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issue: April 2003 Whirlpool Special Section

Whirlpool Special Section
Whirlpool Corporate Overview

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APPLIANCE traveled to Benton Harbor, MI, U.S., to report on Whirlpool Corporation.

Dave Whitwam, Whirlpool's chairman and CEO
In the late 1980s, Whirlpool Corporation set out on a course of growth that would eventually transform the company into the leading global manufacturer of major home appliances, with operations based in every region of the world. At the time, Dave Whitwam, Whirlpool's chairman and CEO, had recognized the need to look for growth beyond the mature and highly competitive U.S. market. Under Mr. Whitwam's leadership, Whirlpool began a series of acquisitions that would give the company the scale and resources to participate in global markets. In the process, Whirlpool would establish new relationships with millions of customers in countries and cultures far removed from the U.S. market - and the company's roots in rural Benton Harbor, MI, U.S.

Whirlpool's global initiative focused on establishing or expanding its presence in North America, Latin America, Europe, and Asia. In 1989, Whirlpool acquired the appliance business of Philips N.V., which immediately gave the company a solid European operations base. In the Western Hemisphere, Whirlpool expanded its longtime involvement in the Latin America market and established a presence in Mexico as an appliance joint venture partner. By the mid-1990s, Whirlpool had strengthened its position in Latin America and Europe, and was building a solid manufacturing and marketing base in Asia.

Whirlpool Corporation in 2002

2002 Net Sales:

  • U.S. $11 billion
  • $7.3 billion in 2002 in North America
  • $2.2 billion in 2002 in Europe
  • $1.27 billion in 2002 in Latin America
  • $391 million in 2002 in Asia

Position: 14 countries, 4 continents, and 170+ global markets

Employees: 68,000 worldwide

Regional market positions:

  • Number 1 in North America
  • Number 1 in Latin America
  • Number 3 in Western and Central Europe
  • Strong position for growth in Asia
  • Number 1 in India

Mr. Whitwam knew that the company's new scale, or global platform, that emerged from the acquisitions offered a significant competitive advantage - but only if the individual operations and resources were working in concert with each other. "If you think about putting together a global leadership position, the challenge is not in buying the individual businesses; it's the hard work required to integrate all the businesses together in a meaningful way that creates the leverage and the advantages that you set out to achieve," says Mr. Whitwam.

Some of the advantages were easy to see. By linking the regional organizations through Whirlpool's common systems and global processes, the company could speed product development, make purchasing increasingly more efficient and cost-effective, and improve manufacturing utilization through the use of common platforms and cross regional exports.

Given the competitive dynamics of the global industry, leveraging the advantages would become a critical objective for the company in the mid to late 1990s. "We concluded that we needed to be in the position to lead change from an industry standpoint," Mr. Whitwam says. "So, we initiated a re-dimensioning, a re-focusing of the company. We went through a number of dramatic changes, including restructuring and reorganizing the company into business units and creating a more responsive environment within which to work and manage, one that could respond to the changes we saw were inevitable."

Whirlpool has had success in refocusing a number of its key functions to the global approach. Procurement was the first function to go global, followed by technology and product development. The two functions shared much in common, and have already led to significant savings from efficiencies. More important, the global focus has helped reduce the number of regional manufacturing platforms worldwide. The work of these two functions, combined with the company's manufacturing footprints in each region, has led to the development of truly global platforms - products that share common parts and technologies, but offer unique and innovative features and designs that appeal to regional consumer preferences.

Work continues on the manufacturing side of the global platform as well. Whirlpool is in the final stages of its global restructuring initiative that was announced in December 2000. Since that time, the company has rationalized manufacturing in each region in ways that have reduced costs and aligned the resources to the company's strategies for growth. "We identified the activities and finalized the charges of our most significant and important restructuring effort in the company's history," adds Mr. Whitwam. "When fully implemented, the restructuring will reduce ongoing structural costs by more than U.S. $200 million a year. Changes to date have already strengthened our global platform and our regional manufacturing positions."

Acquisitions that complement the company's global platform remain an important element of Whirlpool's long-term growth strategy. Last year, for instance, Whirlpool acquired leading appliance businesses in Mexico and Poland. Vitromatic S.A. de C.V., now Whirlpool Mexico, is the country's second largest appliance maker and distributor.

Whirlpool Mexico fits well within the company's North American operation, and offers direct access to Mexico's fast-growing domestic market. The Supermatic and Acros brands, combined with newly acquired distribution channels, create additional export opportunities for Whirlpool. The company also acquired Polar S.A., a leading home appliance maker based in Poland, which complements Whirlpool's European manufacturing platform, expands its distribution network in the region, and provides additional export opportunities for Whirlpool Europe.

