warehouse. If the required product is available in these warehouses then the delivery is made in 24 hours but if it is not available then the delivery has to be made from the central warehouses which takes 2 to 6 days time.

On the other hand, the central warehouse has been managed by the company for selling the built in appliances directly to the customers such as builders and architects. Each of the manufacturing plants of the company produces a different product,therefore, all of them have their own warehouses for finished goods and raw materials. The company also offered a discount of about 4000 lire is to the builders and designs because of their large orders of truckload sizes. The inventory of the company is stored at the 17 regional warehouses, 1 central warehouse and the 5 plant warehouses of the company. All of these inventory warehouses play an important role in the logistics system of the company as shown in figure 1 above.

Merloni Eletroddomestici SpA The Transit Point Experiment Harvard Case Solution & Analysis

Question 2

From the exhibits, calculate the inventory turns at each regional warehouse. Explain how you would evaluate performance of the warehouse managers given these values.

Using the exhibits, we have computed the inventory turns at each of the regional warehouses. Exhibit 8 of the case provides us with the daily demand of the products across each of the 17 regional warehouses. Using the daily demand of all the products, we have first calculated the mean demand of products across each regional warehouse. Its standard deviation and coefficient of variation has also been computed. The coefficient of variation has been computed on daily basis for a single regional warehouse by dividing the daily coefficient of variation with 5.12 to get monthly coefficient of variation. After this, the mean demand served by regional warehouses and the inventory on hand at each of the regional warehouses has been computed and then the inventory turn has been calculated using the following formula:

Average monthly demand/Average monthly on hand units = Turn Rate

The computation has been performed in the excel spreadsheet, which is shown below:

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