After the company announced plans to buy Maytag, Whirlpool's supply chain team faced the daunting challenge of combining the supply chains of two of the world's largest appliance makers while conducting business as usual.
David Maloney has been a journalist for more than 35 years and is currently the group editorial director for DC Velocity and Supply Chain Quarterly magazines. In this role, he is responsible for the editorial content of both brands of Agile Business Media. Dave joined DC Velocity in April of 2004. Prior to that, he was a senior editor for Modern Materials Handling magazine. Dave also has extensive experience as a broadcast journalist. Before writing for supply chain publications, he was a journalist, television producer and director in Pittsburgh. Dave combines a background of reporting on logistics with his video production experience to bring new opportunities to DC Velocity readers, including web videos highlighting top distribution and logistics facilities, webcasts and other cross-media projects. He continues to live and work in the Pittsburgh area.
When Rich Gorbett first learned of his company's plans to buy Maytag, he felt a rush of mixed emotions. Gorbett, the senior manager of supply chain operations at Whirlpool Corp., recalls being both excited and a bit intimidated by the magnitude of the challenges ahead. "I knew it was a once-in-a-career type of event—integrating the supply chains of two of the world's largest appliance manufacturers," he says.
In some ways, Gorbett was understating the challenges that he and his team faced. At the time that Whirlpool announced its intent to purchase Maytag in July 2005, the two companies had a combined total of 18 factories, 16 regional distribution centers, and 155 local distribution points. Each had to be evaluated to see how it would fit into a merged operation. At the same time, it had to be business as usual while all of the work was being completed.
"We had to make sure appliances were delivered each day and take on the major challenges of the merger as a second job," Gorbett recalls.
He and his planning team were not the only ones with concerns about how the merger would play out. Everyone involved in the supply chain, from trading partners and suppliers down to workers in the factories and DCs, wondered how the combination of the two behemoths would affect them. Would duplicate functions cause elimination of some jobs? Exactly how would a combined company function?
Among the first things Whirlpool did once the deal became public was to send its executives out into the field to calm fears and promote confidence among employees and suppliers. They shared their vision of how the newly combined company would operate and described the efficiencies and cost reductions that would result. To keep communications open throughout the acquisition process,Whirlpool also made updated information about the merger available through a special Web site.
From a supply chain perspective, Whirlpool's managers saw the merger as an opportunity to re-think their operations. It was as if they had been given a clean sheet of paper and had the support of management to redefine how an optimal appliance supply chain should look. "Anytime you undertake anything this large, you have the opportunity to evaluate how you do business," says Gorbett.
Jump start
From the outset, the supply chain planning team knew it had to be ready to spring into action as soon as the deal closed.
"We had the period between the announcement and the close of the deal where our network engineering began planning how we would consolidate," recalls Dan Iddings, Whirlpool's senior manager, supply chain program management.
This gave the transition and planning team about an eight-month window for strategic planning. All together, the team's approximately 200 members worked on 128 separate initiatives and identified 4,477 individual milestones to attain, 1,400 of which had a financial impact.
One of the first steps was to determine what inventory was on hand in both operations so that Whirlpool could determine what to do with it. The company acquired ILOG's LogicNet Plus suite of network design and planning software so it would have a tool in place that could import and crunch data once the deal was finalized (regulations did not permit the managers to have access to Maytag-specific data until the acquisition closed).
"When the deal was completed on March 31, 2006, we were in the starting blocks ready to go. We had our tools in place and people in place, and we had our own data. We were then prepared to bring in the Maytag data," says Iddings.
Another early initiative was to provide the real estate department with information about the location and size of each existing facility. This was completed by the end of April and allowed for modeling of an optimized distribution network. The real estate department then began the work of disposing of facilities that were slated to close and acquiring new facilities in areas where it fit the network model. "Their job was to find the most efficient facility that would get us as close as possible to our network optimization," says Iddings.