Procurement's Prerequisite

Jeff Fettig, president and COO

During the mid-1990s, procurement became the first function to be structured as a truly global organization. According to Mark Brown, senior vice president of Global Strategic Sourcing, managing Whirlpool's procurement as a global function makes sense.

"Because of our scale, we are a very attractive customer for suppliers," says Mr. Brown. "A partnership with us gives suppliers the opportunity to sell globally, but it also gives them efficiencies within their operations. They don't have to design for different places in the world. They can come at us as one supplier to serve all of our global needs. We think that gives us access to their best technology and to all of their best people globally. We can obtain savings as a global player, as opposed to a company that has four separate businesses that come at a supplier in four different ways."

Mr. Brown notes that the benefits of procurement are so important to Whirlpool that it is the first process to get serious attention following every acquisition. "Each time we make an acquisition, we begin leveraging our global platform again in terms of procurement." The integration process, which is conducted by Mr. Brown and his team, focuses on changes that need to be made based on how the new business operates. The success of the integration depends on people and training. "We work on installing our global systems and training the key personnel to think in Whirlpool terms," says Mr. Brown.

Whirlpool's global procurement approach complements the global development process. "We have purposely placed procurement within the Corporate Technology Organization for two reasons," says Mike Thieneman, executive vice president and chief technology officer. "First, to marry procurement with technology so we can obtain value at the front end of design; and then to operate as a global unit - to drive global design from region to region, category to category, commodity to commodity."

Product Development for Global Markets

"Our global product development structure and process allow us to rapidly migrate innovative consumer solutions from one part of the world to another," says Jeff Fettig, Whirlpool's president and COO. "For example, our operations in Brazil manufacture refrigerators with innovative features and designs that appeal to consumers worldwide," says Mr. Fettig. "In 2002, the region exported these popular refrigerators to Europe. Because of the global product development process, Whirlpool India was also able to leverage the Brazilian platform and quickly ramp up production. As a result of the successful launch, Whirlpool India now claims the number 1 refrigeration position in the country."

"Before the globalization of product development took place," explains Mr. Thieneman, "there were multiple platforms in each product category, little feature leverage, multiple technologies with wide performance variations, significant technical resources to keep all of these platforms going, and long and costly product development. Today we manage 60 percent of our commodities globally, and we have fewer platforms. Global product development cuts our engineering costs considerably and, in the end, the consumer is the winner. They get better performance and more features that are relevant to who they are."

Mark Brown, senior vice president of Global Strategic Sourcing

"Fewer platforms also give us the ability to design global products with regional features, such as energy-efficient appliances," says Hank Marcy, vice president of Corporate Technology and Engineering Development. "It's easy to design and build from global platforms even when regions have different energy efficiency requirements. For instance, in Europe, you know you need a more efficient product, so starting with the same global cabinet and wall thickness, you can obtain more energy efficiency - and meet European energy standards - by simply adding a different compressor."

"Our goal in global product development is to evolve quickly from regional platforms to a global platform, while ensuring that we meet the unique needs of consumers in all the diverse markets we serve," adds Mr. Fettig. "Through a transfer of technology and knowledge around the globe - the product reaches the marketplace faster."

A Platform for Continuous Improvement

While Mr. Whitwam and his team have spent more than a decade building the company's global entity, he points out that Whirlpool still is only 50-60 percent complete. From a productivity standpoint, the global platform gives Whirlpool the capability to drive key operational initiatives for maximum impact.

This includes the company's customized Six Sigma, lean manufacturing methodology, known as Operational Excellence, which ensures that it consistently improves quality levels, even as costs are reduced and cycle times are shortened.

Mr. Fettig adds, "We have systematically gone through our business and said that we should perform every activity - at every level - with a focus on the value that we deliver to our customers. In some cases, repositioning, realigning, and leveraging the manufacturing footprints can help. For example, we produce virtually all of our microwave ovens for the world in one location: China. We are trying to take what we learn around the world in terms of best practices, innovation, and new ideas and quickly transfer that learning. There is no one model that works. The test for us is if we can bring a better benefit to customers."

Mr. Whitwam is quick to emphasize the importance of customers to the company's strategic plans. "Our strategy is customer loyalty, and the global platform strategy enables us to accomplish our goal," he says. "We recognize that consumers are different around the world. They have different tastes, cultures, and usage patterns with our products. We want to understand better than anyone else in this industry what will satisfy a customer."

