Logistics & Supply Chain Management

Cliffton Pereira

Table of Content

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1 Introduction3 1.1 Company Profile

31.2 Global Reach

31.3 Competition

31.4 Mission & Vision

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2 Main Body 4

2.1 Competitive Strategy4-52.2 Global Integrative strategy52.3 Challenges

62.4 Supply Chain Drivers

72.4.1 Facilities

72.4.2 Inventory

72.4.3 Transportation

82.4.4 Information

8-112.4.5 Sourcing

122.4.6 Pricing

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3 Conclusion 12-13

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4 Bibliography 13-15

IntroductionCompany Profile

Whirlpool Corporation is a leader in home appliances which operates in 130 plus countries by marketing major brands such as , Maytag, KitchenAid, Jenn-Air, Amana, Brastemp, Consul, Bauknecht  and other major brand names. It employs 69,000 employees worldwide & its sale in 2013 was around $ 19 billion .

Whirplool Corporation runs 59 manufacturing and technological research centers worldwide with its main headquarter in Michigan,United States.

The company’s initial inception was the production of a motor driven wringer washer which was patented by Lou Upton. Hence forth Lou upton along with his uncle Emory and brother Fred came together to establish the then called Upton Machine Company.

(Whirlpool Corporation 2014)

Whirlpool came a long way since its initial inception of motor driven wringer to having a large amount of share in global market and by 1980’s, Whirlpool extended their boundaries to Europe,Mexico,Canada,Brazil,South Africe,China and India (Mishra 2013)

Global Reach

Whirlpool Corporation according to the Manhattan Associates has 2.2 to 2.5 million units of inventory to meets its demands from consumers homes

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as well as builders. Whirlpool provides goods to 30,000 retailers worldwide from its 40 manufacturing facilities which acquires goods from7000 different suppliers(Manhattan Associates2013)

Competitors

After the acquisition of Maytag in 2005, Whirlpool became the biggest industry in home appliances , but even still the competition is intense with major brand players such as Arcelik, Bosch Siemens, Electrolux, General Electric, Haier, Indesit, Kenmore, LG, Mabe and Samsung(csimarket2014). Customers expectations are increasing more than ever and there are competition in terms of cost, service, quality, valueof product, reliability and major factors in today’s market is the speedat which customer receives the product.

Mission

“Everyone, Passionately Creating Loyal Customers for Life”

 Vision

“Every Home… Everywhere… with Pride, Passion and Performance”

(Whirlpool Corporation 2014)

Main BodyWhirlpool on having taken the advancement for globalization was a bold step but this brought with it more complexcity in terms of coping up with its supply chain. Its delivery performance in 2000 was a major downfall. The company was not able to meet its delivery targets and the major issues encountered were inventory was not delivered rightly by having a lot or very less inventory, also there was an issue of having inventory at incorrect locations.

The performance to rate company’s inventory availability was only 83% in2000. These figures did not farewell in comparison to industry standards.

(University Alliance 2014)

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In this report we will be addressing and analyzing the key areas relatedto Whirlpools supply chain process and the factors responsible for its development.We will be covering following

Competitive strategy adopted to enter global market-Strategic Planning Challenges and associated problems Supply chain drivers and its strategic fit Medium Term Plan- SC drivers and relative decisions

Competitive Strategy

Whirlpools strategy was to gain competitive advantage by having global presence in the market inspite of consumer’s difference in taste, habitsand preferences. As perassignmentpoint (2014), ‘Regionalization Strategic Approach’ allowed them to gain a global edge.

For a better understanding the world was categorized into 4 parts : North America (Canada, Mexico, USA), Europe (Western, Central and Eastern Europe, Africa and the Middle East), Asia and Latin America. Thebest strategic fit was tried to be formed depending on customers, markets, demand, political stability, economic growth and so on.

(assignmentpoint 2014)

Whirlpool in North America

Strategic approach:Better customer focus by considering customer needs, improving product quality and having appropriately priced products. “Global Functional Structure” cost effective approach that had one

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marketing division, one manufacturing division, one product group structure and one development division for technology was structured butlater cross functionaldevelopment took place.

Whirlpool in Europe:

Strategic approach: A strategy that was more Customer centric and positioned Brands to meet the needs and conditions in Europe was adopted“Customer Focused Business”. Whirlpoolestablished its mark in Europe through the joint venture of Phillips.Business structure- The business structure used was “Global Functional Structure” same as North America

Whirlpool in Latin America:

Strategic approach: Whirlpool used a “customers for life” strategy approach to build an advantage of capturing of its large market size. Whirlpool introduced a wholly owned subsidiary which was led by whirlpool overseas corporation to get higher financial returns.

