Last month, I wrote a piece on explaining the value of logistics to the CEO. Earlier this week, as I was catching up on my reading, I came across this quote from Jeff Fettig, Chairman and Chief Executive of Whirlpool, in a Wall Street Journal article by Joe Barrett: “[Logistics] and investment in new product innovation are the only areas that we’re spending the same on as we did four years ago when we had record demand.”
Mr. Fettig is not the weakest link in his company’s supply chain.
The WSJ article highlights how, starting in 2005, Whirlpool undertook a four-year, $600 million program to makeover its distribution network. The company’s acquisition of Maytag in 2006 further energized the effort. In a nutshell, as part of the overall project, Whirlpool replaced 41 outdated warehouses with 10 large regional distribution centers. The DCs were laid out in quadrants to minimize travel distance and slotting was optimized (e.g., fast-moving goods were placed closer to the loading docks). The net result of the network redesign: Whirlpool reduced its annual inventory by about $250 million per year and cut its delivery lead times from 5-10 days to 48-72 hours.
Brian Hancock, Whirlpool’s vice president of supply chain, presented at Manhattan Associates’ Momentum User Conference back in May (Manhattan is an ARC client and Logistics Viewpoints sponsor). Brian shared some of the results mentioned above in his presentation, and he also emphasized the role IT has played in enabling this transformation. Here is my favorite quote from his talk, which is also captured in the informative video below produced by Manhattan Associates (Whirlpool is one of its customers):
“The relationship between the supply chain organization and the IT organization is essential. I would also throw the financial organization in there as well. I look forward to the day when just-in-time supply, just-in-time inventory, meets just-in-time cash flow. That requires perfect information. How do I make sure that we have visibility all the way from the supplier to the retailer and that we can use that information versus using our capital to have to buy extra goods or hold extra work-in-progress inventory.”
Here are my key takeaways from Whirlpool’s story:
- Smart upstream design and engineering (e.g., distribution/transportation network design, warehouse layout and slotting optimization) leads to large downstream savings (e.g., reduced inventory and transportation costs, increased productivity).
- Obtaining “perfect information” remains a key objective for companies. It’s what drives continued investment, by both software vendors and their customers, in visibility, business intelligence, and analytics solutions. Unfortunately, as I’ve written many times before (see here and here), poor data quality remains the Achilles’ heel of supply chain management.
- Collaboration and alignment between supply chain, IT, and finance can lead to great results. Having a CEO that “gets it” also helps.
- Investing in supply chain and logistics people, processes, and technologies is good for business, even (or especially) in these economic times.