Building Unmatched Customer Loyalty

Nancy Snyder, vice president of Strategic Competency Creation

To sustain the growth of its global business, Whirlpool has embarked upon a strategic path to build unmatched levels of customer loyalty. "Whirlpool's growth strategy - 'Building unmatched customer loyalty' - is unlike any other within the appliance industry," says Mr. Whitwam. "The strategy focuses on winning the hearts and minds of our customers. We know that loyal customers are recommending our brands to others; that they are requesting and repurchasing our brands over those of competitors; and that they are beginning to upgrade their appliances because they trust the innovation and value that our brands deliver."

Nancy Snyder, vice president of Strategic Competency Creation, says that Whirlpool operations are engaging employees in initiatives to better understand the perspective of customers by becoming a customer that shops and interacts with the company's brands and products. Ms. Snyder says that Whirlpool's Latin America operation was the first to implement such an effort to help employees within the region become knowledgeable advocates of the company's brands. Management implemented an employee purchase program to encourage its employees to purchase and use Brastemp and Consul brand products. The program also provided opportunities for employees to ride along during appliance deliveries and visit retail outlets to experience the brands through the eyes of a customer.

Whirlpool's Global Brands

By focusing on consumer needs, Whirlpool has been rewarded with strong consumer acceptance of its brands worldwide. Whirlpool's portfolio of brands ranges from global brands to regional and country-specific brands of appliances.

In North America, key brands include Whirlpool, KitchenAid, Roper by Whirlpool Corporation, and Estate. Acquired with the company's 2002 purchase of Vitromatic S.A., brands Acros and Supermatic are leading names in Mexico's domestic market. In addition, Whirlpool is a major supplier for the Sears, Roebuck and Co. Kenmore brand. In Europe, the company's key brands are Whirlpool and Bauknecht. Polar, the latest addition to Europe's portfolio, is the leading brand in Poland. In Latin America, the brands include Brastemp and Consul. Whirlpool's Latin American operations include Embraco, the world's leading compressor manufacturer. In Asia, Whirlpool is the company's primary brand and the number 1 refrigerator and washer manufacturer in India.

Each of the company's brands is involved in ongoing innovation efforts designed to build customer loyalty by delivering products and services that consumers value and that cannot be easily duplicated by competitors.

Much of the success of Whirlpool's brands and innovations is based on the ability of its regional operations to execute the company's global value-added trade and distribution strategies. In North America, for example, Whirlpool holds the number 1 appliance position with the top national appliance retailers and buying groups. Whirlpool has relationships with trade partners that have trained salespeople who can effectively demonstrate that value of Whirlpool's product innovation to customers. Whirlpool believes this type of value-added format is a winning formula for Whirlpool and its trade partners.

Mike Thieneman, executive vice president and CTO

Another key aspect of customer loyalty involves the experiences that touch customers before, during and long after the initial purchase. Each of Whirlpool's brands is putting in place a complete set of experiences - such as brand advertising, the in-store purchase, call center interactions, and ongoing customer communications - that will help forge lifelong relationships with our customers.

Innovations Drive Customer Loyalty

In addition to the company's global platform and brands, innovation is another key element of Whirlpool's strategy to build unmatched customer loyalty. The company's innovation effort began in 1999 as an effort to help employees think of customer-relevant solutions that go beyond the traditional view of the "white box" home appliance. The idea was to capture the imagination of employees and customers through a formal process that helped generated truly unique "out-of-the-box" products and services.

Initially, says Ms. Snyder, Whirlpool lacked the innovation skills and capabilities needed to advance the strategy, and so turned to outside consultants to help develop the process. "Ultimately, we found a group called Strategos that offered us a set of tools that were accessible to anyone within the organization and that created an infrastructure within which to innovate," she says.

But how is such a task communicated to Whirlpool's employees? "We started out by identifying 75 people around the world, 25 from each of our major regions to work full-time on learning these tools," Ms. Snyder says. "We also instituted KM, a knowledge management employee intranet site, for people around the world to connect virtually. We also set up an innovation database for anyone that was working on an innovation project to get help, resources, and find answers to questions. The KM was a way for us to propel innovation," she says.

Since the initial months of the effort, Whirlpool employees worldwide have participated in the process and helped develop and introduce more innovations than at any other time in the company's history. A sampling of the company's new innovation in 2002 includes: the Whirlpool¨ Polaraª range, the world's first refrigerated range; the KitchenAid brand brivaª in-sink dishwasher; the Gladiatorª GarageWorks line of organizing products and appliances for the garage; and the Whirlpool¨ Family Studio, a suite of cabinetry containing integrated fabric care innovations that transform the traditional laundry room into a functional family space.

