In 1994, BSH started with washer assembly in a new factory in a rented production hall. The policy was to make a slow start (just 50 washers per day), and to carefully construct a factory and a group of qualified and dedicated staff. Just 1 year later the decision was made to build a complete factory to serve the Eastern European markets. Production began in 1997.

The Ruble Crisis in 1998 made the Russian economy collapse, and the market there virtually disappeared. BSH decided to refocus on value-for-money markets in Northern Europe, mainly the UK. In 2002, dishwasher production started with the GV600 platform, redesigned for lower costs. Production is now on one line, and a second line is being considered for the future.

Says Plant Manager Hans Höfer, "Not only are labor costs lower here in Poland, but we have a lot more flexibility in production volumes; we can run on the weekends if needed. People are glad to work overtime; they look at the extra money they can make. These aspects, and the general circumstances, make Poland one of the best manufacturing locations in Middle Europe.

"Regarding suppliers, one has to realize that there were no suppliers who would fit into our system," he adds. "So we agreed with our existing suppliers that they would follow us to Poland. Parts are identical, but cheaper. They knew that this was new business, not relocated from other factories. Other than competitors, we do not want new brands. Our existing brands do well, and for us, the costs associated with new brands are too high."

The different build of the Lodz dishwasher is shown here, as the stainless steel tub is mounted on the plastic base. Many European consumers prefer full stainless steel models.

The History

After the "Wende" (which is German for "change"), the business community waited a few years to see how conditions would develop, and around 1993 to 1995 many companies started operations, mainly in Central Europe (Poland, Czech, and Hungary). The Russian market was seen by many as somewhat too adventurous. This turned out to be quite true, as the Ruble Crisis hit Russia in 1998. Huge currency devaluations caused enormous losses, and the markets collapsed almost overnight. However, business in Middle Europe itself was relatively stable, except for the export to Russia, which came to a standstill. Now, the situation in Middle Europe has greatly improved and many manufacturers have moved production to Poland.

Looking back, one has to realize that BSH already was present in Poland before 1998, with both sales offices and manufacturing, and structure and volumes of sales are not to be compared with today.

"BSH started its own companies in Poland and Hungary in 1993, in Czech in 1997, and in Romania in 1999," says Bernhard Horak, commercial manager for Middle Europe. "In Slovenia we have had a factory for small appliances factory since 1993. Yet, BSH is not a newcomer in these markets. Our two main brands had high awareness thanks to our well-established mother companies having been present for years."

Building Business

So where does one start if a totally collapsed communist economy is the starting point? Mr. Horak says, "You have to build a trade structure. All elements of a Western economy must be initiated, including supply chains to the new retailers. Also, your own organization, such as administration and customer service, needs attention. In the beginning, many trade partners were quite unorthodox; everybody was selling everything, whether they were competent or not.

"Creating business in a booming economy is completely different from saving your business in times of crisis. So, after a few downturns, selection takes place. In current Poland, this process is still going on. Sometimes this affects our business, as well. If an important retailer gets in trouble, it is in our interest to give extra support," Mr. Horak continues. "But, you need accurate and independent credit information to back up your decisions. BSH maintains a close relationship with its retail partners. They like to be advised by an experienced partner like BSH, on specific but also on general business subjects. In a mature market like Germany, one is not as close.

"Regarding the other Middle-European countries, Czech benefits from its closeness to Germany and its pre-war industrial tradition," he adds. "Hungary has always been the most advanced; in communist times they were relatively well developed, economically. Markets in Slovakia and Romania are less developed. These markets are even more price-sensitive, and the share of BSH is modest; however, growth is satisfactory."

There is quite a difference between Middle and Eastern Europe (Russia and Ukraine). In the latter countries, toll barriers still exist, and there are many judicial, economic, and general insecurities. "Because so much money was lost in the Ruble Crisis, business in Russia has to be determined carefully," Mr. Horak says. "Everything is carefully weighed. Many business people lost a lot of their private money."

