Electrolux's injection molding supplier search highlights supply chain strategy

According to Geoff Pollak, VP of purchasing for Electrolux-North America, the company has a history of innovation and a passion for success. “Today we sell across many brand families but our flagship brand is Electrolux, and our desire is to build a premium brand in North America,” he adds.

In November, Electrolux kicked off a search to enhance its base of injection molding suppliers. The goal was to find new suppliers in the Southeast region of the U.S. that can serve the company’s manufacturing plants in Kinston, NC and Anderson, SC, as well as the National Parts Distribution Center in Asheville, NC, and help reduce “total landed cost” for its many components. “This was the first event like this that we’ve done to my recollection,” Pollak says.  “We did this based on the fact that when we looked at our current supply base for the Southeast, we found a need to look at suppliers that are close—saving fuel—that can easily ship in reusable, returnable containers. This sparked the idea of holding this event and reflects an ongoing commitment by Electrolux for local sources of supply.”   

In October 2010, Electrolux put out a request for supplier participation, sending press releases to plastics magazines to attract participation. “We received an overwhelming response—over 300 injection molding companies answered our call for participants,” Pollak explains.  “That tells you the state of the industry and the level of interest.” 

The next phase was to send a Request For Information (RFI) to each of the 300 respondents, which provided extensive overviews of the prospective suppliers that included history, financials, technology capabilities, cost structure, delivery, and service. Other attributes considered in the supplier selection process included flexibility, sustainability, and supply chain-based cost-outs (returnable packaging and raw material buying efficiency, for example).

Out of the initial 300 molders responding, 50 molders were selected for the next level of the search. Combined, this select group encompassed 149 factories and 108 facilities in the Southeast, including 17 locations in North Carolina.

The meeting with the 50 molding companies was held in Kinston, and opened with an overview of Electrolux as a company and what it looks for in suppliers. Then each injection molding company went through four rotations:

1) A sit-down interview with an Electrolux North American Purchasing representative to review their RFI.
2) A “parts room” was set up with representative samples of the parts Electrolux purchases for the molders to see and, from their perspective, to get a better understanding of Electrolux’s expectations.
3) Because the event was located near the Kinston factory, a tour of the factory was provided so that each potential supplier could see the production floor, understand the quality aspect of Electrolux’s products, and how the parts are used in the units produced.
4) An Electrolux “Experience Room” displayed the products that the company produces and demonstrations of the products were performed so that the molders could see and touch the final unit, as well as understand the expectations that Electrolux’s customers have with regard to fit, feel, and finish of the products.

Angel de la Mora, commodity manager, injection molding, Electrolux Major Appliances-North America, adds, “The turnout of qualified suppliers could not have been greater. The potential suppliers we met with represent the highest level of quality, service, and product and delivery excellence that the region has to offer, and we look forward to including select suppliers in our sourcing strategy going forward.”
   
Developing good supplier relations
Pollak explains that developing a good supply chain and maintaining good supplier relations are woven together. “To develop a good supply chain we need to understand the basis for that relationship. From that perspective transparency throughout the supply chain is important,” he says. “What are our demands in terms of cost and quality? It’s a two-way street. We see our forecasted demand and reflect that to the supplier. They see what they need to do to meet our demands.”

Electrolux focuses on four primary aspects in the relationship: quality, cost, delivery, and technology. “Technology is key,” says Pollak. “We want to know what can the supplier offer beyond just molding parts, such as two-shot molding and other technologies.”

Pollak notes that Electrolux has a lot of connectivity with its supply base in terms of providing data about the company’s business. “We also have quarterly supplier reviews where we talk about quality, cost, and technology. On the physical score card, we ask them to score themselves, then we score them,” Pollak says. “There are times when there is a mismatch in the way they score themselves and the way we score them, and commercial disagreements arise from time to time. But a lot of this is just about different expectations.”

Picking good suppliers
When it comes to choosing suppliers, Electrolux performs extensive due diligence. “We do obviously get involved in the issues of our supply chain and engage them in their financial status,” Pollak says. “We pick suppliers that are strong financially.”
   
An added benefit for Electrolux suppliers is an Electrolux-developed Supply Chain Finance Program with Deutsche Bank to offer a more beneficial borrowing position for them. “We can leverage our balance sheet and help the supplier using our financials. In doing so, we get better data from our perspective and lower costs for the suppliers,” says Pollak.

With respect to material cost increases over the last couple of years, Pollak acknowledges that nobody likes talking about increases. “That’s always an uncomfortable discussion,” he says. “Like most OEMs, we have contracts with resin suppliers, and for our Most Valued Suppliers we create ways for them to buy off our contract. If a supplier has a better cost structure, we’ll look at that openly and leverage the better cost structure. Larger molders typically have large raw material buys and can get better cost structures on those.”

Pollak adds that the core theme for Electrolux of quality, cost, delivery, and technology is the key to all of the company’s supply-chain participants. “We operate from a total cost perspective, but ultimately we want good parts!” he stressed. “After all, it’s our name that goes on that product.”

Electrolux has been around since the early 1900s, beginning with its world-famous vacuum cleaners sold by door-to-door sales people. However, the company evolved in North America to offer major appliances such as refrigerators, ovens, and dishwashers, among other products. The company’s entrance into major appliances in North America began with Electrolux’s purchase of White Consolidated Industries in the 1980s, and included such brands as Frigidaire, Gibson, Kelvinator, and White Westinghouse.

Survey shows supply-chain relationships important
A recent survey of 479 manufacturing plants (334 in the U.S.) that responded to the The MPI Group Inc.’s 2010 MPI Manufacturing Study, found that supply-chain relationships and practices are critical to these OEMs’ ability to be successful. One-third of the plants (32%) rated supply-chain management as “highly important” to their success over the next five years, and 39% rated it as “important,” for a total of 71%. 

Despite this overwhelming percentage, the study found that most manufacturers remain in traditional “buy-and-sell” relationships with both suppliers (44%) and customers (34%). Only one in five plants (20%) treats suppliers as partners (e.g. sharing resources, intellectual property, cost savings), and 20% treat customers as partners; only 6% treat both suppliers and customers as partners. The study also found that U.S. manufacturers are more likely than international manufacturers to have “buy-and-sell” relationships with both suppliers and customers.

When it comes to programs to help manage their supply chains, a majority of the manufacturers that responded to the MPI Group’s survey indicated that they certify major suppliers (51% of manufacturers) and conduct customer-satisfaction surveys (51%).  It was also found that plants that rate supply-chain management as “highly important” or “important” are more likely than other plants to use supply-chain programs/practices, e.g., 47% of supply-chain-focused plants have a supplier-management program vs. 18% of other plants.

Some other interesting results from the study include the fact that 49% of the U.S. manufacturers that responded have “collaborative design with their customers.” But, only 34% have “collaborative design with their suppliers.” While 44% of the U.S. respondents reported they “share forecasts with suppliers,” only 35% of the supplier manufacturers report they have “access to customer forecasts.”

So while many manufacturers claim that supply-chain relationships and practices are critical to their success—as they should be—it would appear from the study results that many don’t yet walk the walk when it comes to actually having these transparent relationships. —Clare Goldsberry