"Because innovation is such an important driver of customer loyalty, we are expanding our efforts to transfer innovation capabilities and skills to employees everywhere," says Mr. Whitwam. "Approximately 600 innovation mentors and consultants assisted and trained employees who were involved in development projects last year, and that number will grow as our innovation efforts continue in 2003."

Innovation is now a regular part of the corporate culture at Whirlpool, and each employee is expected to participate. Consumers are much more involved in product development than ever before, from the earliest discussion stages through introduction. Interviews are conducted in consumer's homes, and prototypes are tested there as well.

Mr. Marcy notes that a culture in which innovation is fostered and welcomed is prevalent within his group. "We spend a lot of time working with consumers," he says. "We get out into people's homes, into where they buy the products, and get to consumers at the front end of a product's technology string to understand consumer's wants and needs. We get our ideas out into people's home very early in the process rather than waiting until all investment decisions have been made. We've built concept homes and rooms and have showed them to consumers to gauge consumer reaction.

"As we began to go down this innovation path, all sorts of things started to open up to us," Mr. Marcy explains. "When we go through our innovation process now, we no longer are looking to improve the traditional white box with bells and whistles. Instead, we're looking for consumer solutions."

Mr. Thieneman adds, "We tried to create migration paths, or paths of products, ideas, and services that get us from where we're at today up into the dream space. It's from those migration paths that we get to formulate; we take ideas into the concept stage and some even into prototypes."

Diverse Customers, Employees, and Ideas

According to Mr. Whitwam, much of Whirlpool's customer loyalty and innovation strategies are built upon the same foundation that supports the company's approach to diversity and inclusion. "Understanding and embracing differences and ideas of customers and coworkers are essential first steps in our innovation process," says Mr. Whitwam. "Diversity within Whirlpool creates the originality and relevancy of ideas needed to solve unique problems. And because diverse employees reflect our global customer base, Whirlpool gains a keen understanding of our customers' needs."

Working with the Global Environment

As a leader in the global home appliance industry, Whirlpool recognizes its role in protecting the environment by producing products that are more energy and water efficient.

As such, the company has established a set of environmental goals for its operations throughout the world. According to Steve Willis, director of Global Environmental Health and Safety, "Each of our plants tends to have the same kinds of processes and uses the same types of chemicals, so our environmental protection goal is the same no matter where you go."

In the U.S., for example, the Occupational Safety and Health Administration (OSHA) laws help to protect employees against numerous things that could harm them in the workplace. Not every country in which Whirlpool has a manufacturing facility has OSHA laws, but Whirlpool's global standards establish OSHA-type rules for each country. A Corporate Environment Health & Safety Council formulates, updates, and improves the policy and the mechanisms and processes that enable compliance.

By making their appliances energy and water efficient, Whirlpool also makes a significant contribution to the preservation of the environment. Whirlpool's hard efforts have paid off. In the U.S., Whirlpool has been named an ENERGY STAR¨ Partner of the Year for four consecutive years by the Environmental Protection Agency (EPA) and Department of Energy for its commitment to making and selling energy-efficient products that save consumers money on energy bills and reduce greenhouse gas emissions. In 2002, the award recognized Whirlpool in particular for its ENERGY STAR¨ qualified Duetª front-loading washer, which uses 68-percent less water and 67-percent less electricity than conventional washers.

Whirlpool's Future

With its global strategy underway, Whirlpool continues to strengthen its position in the market and meet its most important objective: delivering on its brand promise to consumers.

Mr. Whitwam notes, "This is an industry that we said over time would become a full-grown global industry. There is lots of evidence that has happened. A number of major players have elected to participate in the same global markets that we are in. If we look out 5 years from now, I think this is going to be an industry that will continue to consolidate. I think there will be a set of competitors who succeed because consumers say they want it to succeed. Consumers, wherever they are in the world today, have more choices, more power, and more mobility to determine the success or failure of anyone who manufacturers products or services for them. The companies that will win are those who understand the consumer and deliver experiences and value that exceed their expectations."

Adds Mr. Fettig: "Our strategy is completely aligned to deliver solutions to consumers that they truly value. Though price is an important part of the equation, it is not the entire equation. Our goals are straightforward: to grow the strength of our brands in ways that build unmatched levels of customer loyalty."

"We'll grow our brands by doing well everything in a customer's experience with us." - Dave Whitwam, chairman and CEO

APPLIANCE Magazine Whirlpool Special Section - April 2003


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