...rP os t Sw W12079 STRATEGIC SOURCING AT WHIRLPOOL CHINA: FINDING THE IDEAL SUPPLIER op yo Dr. Martin Lockstrom, Thomas E. Callarman and Shengrong Zhang wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Richard Ivey School of Business Foundation prohibits any form of reproduction, storage or transmission without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Richard Ivey School of Business Foundation, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca. Copyright © 2012, CEIBS Version: 2012-06-19 tC It was April 10, 2011, when Gianluca Castelletti, head of Whirlpool’s Asia International Procurement Office in Shanghai, was informed by his colleagues that the company was about to launch a new refrigerator model in just six months. With the current worldwide focus on energy saving, and as one of the biggest home appliances producers, Whirlpool China planned to introduce a new energy-efficient refrigerator. No Castelletti immediately spotted a challenge in Whirlpool...
Words: 3175 - Pages: 13
...Business Practicum Strategic Sourcing at Whirlpool China Q1. Whirlpool’s Global Sourcing Strategy (GSS) 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. Q2. When it came to potential suppliers, Whirlpool set their standards high. In order to be considered a supplier of Whirlpool, quality requirements set forth by the Whirlpool Supplier Quality System had to be met. Most suppliers in China, however, found difficulty in reaching the minimum required score of 60/100 during the first round of audits. Whirlpool used the Sourcing Strategy Development...
Words: 770 - Pages: 4
...Abstract preview Global Sourcing Development at IKEA – a Case Study Paper prepared for the 25th IMP conference Jens Hultman1, Susanne Hertz1, Rhona Johnsen2, Thomas Johnsen2 1: Jönköping International Business School, P.O Box 1026, SE-551 11 SWEDEN E-mail: jens.hultman@ihh.hj.se, susanne.hertz@ihh.hj.se Tel: +46 0(36) 10 10 00 2: Audencia Nantes School of Management, 8 Route de la Joneliere, BP 31222 – 44312 Nantes Cedex 3, France. E-mail: tjohnsen@audencia.com; rjohnsen@audencia.com Tel: + 33 (0)240 37 46 25 Abstract This study explores the dynamic process of global sourcing development through a case study of the Swedish home furnishing giant IKEA and its supply network concerning the PAX wardrobe system. The paper provides a synthesis of the existing global sourcing literature by dividing this growing body of research into three major themes: globalization processes and stages, motives/drivers, and organizational design and management. Moreover, the paper integrates the global sourcing literature with the established literature on the internationalization process of firms. Comparing the existing research on global sourcing and internationalization, we propose two research questions focused on: (1) the ways in which the IKEA global sourcing and supply chain development process resembles a linear stages process, and (2) the principal drivers of the development of global sourcing within IKEA. Relating the findings of the global sourcing process in the case of IKEA, the paper...
Words: 11008 - Pages: 45
...GLOBAL SOURCING Strategic Soucing at Whirpool China Finding the ideal supplier CASE ANALYSIS Assignment 1 STRATEGIC SOURCING AT WHIRLPOOL CHINA FINDING THE IDEAL SUPPLIER CASE ANALYSIS 1. What are the key problem areas for Whirlpool? Finding the right supplier. 2. What is the importance of strategic sourcing? Sourcing the right components is the first step in launching the new product. 3. What are the pros and cons of Whirlpool’s global sourcing strategies? Cons: Payment terms. Pros: To avoid delays in launching the new product. 4. How are suppliers identified, evaluated and selected? It was necessary to define the commodity and allocate responsibilities and resources through co-ordination of global and regional activities. Using the Sourcing Strategy Development (SSD) process in 4 steps: Step 1: internal analysis, identified and prioritized the process –partner requirements, then evaluated the performance of the existing supply base and reviewed the existing supply base, it also identify the switching costs. Step 2: external analysis, which includes analysing the supplier industry and competitors and evaluating competitor performance and strategies. The evaluation process makes use of SWOT (Strength, Weakness, Opportunities, Threat). Step 3: strategy development, is to analyse the competitiveness and their financial impact. Preliminary negotiations could be carried out, a suitable strategy and suppliers should be selected and...