Whirlpool in Asia:

Strategic approach: Whirlpool had planned to incorporate the use of pan-Asian platform to emerge into the market with changes according to different regions. Also since the market was not considered to be matureenough to deal with multi brand approach, hence single brand name-Whirlpool was used. The “Five Ps” approach - Partnership, Products, Processes, People and Pan Asian approach was the main strategy adopted

Global Integrative Strategy :

According to assignmentpoint.com it would be beneficial for whirlpoolto introduce ‘Global Integrative Strategies’ as they operate & integrate processes around different countries for better competitiveadvantage.

For example, whirlpool’s manufacturing department can be in Brazil, China and India, for availability of cheap labor force, raw materialsand so on.

(assignmentpoint 2014)

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Challenges

Due to the Global expansion and a complex network of material flow insupply chain, it became cumbersome for Whirlpool to manage appropriate inventory. Also a major drawback of the supply chain was primitive ways of operating as they did not leveragelatest technology. All these factors led to the issues faced by Whirlpool.(Mishra 2013)

There are mainly 2 issues when it comes to the broad level faced by whirlpool which are:

Inventory Related problem Customer Orders Delay

Associated problems with piled up such as not having the right stock at right place, trade partners holding lot of stock,delay in fulfilling customer order, no effective order communication, forecasting errors and inappropriate functioning of facilities.

To add to the above challenges another major challenge was the smoothintegration of Maytag into Whirlpool Corporation as mentioned below.

Maytag Acquisition& Associated challenges

One of the biggest events in the history of Whirlpool would be its acquisition of Maytag a rival appliance company in 2005. After the $2.7 Billion acquisition of Maytag according to MacMillan (2008), Whirlpool went on to be the leading market industry in terms of home appliances.

Whirlpool had already started to have a hard analysis of its supply chain just before the acquisition. Acquisition of Maytag was very challenging as they were almost of same size and integrating its

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supply chain along with order, sales and information flow would be a cumbersome task.

(MacMillan 2008)

Supply Chain Drivers

Facilities

The customer’s needs and desires are changing continuously and this is driven by economy as well as the availability of products through different product mixes through multiple delivery channels and to addto this challengeretailers want to carry fewer inventoriesandconsumers want products at a faster pace (Manhattan Associates2013)

Some of the innovations made to the facilities are:

During the Maytag integration, Whirlpool downsized its major facilities from 47 down to 25, here consolidation was the key asthe management of inventory would be better to track and located(Manhattan Associates2013). According to Sengupta, betterresponsiveness can be achieved when the number of stages in supply chain reduces MacMillan(2008)

Storage in the distribution center was made in such a way that the merchandise was placed according to the rate at which they will leave the facility.Slow moving items were placed at center of facility like expensive refrigerators and stoves, whereas

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fast moving items like dryers and washing machines were closer to loading docks.(Barrett2009)

Whirlpool used a identical quadrant approach to its facilities to make it easier for order pickers to circulate around one quadrant without leaving it as all the 4 quadrants where where placed in similar order with similar products, hence the time needed was reduced considerably(Supply chain digest2009)

The downsizing of facilities led to better coordination and consolidation and changes in infrastructure led to them beingmore efficient and responsive.

Inventory

Whirlpool got a better understanding of its resources and whereaboutsof inventory after the consolidation of its warehouses.

Whirlpool used a “Just-in-time” inventory management approach. This meant that the major chunk of inventory sent to retailers had been cut down , also the retailers were able to track the position of inventory(Tharp2009)

Sophistication in inventory management has been introduced to offer a variety of colors to the products, but not actually holdthis inventory. The items would be painted to appropriate color as per order. This postponement strategy of the commitment to color allows a further substantial reduction in inventory (Thomas1995)

Based on the theory, relationship improved as retailers got a better hold on its inventory status and customized products were available at a faster rate to customers.

Transportation

Transportation for Whirlpool has come up a long way in terms of improving its efficiency and reducing of green house gases

Some of the techniques used are:

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In order to make better use of its transportation, the company wanted to leverage each shipment to the fullest by making full truck load rather than multiple truck shipments that where lessthan full. This strategy marked the success as 63% of its shipments where made by full truck loads. I addition to this a “cube out”(fill up the trailer) rather than “weigh out” (reach maximum weight capacity) was used to maximize space utilization(Cooke2008)

Intermodal Transportation was to be used for long distance travel wherever possible , this method of mode selection for the routes over the past 6 years gave a much needed savings andcost benefits as 7.5 million gallons of diesel fuel was saved in addition to CO2 emission by 78,000 metric tons (Whirlpool corporation Sustainability report2012)

Whirlpool had outsourced their logistic activities to Penske logistics which where instrumental in creating a new routing network by consolidating its warehouses that included Local distribution center & Regional distribution centers, also they played a key role of Lead logistics provider during the acquisition of Maytag in 2005 by consolidation their networks &creating Hi/Lo network for the betterment of service levels. They were also focused in areas such as Cross docking, Mode selection, shipment load panning and optimization(Penske2010)

By having a better hold on its routing network and mode selection Whirlpool became more efficient and reliable

Information

Electronic Data Interchange (EDI)

EDI is an electronic was of transferring data across organization andbetween trade partners. This was implemented for a more systematic data approach which promised fewer transactional errors with improvedaccuracy and better effectiveness. According toMishra (2013)EDI was implemented across Whirlpools to reduce paper work of 600 suppliers.

