GE Appliances, one of the largest home-appliances manufacturers in the U.S., says a $2 billion effort to remake its supply chain has helped it double revenue since 2017. The Louisville-based company, now a subsidiary of China’s Haier Smart Home, has added manufacturing capacity, opened seven new distribution centers and implemented digital tools to knit together operations from production through to delivery. It is an example of how companies are resetting their supply chains to be more flexible, moves that come after retailers and household goods companies navigated disruptions, shipping delays and dramatic shifts in consumer demand during a chaotic period marked by waves of stockouts and overstocking.
“A lot of companies are really striving to create increased visibility in their supply chains and also to build greater resilience in their supply chains,” said an N.C. State professor. That includes efforts to “improve coordination and integration and scheduling, and at the same time, try to reduce their inventory.”
One of the biggest changes has been to bring more manufacturing into the U.S. from Asia, reports The Wall Street Journal (July 8, 2024). GE has added 4,000 manufacturing jobs across its nine U.S. plants over the past seven years. Shifting production from overseas has cut shipping costs by reducing the number of bulky appliances that are sent across the Pacific Ocean and has given GE more control over production. When you have something that’s in a container on a boat for six weeks, it’s difficult to change your orders and be able to adjust to shifts in demand.
GE also measures inventory differently today than before the pandemic. The appliance company previously tracked “weeks on hand,” which measures finished products relative to how many units typically sell in a given week. It now tracks customer orders delivered on-time and in-full, a measure that prioritizes existing orders so the company doesn’t spend time manufacturing items that aren’t in demand. To accommodate that change, GE installed digital tools that allow factories to see upcoming customer orders. The plants can then manage production schedules to ensure orders are ready on time, but not too early. Storing bulky, fragile appliances in a warehouse for a long time eats up space, adds storage costs and increases the risk of damage.
Classroom discussion questions:
- What is the difference between “weeks on-time” and “on-time and in-full”? Hint: See our Feb, 25, 2024 blog
- What major OM moves ae described in this piece on GE Appliance?