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Leading a Supply Chain Turnaround

Presented toCmde. Rajinder bhandari

Presented byPulak agarwal

Mohsin khan

Five years ago, salespeople at Whirlpool said the
company's supply chain staff were "sales disablers.
Now, Whirlpool excels at getting the right product to
the right place at the right time-while keeping
inventory low.

This case discusses the problem that was faced by the

whirlpool in their supply chain and the steps that the
company took to turnaround their supply chain from
worst to best.

The supply chain organization was the part of the
business that Whirlpool's salespeople were in the habit
of calling the "sales disabiers" in 2000.
They were perpetually behind the eight ball, tying up
too much capital in finished goods inventory - yet failing
to provide the product availability their customers
needed. Their availability hovered around 87%.
Their colleagues grimly joked that in surveys on the
delivery performance of the four biggest appliance
manufacturers in the U.S., they came in fifth.

Whirlpool North America had flipped the switch on a
massive new ERP system, Normally, Whirlpool ships
close to 70,000 appliances a day to North American
customers. The day after they went live with SAP, they
were able to ship about 2,000. A barrage of bad press

Devising the Strategy

At the top level it's a simple formulation: getting the
right product to the right place at the right time - all
the time. That gets complicated very quickly,
however, when you consider the scale of the
Whirlpool makes a diverse line of washers, dryers,
manufacturing facilities in 13 countries. They sell
those appliances in 100 countries, through retailers
big and small.
They formulated a battle plan that included new
information technology, processes, roles, and talents.
But before they could begin to imagine those, they

They decided that they could answer that question only by

focusing on customer requirements first. Their approach to
developing their supply chain strategy would be to start with
the last link-the consumer- and proceed backward.
Understanding Customers' Needs.
If you start with the customer, the customer can't be an
afterthought. The people value "delivery with integrity." That is,
your ability to get it there fast is important, but not as important
as your ability to get it there when you said you would.
Identifying Trade Partners Priorities.
Moving upstream, they needed to understand the desires of
their direct customers better. They conducted their own
interviews to define requirements by segment. As well as
looking at smaller retailers versus larger ones. They asked
about inventory management and how they might want
Whirlpool to assist in it. In all, they discovered 27 different
dimensions along which their performance was being judged,
each varying in importance according to the customer.

Benchmarking the Competition.

They benchmarked their competitors-primarily GE, they
obtained cross-industry information and competitive
intelligence from AMR, Gartner, and Forrester Research
to make sure they had a broad and objective assessment
of supply chain capabilities. Then they mapped out what
would be considered world-class performance for each of
the 27 capabilities and how much it would cost them to
reach that top level.
Building for the Future.
A final component of their supply chain strategy was
identifying the probable range of future operating
technological trends. The point was to assure themselves
that their proposal was robust enough to with- stand
these various scenarios.

Selling the Revolution

You need to maintain a careful balance between
seeking the internal customers guidance and selling
your vision.
As a cost center in the company, they had to justify
their project wholly on expense reductions and
working capital improvements. Even if they believed
that better product availability would boost sales.
They spent an enormous amount of time talking with
the brand general managers and others who would be
affected by the changes they were proposing, at the
same time they were also in the thick of the analysis
and design of the solution.

It was important to break out each component of the

plan into a stand-alone initiative, justified by its own
business case.
They charted their current position against their
number one competitor on each dimension valued by
customers, then extrapolated to show how, depending
on the level of investment, they could overtake that
company or allow the gap to widen.

Getting Focused
One of the earliest successes in the turnaround of Whirlpool's
supply chain was the rollout of a new sales and operations
planning (S&OP) process.
They soon pushed their forecasting capability further by launching
a CPFR pilot. The acronym stands for collaborative planning,
forecasting, and replenishment, with the collaboration happening
across different companies within a supply chain. With CPFR, they
use a Web-based tool to share their forecasts and they collaborate
on the exceptions.
Within 30 days of launch, their forecast
accuracy error was cut in half.
A couple things were absolutely critical to keeping them all on
track: a highly disciplined project management office and stringent
performance metrics.

The job of the project management office was to

ensure the completion of projects on time, on budget,
and on benefit.
In 2002 Whirlpool had historic low inventories and a
sustained high service level. They delivered slightly
more than promised by reducing finished goods
working capital by 10% and improving total cost
productivity by 5.1%.

Engaging Talent
Whirlpool's supply





They developed a supply chain "competency model."

This is essentially an outline of the skills required in a
top-tier organization, the roles in which they should
reside, and how they need to be developed over time.
They created a new banding system. Now people can
be rewarded for increasing their expertise even if they
are not being promoted into supervisory roles.

They also put a heavy emphasis on developing

people's project management skills. It was a sort of
organization's project management capabilities.
To fill out their project management ranks, they
recruited young people from companies with strong
supply chains and from premier operations-oriented
MBA programs.
They assembled a supply chain advisory board and
chartered its members to keep challenging them.
These experts kept them on their toes in a way no
consulting firm could.

Sustaining Momentum
They continued to assign themselves and deliver three
new capabilities per month.
They formulated a supply chain strategy that allows them
to identify the SKUs across all of their trade partners in all
of their channels and to ensure that the replenishment
system for their regional warehouses keeps them in stock.
They also worked on the plan that instead of having one
availability target for all their products, they are
recognized that some products are of greater strategic
importance than others.

Recently, they have been focused on system-tosystem transactions, in which their system talks
directly to a customer's system for purposes of
transmitting orders, exchanging sales data, and even
submitting and paying invoices.
They have also have implemented event-management
technology, which will allow them to be more on top of
the movement of goods through the supply chain. An
event manager provides an alert whenever an action
in the process has taken place.

Whirlpool has much to show for its supply chain
efforts. By the end of 2003, their product availability
had reached over 93%, up from 88.3% in 2001.
The number of days worth of finished goods they were
holding in inventory had dropped from 32.8 to just 26.
They drove freight and warehousing total cost
productivity from 4% to 7.2%.
From 2002 to 2003, they lowered working capital by
almost $100 million and supply chain costs by almost
$20 million.

On the Horizon
They will face greater demands for end-to- end accountability. They are
already responsible for the resale of any returns.
They will be taking an even closer look at the design of the products
themselves. If they can redesign a product make it in a smaller plant,
make it with smaller parts, ship it in smaller pieces - they can
dramatically affect supply chain economics.
They have fierce competition all over the world. They may be a white
goods, big box supplier, but because their customers also buy
electronics and apparel and so on, they are constantly being challenged
by the benchmarks of other.
Technologies continue to evolve, channel power continues to shift, and
the bar is constantly being raised. But the talent in Whirlpool's supply
chain organization will be equal to it all.