As shown in the diagram below, EDI eradicated the use of manual interfearance that caused errors while use and used a more universal

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approach of transferring data. The data to be transferred is coded ina computer format and sent via EDI servers and accessed at receivers end with readable version.(Whirlpool - Electronic Data Interchange2003)

CPFR

Whirlpool believed that in order to have a competitive advantage, it needed to have a more customer-focused approach and hence in 2000 according to Sagar(2003-’04)Whirlpool was focused on using a better forecasting procedure.

In order to take away the hassle of sharing forecast related documents at various intervals without any scheduled time and later on causing mishap and confusion across the organization with lots of meeting that included manual interactions, Voluntary Inter-industry Commerce Standards Association (VICS) presented with a solution wheresensitive forecast data would be shared across trade partners via a centralized hub and updating was rather easy and leaved very less manual interactions

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To implement this I2 Supply chain collaborator software was used thathad a secure shared point and various end users could access the data. This also gave access to have collaboration weekly rather than monthly cycle.

(Sagar 2003-’04)

Data Warehousing

Data warehousing basically facilitated the use of company data for analyzing different data and for making important decisions pertaining to quality, sales, logistics, manufacturing, global procurement, customer service and marketing(Haley, Watson& Goodhue 1999)

As seen in the diagram , information from different departments gets fed into integration layer where the data coding takes place into appropriate format and then fed into a centralized data warehouse. This data can be used for accessing minute data like quality of a component to make strategic business decisions.

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Source: Sagar 2003-’04

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Source: Sagar (2003-’04)

Sourced from(http://en.wikipedia.org/wiki/Data_warehouse)

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Fig.Data Warehousing Applications and the Business Needs That They Satisfy

Schedule Actualization

This is basically about tracking or knowing the whereabouts of the inventory so that the retailers have a better idea on its shipments. Whirlpool decided to have a more customer focused approach by packingbulk inventories and consolidating its warehouses to lesser number. In order to meet the customer demand better it was crucial to have a “Just-in-time” approach for inventory(Tharp 2009)

Adopting new technology for information flow was the biggest achievement for whirlpool as they became more responsive, efficient, processes were more reliable and relationship ties with stakeholders improved.

Sourcing

In order to have a more effective Global procurement needs , Whirlpool has outsourced its part sourcing operations to ‘Directworks’ which provides a software that creates custom templates for its suppliers thatreplaces the manual work of spreadsheets and ledger based documents.(Toensmeier 2013)

According to Toensmeier purpose of the template is to analyze key data such as:

Cost of part Cost of shipping Finance related cost Issues related quality standard Compliance reporting

Managers would have the ability to perform efficiently by reviewing onlythe most important suppliers and negotiations will be done with them. This is a highly responsive and efficient system as major junk work would be carried out such as bid analysis, storage and retrieval of data

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that requires a lot of time and the managers will have more time to makedecisions on of strategies and negotiations

(Toensmeier 2013)

Pricing

According to Getz (2012) some of the challenges for pricing are innovative product, value perception & cover costs while maximizing profits and while introducing new product in the market, whirlpool uses Price skimming strategy where the product is relatively highly priced.

Another strategy Whirlpool uses is the MSRP (Maximum selling retail price) this is the price recommended by the company the retailers need to sell at, but this price can be changed depending on the retailer’sstrategy (Levins 2013)

Having flexibility in price gave a better confidence to retailers in theinventory exhaustion and the relationship can have a better impact.

Conclusion

It is clear that Whirlpool’s desperate measure to recover from its down fall of early 2000 has been fruitful even by having some major challenges like the Maytag marriage and its consolidation of supply chain with whirlpool.Having made some of the biggest strategic long termdecision coupled with reasonable investment in plans to integrate supplychain, we can see it was able to keep its Mission and vision intact. Some of the major highlights that led to Whirpools confidence in global market were its massive restructuring of facilities, adapting with technological pace of smart way of information sharing and having trust in outsourcing its capabilities of transportation and sourcing to Penskeand Directworks respectively shown a bold stride. As we can see Whirlpool is leading a more responsive and efficient SC strategy .But itis rather early to say that the bitter days of Whirlpool are far behind with consistent competition from its better rivals in terms of innovation, price and agility to market.

Bibliography

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University Alliance, 2014. Supply Chain Management Case Study: Whirlpool. [Online] Available at:http://www.usanfranonline.com/resources/supply-chain-management/supply-chain-management-case-study-whirlpool/#.VFeD6pR_sxh [Accessed 24 October 2014]

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