Whirlpool Corporation is the globe’s leader in manufacturing and marketing major home appliances, The Corporation was regularly ranked high in a variety of ratings, such as Fortune 500. The Corporation enjoys a highly developed manufacturing and distribution network, encompassing many states worldwide (Bloomberg Business, 2008).
The success of the Corporation is rooted in emphasizing its brand and product strategy. Furthermore, it has a quite active acquisition policy, and has recently acquired the company called Maytag, specializing in manufacturing kitchen, laundry and other home appliances.
The acquisition of Maytag and resulting need to blend two supply chains together revealed a number of challenges, faced by the Whirlpool Corporation. It is important to mention that the challenges did not stem from the acquisition itself, but merely resulted from recent trends in home appliances’ market. However, the acquisition of Maytag became an important driver of change for Whirlpool Corporation, as it often happens, when to large-scale companies need to get adjusted to function as a single entity (Russel, 2015).
So, the first market change, being experienced by the Corporation, is that the modern retailers are willing to hold significant volumes of inventory, because consumers have more significant demands. Most often buyers tend to have a so-called “distressed buy”, because their home appliances are broken. So, they want their new appliances to be delivered shortly after they buy them. To get adjusted to the above changes in the market and customer behavior, the Whirlpool Corporation has to address two important challenges.
Firstly, the Corporation has to ensure that customers get their products within 48 hours following the purchase of appliances. In order to do that, it shall reconsider its strategic focus, emphasizing supply chain and inventory management. In this regard, it is crucial to highlight that inventory management plays a key role in terms of managing a supply chain due to the fact that it serves as a tool, allowing for coordinating the demand and supply (Esper&Waller, 2014). For the Whirlpool Corporation, it was crucial to both increase the role of supply chain and inventory management in its strategy and provide for effective segmentation of inventory to ensure timely deliveries.
The second challenge, addressed by the Corporation, was finding a way to bring down costs related to both manufacturing and distribution. This need tends to stem from the fact that the Corporation cannot reach the labour savings of other manufacturers, achieved with the help of outsourcing production processes.
Finally, in view of the acquisition of Maytag, the Whirlpool Corporation had to move towards standardization and consolidation in multiple terms, including the supply chain management.
The Whirlpool Corporation decided to meet the above challenges by several major changes. Firstly, it reconsidered its approach to inventory management to ensure that retail partners get more significant inventories and increase their capabilities of responding to consumer needs. Secondly, the Corporation also decided to unit e its multiple warehouses into several large distribution centers. Importantly, the Whirlpool Corporation also decided to rationalize its facilities and eliminated 100 of its buildings (Bloomberg Business, 2008).
Thirdly, specific measures were taken in order to achieve the optimization of supply and demand, mainly regarding the introduction of new planning models and getting the Corporation’s software integrated with the one of upstream suppliers. Last, but not least, the Corporation invested into the elaboration of a special tracking system, so that the customers can get to know where exactly their appliances are. Furthermore, tracking systems are important for improving the warehouse uptime, as well as the inventory accuracy and warehouse efficiencies.
The above approach brought a number of changes. First of all, it allowed achieving a more effective partnership with retailers, who required more inventories to be stored in their warehouses to meet the needs and wants of customers. Secondly, the approach helped to achieve significant cost savings, specifically due to the fact that the Corporation eliminated a range of its facilities. The cost savings, resulting from the consolidation of warehouses into ten large distribution centers, achieved 60 million.
Fourthly, the new solution can be considered customer-oriented, because it ensures a more quality fulfillment of the needs and wants of customers and also provides them with an additional service (tracking their purchases online). Finally, the changes were highly beneficial with regard to improving the visibility of the company’ supply chain and getting the supply chains of the Corporation and Maytag integrated.
The Corporation’s strategy with regard to its supply chain can be described as follows. The basic principles of change included customer orientation, cost savings, improving the visibility of supply chain and quick integration with the supply chain of Maytag. Narrowing the timeframe for orders’ delivery and introducing the electronic system of appliances’ tracking were the major explicit reflection of customer orientation element of the Corporation’s supply chain strategy. Cost savings were achieved with the help of reconsidering inventory management as a key instrument of facilitating the demand-supply ration and minimizing the number of the Corporation’s warehouses and other facilities. .
The improvement of the visibility of a supply chain was reached with the help of reconsidering the Corporation’s relationships with its retailers, so that they got a more significant access to inventories, necessary for a timely fulfillment of orders. In this regard, the Corporation also invested into getting its software integrated with the one of upstream suppliers. All the above measures necessarily helped the Corporation to improve the integration of its supply chain with the one of Maytag.
Demand, capacity, scheduling and inventory challenges are resulting from current changes in the majority of markets, caused by the significant volumes of production and competition between products’ manufacturers. Nowadays the vast majority of individuals possess home appliances. Therefore, they buy new ones only in two cases. Firstly, they may decide that a specific product is already old, lacks modern functions and needs to be changed. However, more often the customers’ demand for new home appliances is driven by the fact that the old ones suddenly broke down. Thus, it is crucial for them to get new ones as soon as possible. However, taking into account the scale of the Whirlpool Corporation business and its broad network, it is rather complicated to ensure timely delivery of a product, meeting consumers’ needs.
The phenomenon of “distress purchase”, broadly spread in the field of home appliances’ deals with capacity and inventory challenges. Thus, an important task of the Corporation is not only to ensure the quality of its products, but timely delivery to customers. In this regard, it is important to optimize trading partners’ inventories with the ones of the Whirlpool Corporation, as well as achieve better integration with the upstream suppliers. Prompt delivery requires the reduction of travel across the Corporation’s facilities, necessary to complete an order; speeding pick rates, as well as providing real-time tracking of inventories at the Corporation’s distribution centers and the use of pick-pack approach to orders. Scheduling is also crucial to balance quality fulfillment of orders and rational use of human resources.
Facing the above challenges requires an integrated solution. The way to secure a complex nature of a solution and its focus on supply chain and inventory management can be concerned with establishing a special business foundation to fulfill specific supply chain-related benchmarks. Constituting a new foundation is essential for preserving the existing emphases on brand and product management and getting supply chain-related changes implemented without bringing the Corporation away from its current focus.
The solution needs to encompass several aspects, such as the improvement of the distribution network (e.g, support of strategic administration), reconsidering and enhancing the transportation network-related elements (e.g., focusing on loads’ planning, monitoring of shipments, reducing travel miles between facilities of the Corporation), financial consolidation and, finally, utilizing technologies to achieve greater visibility of the network. It is proposed that the new business foundation is divided into four teams, aiming to operate within four of the above domains, and a special team, responsible for integrating the supply chains of the Whirlpool Corporation and Maytag.
The new foundation needs to be responsible for achieving the benchmarks within a specific timeframe and report its activities to the board of the Whirlpool Corporation.
References
Bloomberg Business (2008). The issue: Whirlpool cleans up its supply chain. Retrieved 25 February 2016 from http://www.bloomberg.com/bw/stories/2008-10-24/the-issue-whirlpool-cleans-up-its-supply-chainbusinessweek-business-news-stock-market-and-financial-advice
Esper, T.L., Waller, M.A. (2014). The role of inventory in supply chain management. Retrieved 25 February 2016 from http://www.ftpress.com/articles/article.aspx?p=2192703&seqNum=2
Russel, C. (2015). Segmentation is not inventory optimization. Retrieved 25 February 2016 from http://supplychaincrunch.com/segmentation-is-not-inventory-optimization/