Big-time savings
The overall goal for any acquisition is to gain competitive advantage. Whirlpool's acquisition of Maytag was no exception. Management's main objective was to create a stronger, leaner company from the two units. There was obvious duplication in nearly every area of the two companies. Not only did they have similar product lines, but they also had the same basic distribution configuration—each had manufacturing operations that shipped from factory distribution centers to regional DCs, then on to local DCs. Streamlining these operations and eliminating redundancy could offer the kind of savings that made the merger very attractive.
Senior management had committed to the investment community the huge goal of $400 million in savings over the first three years, 2006 to 2008.
"That would be achieved from savings in procurement, manufacturing, and logistics," says Gorbett. "We targeted $40 million of savings in freight and warehousing costs alone for each of those years. That aggressive target galvanized everyone into action, as we organized and immediately began to identify where we could achieve those savings."
A huge chunk of the savings would come from shuttering duplicate facilities. At the time of the merger, there were 18 distribution centers connected to manufacturing operations. The plan, which is two-thirds of the way through implementation, calls for this to be reduced to 15 factory DCs. Sixteen regional DCs are also in the process of being consolidated into 10 larger, more efficient buildings. And 155 local DCs, primarily cross-docking facilities serving cities and towns, have been reduced to 106 buildings. Overall, nearly a third of the pre-merger buildings are either being closed or relocated.
In addition to the facility closings, some changes had to be made to equipment operating within each of these buildings. For example, Whirlpool's lift trucks were equipped with appliance clamps, but Maytag did not use clamps. There was also a difference in the way products were "cartoned," so there has been a move to common packaging for both brands.
But the most significant changes went well beyond equipment: Operations at the distribution centers themselves are being radically changed. Nowhere is this more obvious than at the 10 facilities that will serve as regional distribution centers. These will be significantly bigger than their predecessors and feature advanced concepts to optimize distribution.
Half of these regional DCs are newly constructed and represent a total of 10.23 million square feet of new distribution space. Five are designated as "full mix" DCs that will handle the company's full product line. The first of these, a facility in Perris, Calif., is now open. The others, targeted to come online late this year and next year, are located in Atlanta; Fort Worth, Texas; Columbus, Ohio; and Seattle.
We'll always have Perris
The Perris facility is a good example of how things have changed at Whirlpool. For one thing, the building measures a whopping 1.8 million square feet. Whirlpool's largest DC prior to the merger was less than half that size. Most products are floor stacked in bulk areas, which provides flexibility in handling a range of product lines and sizes.
Perris is also what the company calls a "Hi-Lo" stocking facility—one that handles both high- and low-velocity products. Eventually, each of the fullmix DCs will handle both fast- and slow-movers, while the remaining five DCs will stock only fast-moving stock-keeping units (SKUs). Though it might strike some as unusual, that stocking strategy makes sense for Whirlpool, which experiences high demand for a fraction of its products: A mere 2 percent of its SKUs account for 40 percent of its overall shipments, and just 11 percent of its total SKUs account for 80 percent of its shipments. Orders for highvelocity items can be turned within 24 hours. Slower movers must be transferred from a Hi-Lo facility to the nearest regional DC before shipment. These orders can be turned within 48 hours.
The Perris DC is designed so that fastermoving appliances are placed close to the docks. Many of these SKUs are designated for picking in "full clamp quantities," which means that a lift truck equipped with a large clamp can pick up several of them at a time. Less-than-full-clamp SKUs go to an active zone, where they are picked individually. The design cuts down on travel and allows the fast movers to get out the door quickly.
In addition, the Perris facility uses the "task interleaving" approach to work assignments— a technique that will be adopted in the other new buildings as they come online. In the old facilities, a lift-truck operator would be assigned the task of unloading a trailer. He would work on that one assignment until finished, but that meant that on return trips to the trailer, his fork would be empty, wasting time and effort. Now with interleaving, the driver is dynamically assigned to the highest-priority task, such as performing a pick close to where he made his last putaway. After completing the pick, he may be directed to return to unloading duties, but not necessarily at the same trailer where he started out. Interleaving keeps drivers busy at all times and eliminates travel with empty loads.