Words: 437 - Pages: 2
...Global Dual Sourcing: Tailored Base Surge Allocation to Near and Offshore Production Gad Allon and Jan A. Van Mieghem Kellogg School of Management, Northwestern University, Evanston, IL 60208 September 25, 2008; Revised Oct 8, 2008 When designing a sourcing strategy in practice, a key task is to determine the average order rates placed to each source because that affects costs and supplier management. We consider a firm that has access to a responsive near-shore source (e.g., Mexico) and a low-cost offshore source (e.g., China). The firm must determine an inventory sourcing policy to satisfy random demand over time. Unfortunately, the optimal policy is too complex to allow a direct answer to our key question. Therefore, we analyze a tailored basesurge (TBS) sourcing policy that is simple, used in practice, and captures the classic tradeoff between cost and responsiveness. The TBS policy replenishes at a constant rate from the offshore source and produces at the near shore plant only when inventory is below a target. The constant base allocation allows the offshore facility to focus on cost efficiency while the nearshore’s quick response capability is utilized only dynamically to guarantee high service. The research goals are to i) determine the allocation of random demand into base and surge capacity, ii) estimate corresponding working capital requirements, and iii) identify and value the key drivers of dual sourcing. Given that even this simple TBS policy is not amenable to exact...
Words: 5549 - Pages: 23
...Supply Chain Management – Assignment (Wal-Mart & IKEA) Are they involved in strategic alliances with major trading partners? If so, how and for what purpose? Strategic Alliances Definition of Strategic Alliance: Strategic alliances are inter-firm collaborative business models that allow firms to create value by sharing resources, obtaining market influence or access novel markets. Simply put, strategic alliance allows for projects where companies can share their resources and risks for an agreed period or project. Resources such as distribution chains, development of products, technologies or services become communal amongst alliances. In recent times, the potential positive effects of alliances are highly regarded by firms, thus, leading to an increasing trend in entering into strategic alliances with the aim of constructing stable collaborations. While the successes of alliances are plentiful, there is also evidence of many undesirable business outcomes. This section of the research paper will discuss and analyze the applications of strategic alliance for global giants in the retail business: IKEA and Wal-Mart. IKEA’s Strategic Alliances: IKEA aims to provide consumers with low-price products through fostering long-lasting business relationships and networks with its main suppliers. These relationships are a pivotal part of the development of IKEA’s products and technologies. IKEA tends to push interactions with their suppliers as far upstream as...
Words: 1882 - Pages: 8
...Purchasing The Low-cost Learning curve t might not be the best habit, but people have a tendency to categorize everything. The same often happens with low-cost country sourcing, which lumps totally diverse countries scattered all over the world into the same category of inexpensive procurement opportunities. Many still debate whether the process itself actually varies that much from country to country. Is the strategy for sourcing from China really any different than it is from India, Turkey or Brazil? For David Hoover, vice president of strategic procurement for HNI Corp., the answer is, “No, it’s not.” Of course, there’s a little more to it than that. “In the end, human beings are always the ones doing the business. And everyone has an interest,” notes Hoover. “The challenge, in any supplier relationship, is to understand what the other party’s interests are, so that you can help satisfy them. When you do that, they will be compelled to help satisfy yours.” A few years ago when HNI, a global office furniture manufacturer, started evaluating the potential cost benefits of sourcing in China, the company took an approach that utilized its decentralized business model called “split and focus.” However, while the model proved very effective on the customer side of the business to accommodate different product markets and consumer bases, the company quickly learned that the approach needed a few minor adjustments to be as successful on the supply side. “[Initially] we were sending...
Words: 772 - Pages: 4
...business. Chances are, if you've been to an airport, grocery store, mall, or the downtown area of a large city, you've been to or seen a Starbucks. Without a doubt, Starbucks is the de facto leader in the specialty coffee market, and not just in the United States. In 1999, Starbucks expanded into China. Today, their expansion continues in China and around the world. Starbucks now has stores in 47 countries. Their global expansion strategy and performance is stellar. Let's examine some possible components of Starbuck's global expansion strategy that enables them to determine how, why, and where they expand. According to their Annual Report, Starbucks opened up 2,571 new stores in 2007 (www.starbucks.com). They now operate over 15,000 stores around the globe. In China, their aggressive expansion continues. In 2006, Financial Times quoted Howard Schultz as saying "China has emerged as the strategic priority within the company today and in the long term. The opportunity we have in China is like no other" (17). To succeed globally, companies must analyze and choose from many strategic plans. One way they do this is by using a SWOT analysis a strategic planning tool used to evaluate Strengths, Weaknesses, Opportunities, and Threats. The goal of a SWOT analysis is to identify key internal and external factors that affect the desired outcome. Strengths and weaknesses are internal to the company and include things like wage/benefits, corporate culture...
