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Leading a Supply Chain Turnaround
Introduction
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.
Issue
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.
Continue
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
followed.
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.
Engaging Talent
Whirlpool's supply
renaissance.
chain
turnaround
is
talent
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.
Outcomes
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.
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