All of these new initiatives have been made possible by the installation of new warehouse management systems from Manhattan Associates. The new systems were required to handle the volumes and complexities of the bigger DCs, and have resulted in significant cost savings and productivity gains. The software directs workers in making fewer touches and taking more efficient routes. It is being phased in system-wide to the other regional DCs and the factory DCs so that there will be one process across the entire distribution network. The same team that has managed the merging of the supply chains is also handling the multi-year WMS implementation.
In addition, the company is taking a "green" approach where it can. Over 700 existing propane lift trucks are being replaced with electric vehicles. Energy-efficient lighting systems with sensors to turn them on and off are being installed to save up to 50 percent on energy usage. Skylights in the new buildings also reduce the need for electrical lighting.
On track
The new facilities, software, and process designs have already allowed Whirlpool to achieve a 15- to 20-percent improvement in labor productivity. And because the company is only two-thirds of the way through the implementation process, managers expect to see further productivity gains. "The savings are tracking quite nicely against our estimates, which bodes well for the future," says Gorbett.
The company has also seen improvements in transportation efficiency. The higher volumes have enabled the company to move more of its products in full truckloads. This allows better utilization of its local distribution facilities, which function primarily as cross-docking operations. The greater volumes have also given Whirlpool more leverage in negotiating transportation rates.
"Our buying power has been enhanced with our transportation providers," notes Iddings. "We are now a major player with the volume bringing economy of scale in moving products from one geography to another."
Those gains, along with greater efficiencies in the warehouse operations, have added up quickly. While Whirlpool had targeted $40 million of savings in freight and warehousing costs annually, the team has actually achieved savings of $66 million this year.
It has been an interesting two years at Whirlpool, to say the least. "Just the sheer magnitude of it has been a challenge— going into 1.5 million-square-foot buildings, the change management involved, the need to communicate with our trading partners, and the integration of a new warehouse management system," says Iddings.
"Each of those things alone could be a major initiative," Gorbett adds, "but we have done it all at once. That required our team to work in concert."
In working through a project of this scale, the team has gained valuable experience in understanding exactly what takes place in each building and how to make incremental improvements that can have lasting effects.
"There are process areas we would never have cracked before had it not been for evaluating everything we do. We are more confident in our ability to handle change than we were a couple of years ago," Gorbett concludes. "After we've come through this success, we can handle anything now."
Congestion on U.S. highways is costing the trucking industry big, according to research from the American Transportation Research Institute (ATRI), released today.
The group found that traffic congestion on U.S. highways added $108.8 billion in costs to the trucking industry in 2022, a record high. The information comes from ATRI’s Cost of Congestion study, which is part of the organization’s ongoing highway performance measurement research.
Total hours of congestion fell slightly compared to 2021 due to softening freight market conditions, but the cost of operating a truck increased at a much higher rate, according to the research. As a result, the overall cost of congestion increased by 15% year-over-year—a level equivalent to more than 430,000 commercial truck drivers sitting idle for one work year and an average cost of $7,588 for every registered combination truck.
The analysis also identified metropolitan delays and related impacts, showing that the top 10 most-congested states each experienced added costs of more than $8 billion. That list was led by Texas, at $9.17 billion in added costs; California, at $8.77 billion; and Florida, $8.44 billion. Rounding out the top 10 list were New York, Georgia, New Jersey, Illinois, Pennsylvania, Louisiana, and Tennessee. Combined, the top 10 states account for more than half of the trucking industry’s congestion costs nationwide—52%, according to the research.
The metro areas with the highest congestion costs include New York City, $6.68 billion; Miami, $3.2 billion; and Chicago, $3.14 billion.
ATRI’s analysis also found that the trucking industry wasted more than 6.4 billion gallons of diesel fuel in 2022 due to congestion, resulting in additional fuel costs of $32.1 billion.
ATRI used a combination of data sources, including its truck GPS database and Operational Costs study benchmarks, to calculate the impacts of trucking delays on major U.S. roadways.
