Strategic Sourcing at Whirlpool China Case Study Analysis Final [PDF]

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Strategic Sourcing at Whirlpool China Case Study

Analysis  Whirlpool’s Global Sourcing Strategy in China had many advantages as well as disadvantages. As the case explains, China had become one of the world’s largest household appliance makers, and relocation of Whirlpool’s Asian HQ to Shanghai helped the company’s products gain acceptance within the market. Furthermore, setting up an international procurement office in Shanghai helped to eliminate various factors that could make global sourcing a difficult process. Whirlpools Shanghai HQ decreased transportation delays and cultural and language differences and supported the company’s own manufacturing operations in Asia. Other advantages to global sourcing in China include: reducing capital investments, gaining market share, focusing on core competencies, and increasing flexibility in production. Although China may provide a cost advantage in regards to raw materials, disadvantages occurred in areas such as quality, reliability, a lack of capable service providers, and inadequacies in transportation and IT infrastructures.  When it came to potential suppliers, Whirlpool set their standards high. In order to be considered a supplier of Whirlpool, quality requirements set by the Whirlpool Supplier Quality System had to be met. Most suppliers in China, found difficulty in reaching the minimum required score of 60/100 during the first round of audits. Whirlpool used the Sourcing Strategy Development process to find adequate suppliers of DC motors. The SSD process included four steps: 1. Internal Analysis 2. External Analysis 3. Strategy Development 4. Implementation Once the commodity is defined and responsibilities and resources are allocated, an internal analysis (Step 1) identifies and prioritizes process-partner requirements, then evaluates and reviews the performance of the existing

supply base. Lastly, Step 1 of the SSD should recognize possible switching costs. Once the internal need is identified, Step 2 analyzes the supplier industry and competitors and evaluates performance and strategies of the competition. Next, a sourcing strategy is developed during Step 3 of the SSD. During this phase, Whirlpool analyzes the competitiveness of the industry, formulates strategic options, and analyzes their financial impact. By the end of Step 3, preliminary negotiations could be carried out and suitable suppliers would be selected. Finally, the sourcing strategy developed in the previous stage is put into play in Step 4. The goal of this step is to give necessary feedback to the chosen suppliers, and to settle final negotiations. If all the steps achieve the goals then it is good but if Not then all the steps need to revise.  With a single sourcing model, the supplier is responsible for all the activities (i:e warehousing, storage, Dock, Delivery etc..) So it is very expensive process as suppliers charge premium prices for taking all the risks and getting work done. Whirlpool has very strict and aggressive about the payments, so the suppliers were not agreed yet to take all the risks. Multiple sourcing, on the other hand, is when a company selects more than one supplier to provide processes or services. It is the good process the main benefit of this process is the Cost Savings which Whirlpool emphasis on. It also gives the benefit of seeking good quality. In this model company could have competitive prices and a good quality. But there is the disadvantage too, the sourcing to many suppliers means having more companies and monitor all, which is quite difficult. We believe that Whirlpool should choose a multiple sourcing model. Whirlpool holds itself to a high standard quality, and as mentioned in the case, it is important that Whirlpool “concentrate on cost reduction, productivity initiatives and innovation” due to stiff competition. In this situation Multiple sourcing is the best option to Whirlpool as it will provide good quality and Cost saving. Another advantage whirlpool could have is the do not need to train single supplier , which could be cost increasing and time consuming process.