An important aspect of the BSH strategy for Middle Europe is shared initiatives for the five countries. In Western Europe, BSH businesses in each country only deal with the Munich head office, not with neighboring countries. Mr. Horak says, "We combine businesses. If we talk to our product areas and express needs for special products, it works better if we combine requests, and thus have larger batch sizes. Also, some administrative and marketing services are shared, as we do not want fully staffed national offices. The regional offices are located in Warsaw; this is more efficient."

As an example of special products, space-saving front-loader washers with reduced depth are very popular in Middle Europe as they fit into smaller houses.

"Regarding our market position, BSH products are in the mid- and top-market segments," Mr. Horak says. "These segments are relatively small here. Still, it is important for us not to go for the lowest prices and ruin the higher segments; we try to maintain good price levels. You can sometimes try to make a market instead of being a follower. Our European market share is somewhat more than 20 percent, but in Middle Europe, it is only 10 to 12 percent, which is not enough. Remember that Italians (with their vast experience in the value-for-money market) are quite successful here.

"Next to the joint marketing for the Central European countries, we will enhance our presence as a producer: a third factory (dryers) will be opened in 2005, and there is room to enlarge the dishwasher factory," Mr. Horak continues. "It is just too expensive to ship an appliance over from Spain or Turkey, and customers relate to a brand much better if it is locally produced. We are working on further developing the local BSH establishments in the five countries, especially the information systems infrastructure. About 90 percent of production from this plant is for export to Western Europe, with the price-sensitive UK market as largest single customer."

The Dishwasher Factory

The story of dishwasher manufacturing in Lodz is different from the washer factory. Instead of copying an existing design for factory and products, BSH used Lodz to launch a completely new dishwasher concept. Some years ago, the company, the market leader in dishwashers, decided to find an answer to low-cost competition, without sacrificing quality. Then, the target market was thought to be Russia.

The result is the new GV600 platform, which was developed in the main BSH dishwasher factory in Dillingen, Germany, Europe's largest dishwasher plant. It is a new construction, however, derived from the existing platform. The main difference with the appliance is that it does not have a box-shaped tub (four sides and a back) in stainless steel, but has three sides (left, right, top) and back, and the tub is mounted directly on the plastic base.

"It was a bold decision to replace the 'wholly' stainless steel," says Janusz Krzyzowski, head of Dishwasher Manufacturing. "Normally, European customers insist on a stainless steel tub, even in the low-cost segment, and we were the first manufacturer to take this step. American dishwashers, with an all-plastic tub, would never catch on in Europe. The goal was simplifying the product as well as the manufacturing. Normally, there are five steps: pressing (left, right, top, bottom), folding into the box shape, another 3D-pressing after the folding, welding to close the box, and final welding to attach the back. It was recognized that the most expensive step is the 3D-pressing after folding; not only the pressing itself, but also the initial costs of the press with its highly complicated 3D-shape," Mr. Krzyzowski says.

"In the GV600-line, the plastic (polypropylene) base now also is the bottom of the tub, and the tub is simplified: left-right-top-back," he continues. "The process now has three steps: pressing, folding, and back welding. It needs no further explanation that the investments as well as the running costs are significantly lower, without sacrificing building quality, as the plastic bottom is just as good as stainless steel. Still, as most other parts are shared with the original design, there are no quality sacrifices (the same circulation pump is used). Of course, there are differences in functionality and less advanced features, but it is BSH quality."

He says that other changes have been made to the production line. There are no buffers, so failures at each station can block the entire production. This means that there is less independence between workers. They all have to start at exactly the same time. This requires extra attention from the workers.

"Next, the degree of automation is lower as there are fewer robots," Mr. Krzyzowski says. "The design is geared toward low investments and operating costs. Production is more flexible because people love to work overtime. This is important, as in the summer months, sales can go down as much as 40 percent, but from October to December, volumes are about 20-percent above average."