There’s a photo from 1971 that John Kent, professor of supply chain management at the University of Arkansas, likes to show. It’s of a shaggy-haired 18-year-old named Glenn Cowan grinning at three-time world table tennis champion Zhuang Zedong, while holding a silk tapestry Zhuang had just given him. Cowan was a member of the U.S. table tennis team who participated in the 1971 World Table Tennis Championships in Nagoya, Japan. Story has it that one morning, he overslept and missed his bus to the tournament and had to hitch a ride with the Chinese national team and met and connected with Zhuang.
Cowan and Zhuang’s interaction led to an invitation for the U.S. team to visit China. At the time, the two countries were just beginning to emerge from a 20-year period of decidedly frosty relations, strict travel bans, and trade restrictions. The highly publicized trip signaled a willingness on both sides to renew relations and launched the term “pingpong diplomacy.”
Kent, who is a senior fellow at the George H. W. Bush Foundation for U.S.-China Relations, believes the photograph is a good reminder that some 50-odd years ago, the economies of the United States and China were not as tightly interwoven as they are today. At the time, the Nixon administration was looking to form closer political and economic ties between the two countries in hopes of reducing chances of future conflict (and to weaken alliances among Communist countries).
The signals coming out of Washington and Beijing are now, of course, much different than they were in the early 1970s. Instead of advocating for better relations, political rhetoric focuses on the need for the U.S. to “decouple” from China. Both Republicans and Democrats have warned that the U.S. economy is too dependent on goods manufactured in China. They see this dependency as a threat to economic strength, American jobs, supply chain resiliency, and national security.
Supply chain professionals, however, know that extricating ourselves from our reliance on Chinese manufacturing is easier said than done. Many pundits push for a “China + 1” strategy, where companies diversify their manufacturing and sourcing options beyond China. But in reality, that “plus one” is often a Chinese company operating in a different country or a non-Chinese manufacturer that is still heavily dependent on material or subcomponents made in China.
This is the problem when supply chain decisions are made on a global scale without input from supply chain professionals. In an article in the Arkansas Democrat-Gazette, Kent argues that, “The discussions on supply chains mainly take place between government officials who typically bring many other competing issues and agendas to the table. Corporate entities—the individuals and companies directly impacted by supply chains—tend to be under-represented in the conversation.”
Kent is a proponent of what he calls “supply chain diplomacy,” where experts from academia and industry from the U.S. and China work collaboratively to create better, more efficient global supply chains. Take, for example, the “Peace Beans” project that Kent is involved with. This project, jointly formed by Zhejiang University and the Bush China Foundation, proposes balancing supply chains by exporting soybeans from Arkansas to tofu producers in China’s Yunnan province, and, in return, importing coffee beans grown in Yunnan to coffee roasters in Arkansas. Kent believes the operation could even use the same transportation equipment.
The benefits of working collaboratively—instead of continuing to build friction in the supply chain through tariffs and adversarial relationships—are numerous, according to Kent and his colleagues. They believe it would be much better if the two major world economies worked together on issues like global inflation, climate change, and artificial intelligence.
And such relations could play a significant role in strengthening world peace, particularly in light of ongoing tensions over Taiwan. Because, as Kent writes, “The 19th-century idea that ‘When goods don’t cross borders, soldiers will’ is as true today as ever. Perhaps more so.”
Hyster-Yale Materials Handling today announced its plans to fulfill the domestic manufacturing requirements of the Build America, Buy America (BABA) Act for certain portions of its lineup of forklift trucks and container handling equipment.
That means the Greenville, North Carolina-based company now plans to expand its existing American manufacturing with a targeted set of high-capacity models, including electric options, that align with the needs of infrastructure projects subject to BABA requirements. The company’s plans include determining the optimal production location in the United States, strategically expanding sourcing agreements to meet local material requirements, and further developing electric power options for high-capacity equipment.
As a part of the 2021 Infrastructure Investment and Jobs Act, the BABA Act aims to increase the use of American-made materials in federally funded infrastructure projects across the U.S., Hyster-Yale says. It was enacted as part of a broader effort to boost domestic manufacturing and economic growth, and mandates that federal dollars allocated to infrastructure – such as roads, bridges, ports and public transit systems – must prioritize materials produced in the USA, including critical items like steel, iron and various construction materials.
