Strategic Sourcing at Whirlpool China Case Study

Analysis
Whirlpools Global Sourcing Strategy in China had many advantages as well as
disadvantages. As the case explains, China had become one of the worlds
largest household appliance makers, and relocation of Whirlpools Asian HQ to
Shanghai helped the companys 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 companys 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.
When it came to potential suppliers, Whirlpool set their standards high. In order
to be considered a supplier of Whirlpool, quality requirements set by the
Whirlpool Supplier Quality System had to be met. Most suppliers in China,
found difficulty in reaching the minimum required score of 60/100 during the first
round of audits.
Whirlpool used the Sourcing Strategy Development process to find adequate
suppliers of DC motors. The SSD process included four steps:
1. Internal Analysis
2. External Analysis
3. Strategy Development
4. Implementation
Once the commodity is defined and responsibilities and resources are allocated,
an internal analysis (Step 1) identifies and prioritizes process-partner
requirements, then evaluates and reviews the performance of the existing

supply base. Lastly, Step 1 of the SSD should recognize possible switching
costs. Once the internal need is identified, Step 2 analyzes the supplier industry
and competitors and evaluates performance and strategies of the competition.
Next, a sourcing strategy is developed during Step 3 of the SSD. During this
phase, Whirlpool analyzes the competitiveness of the industry, formulates
strategic options, and analyzes their financial impact. By the end of Step 3,
preliminary negotiations could be carried out and suitable suppliers would be
selected. Finally, the sourcing strategy developed in the previous stage is put
into play in Step 4. The goal of this step is to give necessary feedback to the
chosen suppliers, and to settle final negotiations.
If all the steps achieve the goals then it is good but if Not then all the steps need
to revise.
With a single sourcing model, the supplier is responsible for all the activities (i:e
warehousing, storage, Dock, Delivery etc..) So it is very expensive process as
suppliers charge premium prices for taking all the risks and getting work done.
Whirlpool has very strict and aggressive about the payments, so the suppliers
were not agreed yet to take all the risks.
Multiple sourcing, on the other hand, is when a company selects more than one
supplier to provide processes or services. It is the good process the main benefit
of this process is the Cost Savings which Whirlpool emphasis on. It also gives
the benefit of seeking good quality. In this model company could have
competitive prices and a good quality. But there is the disadvantage too, the
sourcing to many suppliers means having more companies and monitor all,
which is quite difficult.
We believe that Whirlpool should choose a multiple sourcing model. Whirlpool
holds itself to a high standard quality, and as mentioned in the case, it is
important that Whirlpool concentrate on cost reduction, productivity initiatives
and innovation due to stiff competition. In this situation Multiple sourcing is the
best option to Whirlpool as it will provide good quality and Cost saving. Another
advantage whirlpool could have is the do not need to train single supplier , which
could be cost increasing and time consuming process.