Words: 939 - Pages: 4
...supplier (3.0) History of Purchasing. (4.6) Origins of purchasing/Procurement (4.7) Procurement developments in ancient history. (4.0) Purchasing Goals. (5.8) Broad purchasing goals (5.9) Different purchasing goals and their priorities (5.0) Importance of purchasing for an Organization. (6.0) New Trends in purchasing. (7.10) e-Purchasing (7.11) Values of e-Purchasing (7.12) Procurement outsourcing (7.13) Values of Procurement outsourcing (7.0) Conclusion. (1.0) What is Purchasing? For most organization purchasing means buying goods to resell or carry out operations or to manufacture products. “Purchasing (Procurement) aims at anticipating requirements, sourcing and obtaining supplies into the organization and monitoring the status of supplies as a current asset.” – defined by the Book LOGISTICS written by David J. Bloomberg, Stephen A. LeMay, Stephen LeMay Terms “Materials Management”, “Inbound Logistics”, “Procurement” give the similar meaning to...
Words: 1395 - Pages: 6
... By CS; EN; HD; KZ; X H Content 1 Background 2 1.1 About Ericsson 2 1.2 Strategic Sourcing Department 2 2 SWOT Analysis 4 2.1 Strength 4 2.2 Weakness 5 2.3 Opportunities 6 2.4 Threat 7 3 Conclusion 9 Reference 10 Background 1 About Ericsson Ericsson is a world-leading provider of telecommunications equipment and related services to mobile and fixed network operators globally. Over 1,000 networks in more than 180 countries utilize Ericsson’s network equipment and 40 percent of all mobile calls are made through our systems [1]. Ericsson is one of the few companies worldwide that can offer end-to-end solutions for all major mobile communication standards. The company has a global presence supported by strong base of R&D activities. Increasing demand for smartphones and mobile broadband infrastructure gives an opportunity to strengthen its business performance. However, increasing competition and regulations could adversely impact both its business operations and financial position. • Core Value Respect, professionalism and perseverance are the values that are the foundation of the Ericsson culture [1]. • Main Business Networks, Multimedia, Global Services, ST-Ericsson • Main Competitors Huawei, Nokia Siemens, Alcatel-Lucent, ZTE 2 Strategic Sourcing Department Strategic Sourcing was created to manage Ericsson’s Category, Partnering, Supplier and Contracts Management within...
Words: 2574 - Pages: 11
...Table of Content Introduction………………………………………………………………………..……...3 The 3PL market…………………………………………………………………………...4 Procurement As competitive advantage…………………………………………………4 1. Center-led procurement…………………………………………………………..5 2. Strategic sourcing………………………………………………………………….5 3. Supplier integration……………………………………………………………….6 4. Enterprise spend management……………………………………………………6 5. Cross-industry benchmarking…………………………………………………….7 6. E – Procurement…………………………………………………………………...7 Advantages of Apple’s procurement……………………………………………………..8 Disadvantages of Apple’s Procurement…………………………………………………..9 Conclusion…………………………………………………………………………………10 Introduction: When Apple design guru Jony Ive wanted a new feature for the next MacBook: a small dot of green light above the screen, shining through the computer’s aluminum casing to indicate when its camera was on, the problem? It’s physically impossible to shine light through metal. Apple discovered it could use a customized laser to poke holes in the aluminum small enough to be nearly invisible to the human eye but big enough to let light through. Applying that solution at massive volume was a different matter. Apple needed lasers, and lots of them. Most of Apple’s customers have probably never given that green light a second thought, but its creation speaks to a massive competitive advantage for Apple: Operations. This is the world of manufacturing, procurement, and logistics in which the new chief executive officer...
