Drivers for Change
The acquisition of Whirlpool over Maytag resulted in complementary advantages since Maytag shareholders received both cash and Whirlpool stock while Whirlpool expanded its product and service offerings (Fox, 2006). The acquisition effect is an increase in brand portfolio variety and potential improvement in production efficiency (Whirlpool, 2005, p.7). However, this acquisition occurred during one of the most challenging external environments due to a continuing increase in both material and oil-related costs (Whirlpool, 2005, p.6). This was further worsened by a decline in consumer demand within its U.S. market (Whirlpool, 2006, p.5).
Whirlpool countered by increasing the number of new product innovations by expanding the manufacturing capacity in low-cost countries such as Poland and Mexico (Whirlpool, 2005, p.7). Even though the 2005 production output of Whirlpool was estimated to be at seventy million (Whirlpool, 2005, p.15) this was easily managed due to the successful implementation of Six-Sigma (Whirlpool, 2005, p.9). The problem is that the Maytag acquisition required the integration of the Maytag operations, manufacturing, and product portfolio into Whirlpool (Whirlpool, 2006, p.5). This is perceived to be difficult to implement since Maytag primarily uses high cost plants (Jacobs, 2008) while Whirlpool uses low cost plants (Whirlpool, 2006, p.7). The difference in manufacturing processes, costing, and operation resulted in a disruption of Whirlpool’s existing supply chain along with the higher demand in sales volume when it increased by 16.5% in 2006 (Whirlpool, 2005, p.26).
Whirlpool’s logistics management with regards to its upstream suppliers was disrupted since it requires additional training to Maytag and Whirlpool personnel about the product expansions. This is because Whirlpool focused on a global market while Maytag’s main market is in the North American region (Whirlpool, 2006, p.6). The challenging global market was further complicated by the company’s expansion into the Russia and Turkey market during 2006 (Whirlpool, 2006, p.5). This means that the company’s existing supply chain was challenged with a (1) wider variety of products under the Maytag brand along with the product innovations for Whirlpool, (2) different manufacturing facility management for Maytag and Whirlpool, and (3) market expansions in Russia, Turkey, and North America.
Supply Chain Benefits
The primary benefit of the Maytag acquisition is that Whirlpool was able to strengthen its leadership position in the consumer goods sector (Yahoo, 2016). Additional benefits are potential growth opportunities and a better consumer position (Whirlpool, 2006, p.6) resulting to an increase in sales volume by 16.5% in 2006 (Whirlpool, 2006, p.16). But this required a significant modification in Whirlpool’s current supply chain management especially with the company’s global market expansion along with the continuing product innovations.
With regards to marketing and sales, the acquisition was seen to have improved volume sales along with a better market position since it expanded the market coverage of Maytag and Whirlpool brands (Whirlpool, 2006, p.10). This is because Maytag enhanced Whirlpool’s existing brand portfolio with its specialization of cooking and laundry products (Whirlpool, 2006, p.9). The competitive advantage by Whirlpool are its development of unique and compelling products, a faster production timeline, and better brand marketing resulting to a loyal following (Whirlpool, 2006, p.6). The result of the Whirlpool and Maytag strengths are seen in the $3.5 billion increase in sales from the previous year’s $14 billion (Whirlpool, 2006, p.10).
The Maytag acquisition affected the company’s plans to streamline its supply chain especially with regards to its manufacturing facilities (Whirlpool, 2006, p.6). The reason for this is that Maytag primarily uses high cost plants (Jacobs, 2008) while Whirlpool only operates low cost plants (Whirlpool, 2005, p.7). Whirlpool management therefore needed to reconcile both supply chains in order to retain its best-cost and best-quality product reputation (Whirlpool, 2006, p.5). This means that costs need to be decreased (Myerson, 2012) through redundancy elimination in the manufacturing, procurement, and logistic operations (Whirlpool, 2006, p.10).
This was done by consolidating the distribution and logistics network, use of lean processes, maximizing the capacity of a lower number of production facilities, and supplier consolidations resulting to lower material costs for production (Whirlpool, 2006, p.10). The Maytag acquisition meant that Whirlpool was able to take advantage of Maytag’s vital manufacturing operations to improve their product innovations (Whirlpool, 2006, p.9). This also enhanced competitive advantages since Whirlpool can make use of Maytag’s existing market and long-term trade relationships (Whirlpool, 2006, p.9).
Supply Chain Strategy
The supply chain is enhanced with the use of different lean management tools such as the implementation of the six-sigma to Whirlpool’s upstream suppliers (Whirlpool, 2006, p.17). The purpose of which is to develop a more streamlined operation so that Whirlpool management have a more accurate information with regards to product availability, distribution capability, and costs in real-time (Whirlpool, 2006, p.17).