Hyster-Yale’s footprint in the U.S. is spread across 10 locations, including three manufacturing facilities.
“Our leadership is fully invested in meeting the needs of businesses that require BABA-compliant material handling solutions,” Tony Salgado, Hyster-Yale’s chief operating officer, said in a release. “We are working to partner with our key domestic suppliers, as well as identifying how best to leverage our own American manufacturing footprint to deliver a competitive solution for our customers and stakeholders. But beyond mere compliance, and in line with the many areas of our business where we are evolving to better support our customers, our commitment remains steadfast. We are dedicated to delivering industry-leading standards in design, durability and performance — qualities that have become synonymous with our brands worldwide and that our customers have come to rely on and expect.”
In a separate move, the U.S. Environmental Protection Agency (EPA) also gave its approval for the state to advance its Heavy-Duty Omnibus Rule, which is crafted to significantly reduce smog-forming nitrogen oxide (NOx) emissions from new heavy-duty, diesel-powered trucks.
Both rules are intended to deliver health benefits to California citizens affected by vehicle pollution, according to the environmental group Earthjustice. If the state gets federal approval for the final steps to become law, the rules mean that cars on the road in California will largely be zero-emissions a generation from now in the 2050s, accounting for the average vehicle lifespan of vehicles with internal combustion engine (ICE) power sold before that 2035 date.
“This might read like checking a bureaucratic box, but EPA’s approval is a critical step forward in protecting our lungs from pollution and our wallets from the expenses of combustion fuels,” Paul Cort, director of Earthjustice’s Right To Zero campaign, said in a release. “The gradual shift in car sales to zero-emissions models will cut smog and household costs while growing California’s clean energy workforce. Cutting truck pollution will help clear our skies of smog. EPA should now approve the remaining authorization requests from California to allow the state to clean its air and protect its residents.”
However, the truck drivers' industry group Owner-Operator Independent Drivers Association (OOIDA) pushed back against the federal decision allowing the Omnibus Low-NOx rule to advance. "The Omnibus Low-NOx waiver for California calls into question the policymaking process under the Biden administration's EPA. Purposefully injecting uncertainty into a $588 billion American industry is bad for our economy and makes no meaningful progress towards purported environmental goals," (OOIDA) President Todd Spencer said in a release. "EPA's credibility outside of radical environmental circles would have been better served by working with regulated industries rather than ramming through last-minute special interest favors. We look forward to working with the Trump administration's EPA in good faith towards achievable environmental outcomes.”
Editor's note:This article was revised on December 18 to add reaction from OOIDA.
A Canadian startup that provides AI-powered logistics solutions has gained $5.5 million in seed funding to support its concept of creating a digital platform for global trade, according to Toronto-based Starboard.
The round was led by Eclipse, with participation from previous backers Garuda Ventures and Everywhere Ventures. The firm says it will use its new backing to expand its engineering team in Toronto and accelerate its AI-driven product development to simplify supply chain complexities.
According to Starboard, the logistics industry is under immense pressure to adapt to the growing complexity of global trade, which has hit recent hurdles such as the strike at U.S. east and gulf coast ports. That situation calls for innovative solutions to streamline operations and reduce costs for operators.
As a potential solution, Starboard offers its flagship product, which it defines as an AI-based transportation management system (TMS) and rate management system that helps mid-sized freight forwarders operate more efficiently and win more business. More broadly, Starboard says it is building the virtual infrastructure for global trade, allowing freight companies to leverage AI and machine learning to optimize operations such as processing shipments in real time, reconciling invoices, and following up on payments.
"This investment is a pivotal step in our mission to unlock the power of AI for our customers," said Sumeet Trehan, Co-Founder and CEO of Starboard. "Global trade has long been plagued by inefficiencies that drive up costs and reduce competitiveness. Our platform is designed to empower SMB freight forwarders—the backbone of more than $20 trillion in global trade and $1 trillion in logistics spend—with the tools they need to thrive in this complex ecosystem."