The main press used in the Lodz dishwasher factory is an 800-ton press former that was used in another BSH factory. To lower initial investments, the transfer of the sheet metal parts is not automated. An oven, used to seal the insulation to the tub, is operated manually. Attachment of the dishwasher backpanel is done in two steps: first, the panel is attached by stapling, then the final welding is automated using roller welding.

The first robot in the dishwasher line uses a special method to prepare the base plastic for the kit, needed to fix the tub. Without special measures, the kit will not seal the steel-plastic combination as tight. The robot first "roughens" the plastic, then applies the kit. It took a while to design this part of the process; it was found (among other problems) that small residues of oil, necessary for metal pressing, influenced the adhesive power of the kit. Therefore, a special ultrasound degreasing, cleaning, and drying station was added.

To reduce costs of the testing carousel (especially the rotating water connections), a new solution was found for testing the water circuits. A new three-station test method was developed. Now, fully computerized testing (with water) is performed, with much more objective data, lower investments, and at a faster speed. The machines then go on to an 18-station carousel, using the water from the previous test stations, to test the appliance's heater, but without the need for new water. Therefore, the carousel is much easier to construct and operate.

In final electrical testing, each unit is tested for hipot to find possible electrical leaking, combined with visual testing.

The Washer Factory

The washer factory has been is in operation since 1997, and today produces the mid-price Eurowasher. This platform is also used in BSH factories such as Germany, Spain, and Turkey. The appliance's most distinguishing feature is the plastic tub. According to BSH, the state-of-the-art plastic material (which was developed in the space industry) replaces traditional stainless steel tubs to improve quality and performance.

The moment where the washing machine tub is mounted in the casing. In automotive manufacturing, this is called le mariage.

In metal sheet pressing, just one type of housing is used. One press with four steps performs contour cutting, bending and forming, punching and side bending, and additional double bending.

There are three variants of drums produced for three spin speeds; the maximum speed is 1,400 rpm. The drum production line is supplied by Miramondi. There are two types of bearings and motors, and the thickness of the material varies according to spin speed. Three presses make the drum, the back, and the front shield. The presses are standard, but the process flow and tools are specially made for BSH.

According to Washer Factory Manager Malgorzata Jardzioch, "The first generation of washing machines in Lodz was a design created in the Spanish factory. Now, the second generation is in place, where input from all locations was used. Some new product features were the plastic tub, a larger door opening, a 180-degree opening angle, and A-class efficiency in washing. Compared to other Eurowasher lines, this line is somewhat less automated, which suits this location better and especially enables high flexibility and reduces reaction time.

"Another feature of the factory is the shop-in-shop concept: there are suppliers in the production halls for doors, tubs, and control panels," Ms. Jardzioch continues. "All production is controlled by SAP software. When in operation, each production line has three teams. As there are two lines and two shifts, there are 12 teams. Each team has a coordinator. An aspect of empowerment is that in the future, teams can choose their own coordinators. Workers are also encouraged to take a stand in the design of the workplace, to deliver ideas."

The program is called "Top Idea." "There are special group areas where teams can meet to discuss improvements, and boards where qualification tables and improvement reports are visible. Naturally, results of product audits are also published on these boards," Ms. Jardzioch explains. "To further improve empowerment, a new initiative was launched: meet your plant director. Teams can directly discuss suggestions and opinions with our plant manager, Mr. Höfer. It was interesting to see that workers really had to get used to be frank in the presence of upper management, as that is common in Polish factories. But now people have learned to ask questions that leads to thinking and acting as entrepreneurs."

The Future

So what is next? "We might be setting up a second assembly line for dishwashers, a decision on that is expected in the near future," says Mr. Höfer. "The biggest extension is the dryer factory; construction begins this year. For existing production, an important goal is to minimize factory downtime. For the washer line, we want to reduce buffers in the assembly line. All processes have to be fine-tuned, with the low-tech stations having to adapt to the high-tech ones."