Tag: Whirlpool

OM in the News: Whirlpool’s Component Shortages and Production Lines

Michigan-based Whirlpool, which manufactures washing machines, KitchenAid mixers and other home appliances, has seen a surge in demand for its products since the beginning of the pandemic, reports The Wall Street Journal (April 22, 2021). At the same time, the company is facing a strained supply of key components, including microchips from China and Taiwan. It is also running low on plastic as a result of a winter storm in Texas.

While other industries have responded to the shortages by slowing down production— car makers, for example, have cut output or idled factory lines amid the lack of chips—Whirlpool is changing over its production lines more often, depending on which parts are available.

whirlpool

“We look at what is coming in a shipment and what we have on the production schedule,” the CFO said, adding that the company usually has visibility into its production plan 4 weeks in advance. At the moment, the schedule for some items is about 4 days out. “You don’t want to flex them as often as we are,” he said, referring to the company’s factories. “This isn’t ideal.”

Constantly changing which products are being made brings inefficiencies and added costs. Reduced visibility into a company’s production schedule also causes problems. Whirlpool expects its supply chain issues to continue for most of the year. It sources its materials from several thousand suppliers around the world, but holds lower inventories because of high consumer demand and restricted access to components. The average order backlog is 5-6 weeks at the moment, higher than the 2 weeks backlog with which Whirlpool usually operates.

The company in recent weeks raised sale prices for its products by 5-12% to compensate for increased raw material costs, particularly for steel and plastics. Raw materials usually make up 60-65% of cost of products sold at the firm.

Classroom discussion questions:

  1. The Japanese have made scheduling enhancements by using level schedules (see discussion on page 653, Figure 16.7, and OM in Action box on page 657). Does this seem a feasible alternative for Whirlpool?
  2. Should Whirlpool consider reducing its variety of product choices, at least during this time of strained supplies?

OM in the News: Whirlpool Jobs Return to U.S.

Whirlpool is shifting some production from Mexico to this Ohio plant
Whirlpool is shifting some production from Mexico to this Ohio plant

Whirlpool is moving some of its washing-machine production to a plant in Clyde, Ohio, from one in Monterrey, Mexico, reports The Wall Street Journal (Dec. 20, 2013). The shift—another sign of the trend for U.S. manufacturers to bring back some of their production from abroad—will create 80-100 jobs at the Clyde plant, which currently employs about 3,300 people and is the company’s biggest washing-machine factory.

Wages for production workers in Clyde, typically around $18-$19 an hour, are roughly five times higher than in Monterrey. But the shift should lower costs overall. The Clyde plant is more automated and electricity costs are much lower than in Monterrey. Whirlpool also expects to save on transportation because the products won’t have to be shipped across a border before going into the company’s North American distribution network. Like many other companies, Whirlpool is trying to make products closer to where it sells them. That reduces the time needed to respond to changes in demand.

Since 2010, companies have created more than 80,000 manufacturing jobs by moving production to the U.S. from foreign countries, states the head of the non-profit Reshoring Initiative. “The U.S. continues to lose other manufacturing jobs to offshore plants, but those losses now are being offset by inflows,” he says, adding: “We’ve stopped the bleeding.”

Apple, which relies heavily on plants in China for its top selling gadgets, recently began making some of its high-end Mac Pro desktop computers in Austin, Texas. Wal-Mart Stores Inc. has been prodding some of its suppliers, including makers of socks and light bulbs, to provide U.S. made alternatives.

Classroom discussion questions:
1. Why are more firms “reshoring” in recent years?

2. Name several companies (besides the 3 in this article) that have brought manufacturing back to the U.S.

OM in the News: Some Good News for American Manufacturing

Desperate for good news on the economic front, The Wall Street Journal’s  lead story (Jan.19,2011) reports that last year, manufacturing created more jobs than it lost  for the 1st time in a decade.  As our semesters begin, this is an important topic to address in class (and in Ch.1).  Indeed, this is good news as we stress how important manufacturing is for any country that expects to maintain a high standard of living for its citizens.

But before we get too carried away with projections of 300,000 new manufacturing  jobs next year, let’s remember that we lost 6 million factory jobs in the past 13 years. This puts manufacturing  jobs at about 12 million, or about 9% of all US non-farm jobs.  We also don’t  forget that  manufacturing accounts for 11% of US economic output, down from 27% in 1950. After the steep recession slump, however, we need the growth. Manufacturing  jobs pay about $22/hour, twice the average of service jobs.

The other good news is that companies are becoming more efficient, increasing productivity 7.1% from a year earlier while hours worked grew just 3%.

And yet more good news: Whirlpool just decided to spend $120 million to open a new appliance plant  in Cleveland, instead of lower-cost Mexico. (The reasons include a better trained workforce, lower freight costs, and $30 million in incentives). And Caterpillar is building a $120 million plant in Texas to produce machines currently being shipped from its plant  in Japan to N. American customers. Finally, The Journal states that Dow is building a massive new plant in Michigan to make batteries for hybrids and electric cars. Dow claims that every new job there will have a multiplier effect of 5  jobs at suppliers.

Discussion questions:

1. Why are companies starting to create new manufacturing jobs?

2. What will affect long-term growth in such jobs in the US?

3. What are the risks facing these jobs?

OM in the News: Whirlpool Domestic Expansion

Ref: WSJ, Wednesday, Sept. 1, 2010

 Wednesday’s WSJ reports on Whirlpool’s $300 million  upgrade of domestic manufacturing. Both the Cleveland Tennessee plant and the Clyde Ohio plant are seeing major upgrades.  Whirlpool is aggressively restructuring their North American plants… which includes closing plants in Evansville, Ind., Oxford, Miss. and a Michigan plant.  The Clyde plant  is to reduce time to build a washer by 10% and boost output by more than 10%.   

Also while great concern is continually exhibited in the press about the fact that manufacturing employment continues to decline… as OM profs we need to explain (apparently again and again) that manufacturing production and productivity continues to expand. Manufacturing employment does continue to drop ….

But the US is still the largest manufacturing country in the world with  annual productivity increases on the order of 3.4% since 1950.  

This article open a great discussion:

(1) about Whirlpools 2006 purchase of Maytag (industry consolidations… economies of scale) and

(2) the fact that while a plant in Mexico was considered, Whirlpool is making these expansion in the US.

(3)  You can also ask students by how much manufacturing employment drops each year (the article says .1%) or what percent of the work force is employed in mfg.  (the text says 11.2%, but perhaps lower this year).

(4) What are  the implications if manufacturing employment was not dropping … what if employment had never dropped in agriculture or the number of  telephone operators.