Words: 2544 - Pages: 11
...Through the case study of‘SHANGHAI GENERAL MOTORS:THE RIS OF A LATE –COMER’, we learned that the development of automobile industry in China, and GM opening up a historic challenges and opportunities to firm up China’s cooperation with SAIC. 1. Background Information General Motors (GM) is one of the world's largest car companies. Although GM lost its first-mover advantage to Volkswagen, in 2003, China became the second largest single market for General Motors, selling 201,188 vehicles, an 81.6% percent increase over the previous year. In that year Shanghai GM achieved a 13% market share in mainland China, second only to Volkswagen Group China among foreign carmakers. Sales dropped in 2004 when the company retired the Buick Sail and the release of its replacement, the Chevrolet Sail, was delayed to February, 2005, knocking General Motors Shanghai to seventh place in mainland China market share. 2. Automobile industry history and development Development situation can be divided into sevens stages as follows |Time |market demand |local competitor |foreign competitor |Economy |Technology |Political Social | |1950-1965 |small:only for |state-owned |No |the beginning of |Soviet Union provide |have no reference | | |party officials |company | |economy development|technology | | |1966-1976 ...
Words: 880 - Pages: 4
...Latin American and Asia. Currently, Carrefour has opened over 12,500 stores all over the world, with sales in 2006 of $114.9 billion and 456,000 employees. Store Formats. Carrefour operates three store formats in China: Carrefour hypermarkets, Champion supermarkets, and Dia discounted convenience stores. Since Carrefour entered China in 1995, hypermarkets were the principal format for Carrefour expansion. Carrefour opened 150 Dia discounted convenience stores in Shanghai and 100 in Beijing in 2003 (www.carrefour.com.cn), but faces fierce competition from 7-Eleven stores from Taiwan. Carrefour would more likely to learn from and follow 7-Eleven in the convenience store niche . Store Location. China is still a country with a relative low income level and hence the mainstream power of consumption remains in large and prosperous cities and city centers. Therefore, Carrefour establishes their stores in first tier cities and also in more prosperous and business areas . Yan (2003) argues that Carrefour’s strategy of store location enables its leading position among foreign retailers. He continued to argue that the decision of selecting Shanghai as the headquarter location enabled Carrefour’s rapid strategic expansion in China, due to a better sourcing environment, transportation...
Words: 948 - Pages: 4
...Chapter 8 1. What are the advantages and disadvantages or using licensing as a market entry tool? Give examples of companies from different countries that use licensing as a global marketing strategy. Licensing: Advantages: • Low cost entry alternative • Allows licensor to circumvent tariffs, quotas, or similar export barriers • Limits political risk and risk of expropriation • Provides additional profitability with little initial investment • Provides method of circumventing tariffs, quotas, and other export barriers • Attractive ROI • Low costs to implement Disadvantages: • A limited form of participation; licensor generally has no control on marketing program associated with product produced under license. • Financial upside limited by royalty rate. • Licensees can become competitors. 2. The president of XYZ Manufacturing Company of Buffalo, New York, comes to you with a license offer from a company in Osaka. In return for sharing the company's patents and know-how, the Japanese company will pay a license fee of 5 percent of the ex-factory price of all products sold based on the U.S. company’s license. The president wants your advice. What would you tell him? Assuming XYZ is a small manufacturer with limited international experience, and if the picture for both market and sales (market share) potential are promising, licensing can be an attractive entry mode. Possibly entry into the Japanese market could be expedited by following this approach, especially...
Words: 3386 - Pages: 14
...example in this case study – recognise that they can only stand out in a tough sector by competing on an international scale. This increasingly means doing business in high-growth emerging markets like China and leveraging RMB to gain that vital competitive advantage. Background Telco, with its Head office based in London, began life as a manufacturer of wire-line equipment for the Western European aerospace sector. Following the privatisation of national telecoms operators from the late 1980s, it refocused its business to supply carriers in Europe and the US. Telco has been an HSBC client for more than ten years, after finding that domestic banks could not match its international expansion strategy. HSBC’s global network supported its exports growth across new markets by supporting all Telco’s export invoices. Rolling waves of telecoms deregulation saw Telco and other suppliers enter the mobile handset market in the 1990s, attracted by the significant growth opportunities. The intense competition and tightening margins in equipment supply – not least the demand from emerging markets – saw Telco make its first trip to China on a sourcing mission for basic components. Building a business In China At the company’s request, HSBC relationship managers helped guide Telco’s entry into China by working with professional advisors in the Far East to design a tailored business structure and business strategy. The bank also nominated a local Chinese relationship manager to ensure its business...
Words: 1568 - Pages: 7