Some of the main strategies used for enhancing the supply chain are the use of global product platforms, technology centers, and engineering resources (Whirlpool, 2006, p.23). But Akabane, Farias and Filho (2008) believed that this can be enhanced with the TRIZ principle where relationships with the supply chain partners require a higher degree of cooperation and trust. This was seen in the logistics transformation strategy implemented in 2006 for the purpose of targeting the needs of its consumers and trade customers (Whirlpool, 2006, p.17). Additional value suggestions along with best practices were implemented such as online tools and new order processes (Whirlpool, 2006, p.17). The more streamlined ordering process engaged the trade customers by offering real-time information on company products, current promotions, and prices (Whirlpool, 2006, p.17).
The acquisition of Maytag resulted in the efficiency of Whirlpool’s supply chain and operations. However, Whirlpool was able to counter additional costs and operating difficulties by consolidating redundant facilities when it removed more than 50 distribution centers (Whirlpool, 2006, p.17). This was done through some improvement strategies suggested by Morris (2005) such as the assessment of Maytag operations and additional training/education of its employees for the purpose of achieving Whirlpool’s 2005 supply chain benchmark.
This was done by looking for weak links and potential long-term supply chain partners so that effective and efficient improvements are prioritized (Morris, 2005) to improve the dock-to-dock time (Myerson, 2012). Whirlpool used its successful implementation of lean management tools like the six-sigma for Maytag’s operations (Whirlpool, 2006, p.17). The result of which is a more streamlined delivery structure while increasing logistics efficiency under the Quality Express supply chain network (Whirlpool, 2006, p.17). The purpose of the Quality Express network is to deliver consumer and trade customer orders in the U.S. within 48-72 hours (Whirlpool, 2006, p.17).
Supply chain efficiency and employee collaboration was seen as the main factors for the success of the build-to-order system employed in Whirlpool Europe (Whirlpool, 2006, p.22). However, this was not implemented in North America, Latin America, and Asia since it used a more effective distribution strategy (Whirlpool, 2006, p.22). North America used a more effective distribution strategy, which was confirmed by three of its major trade customers (Whirlpool, 2006, p.21). Latin America used a collaborative strategy by enhancing its relationship with trade customers through knowledge exchange programs and business differentiation programs (Whirlpool, 2006, p.23).
Operating Challenges and Recommendations
The first step is a better trade customer engagement tool in the form of the Quality Express supply chain network where it offers product variety and availability (Whirlpool, 2016, p.17). However, the Quality Express network has a longer response time of 48-72 hours, which was higher than the 48 hour target (Whirlpool, 2006, p.17). Myerson (2012) suggests that supply chain improvements can be targeted in transportation, inventory, waiting, motion, overproduction, overprocessing, and defects. Whirlpool was able to counter overproduction waste in its build-to-order system (Whirlpool, 2006, p.22) but may result to production and transportation delays (Myerson, 2012), which contradicts the objective of a better customer response.
Xu, Xu, and Liu (2014, p.160) suggested the use of a more flexible supply chain since the company will need to adjust to changes in its markets (Hemalatha et al., 2015, p.69). Hemalatha et al. (2015, p.69) suggests primarily concentrating on lowering costs through the use of a lean manufacturing strategy and waste elimination. But the main consideration is the flexibility of the supply chain due to the volatile demands of its target consumers (Hemalatha et al., 2015, p.69). This means that the objective of the company and their supply chain must be the same, which means collaborations with both upstream and downstream supply chains to achieve a mutually beneficial competitive advantage (Xu, Xu, and Liu, 2014, p.160).
References
Akabane, G. K., Farias, O. O., and Filho, W. B. B. (2008). Case study: supply chain improvement. Triz Journal. Retrieved from https://triz-journal.com/supply-chain-improvement-for-a-forklift-distributor/
Fox News. (2006). Whirlpool completes Maytag acquisition. Fox News Network. Retrieved from http://www.foxnews.com/story/2006/03/31/whirlpool-completes-maytag-acquisition.html
Hemalatha, S., Babu, G. R., Rao, K. N. and Venkatasubbaiah, K. (2015). Supply chain strategy based supplier evaluation-An integrated framework. International Journal of Managing Value and Supply Chains, 6(2), 69-84.
Morris, J. (2005). The top 10 supply chain improvement strategies. Multichannel Merchant. Retrieved from http://multichannelmerchant.com/marketing/channel-integration/the-top-10-supply-chain-improvement-strategies-02032005/
Myerson, P. A. (2012). The journey to continuous supply chain improvement. Inbound Logistics. Retrieved from http://www.inboundlogistics.com/cms/article/the-journey-to-continuous-supply-chain-improvement/
Whirlpool Corporation. (2005). 2005 annual report. Whirlpool Corporation. Retrieved from http://investors.whirlpoolcorp.com/annuals-proxies.cfm
Whirlpool Corporation. (2006). 2006 annual report. Whirlpool Corporation. Retrieved from http://investors.whirlpoolcorp.com/annuals-proxies.cfm
Xu, L., Xu, Q. and Liu, X. (2014). Wal-mart and Carrefour’s supply chain management strategies in China. International Journal of Business and Management, 9(7), 155-161.
Yahoo Finance. (2016). Whirlpool Corp. (WHR). Yahoo Finance. Retrieved from https://ca.finance.yahoo.com/q/pr?s=WHR
