Whirlpool's vision today speaks to being a leader in an ever-changing global market, to exceeding all of our customers' expectations by building on existing strengths, and developing new competencies. This vision recognizes that Whirlpool has become a truly global operation. We have great opportunities for leveraging our supply chain resources and processes worldwide. We want to be able to deal with our common customers and suppliers around the globe in the same clear and consistent manner.

Whirlpool has not always had that global perspective. The company was founded in 1911 in Benton Harbor, Mich., a small Midwestern community. In the mid-1950s we began a partnership with Brasmotor, a Brazilian manufacturing group. Yet even with this acquisition Whirlpool remained largely a Midwestern, U.S.-centric company until the late 1980s.

Beginning in 1988, the face of Whirlpool changed dramatically. That year we acquired the appliance business of Philips, in Europe. Shortly thereafter, we expanded our Latin American presence to Argentina. Then in the mid-1990s, we aggressively formed joint ventures in India and China. Suddenly, Whirlpool was a multi-national business with a strong need to integrate new units into a truly global enterprise. (Exhibit 1 shows the company's present global configuration.)

Global Supply Chain Strategy Needed

The emerging global presence demanded a global strategy. The elements of that strategy were simple:

• Identify and deploy the best existing processes on a global scale.
• Then improve those processes by enhancing the company's skill set globally while recognizing regional differences.
• Develop new processes where existing processes were weak, outdated, or otherwise inadequate.
• Invest in upgrading the skills and knowledge of Whirlpool's people.
• Measure results and track performance as a prelude to further improvements

Within this strategic framework, Whirlpool felt that the globalization of the supply chain processes would deliver significant benefits. We utilized similar processes, dealt with similar-looking products, and used similar manufacturing techniques around the world. Clearly, doing the same thing the same way everywhere would better leverage our shareholders' investment by creating operating efficiencies, sharing best practices, and maximizing the investment in information systems and processes throughout the organization.

Whirlpool's key business processes include customer satisfaction, financial management, product development, and supply chain. So why initially seek global synergies in the supply chain arena over these others? At least four compelling reasons were identified.

First, supply chain costs are significant: even a 1-percent reduction boosts earnings noticeably. Second, the rapid growth in developing markets such as India and China, which had only limited supply chain procedures in place, provided an immediate opportunity for transferring best practices from other Whirlpool businesses. Third, applying common business processes would hasten true global integration. Finally, the leveraging of common information systems significantly reduces IT operating costs.

A global supply chain strategy allows resources to be leveraged around the world. Thus, the business units are not required to reinvent the wheel and can implement process improvements much faster and with fewer resources. Once a global best practice footprint is established, all businesses can share simultaneously in future enhancements, leading them toward world-class performance. Common global systems enable global product management, product development, and procurement. People can move from business to business without a productivity loss. New operations can start up faster and more effectively. And the company can provide a common interface to global suppliers and customers.

The resulting benefits of a leveraged global supply chain strategy include lower inventories (raw, work in process, and finished), less product obsolescence, and reduced manpower. (See Exhibit 2.) These advantages, in turn, result in improved product availability with less working-capital investment.

• Strategic alignment. Does it enable Whirlpool to behave as one global company?
• Business case. Does it create shareholder value? Does it leverage investments in product development, facilities, procurement, or information systems?
• Speed. Can deep changes be made faster?
• People leverage. Can critical expertise be leveraged globally?
• Global supply chain partners. Will it support doing business with global suppliers and customers?

Globalizing the Supply Chain Process

Whirlpool's internal supply chain consists of the classic components shown in Exhibit 4. "What" refers to understanding of customer requirements and forecasting. "Plan" encompasses production scheduling, materials management, and communication to internal and external suppliers. "Build" embodies the manufacturing activity. And "Move" involves deployment, warehousing, and transportation.

Creating the Model

In addressing the globalization challenge, Whirlpool established a small core team whose mission was to meet with each business around the world to identify the nature of the local business environment and competitive conditions. Local business drivers were clarified, and the current local business processes were mapped in detail in conjunction with line experts.

After performing the base analysis, this core team built a straw model of a common global process. Representatives of each major business assembled to review, critique, and revise the model. The process maps were re-drawn, re-challenged, and refined. The result was a clearly defined common process model that Whirlpool businesses around the globe believed in and agreed to drive toward.

The team then went on to define the economic benefits of attaining this vision. The benefits identified included both the tangible—for example, inventory reduction—and the intangible, such as knowledge transfer. The team conservatively projected the benefits so as not to oversell. Yet it liberally estimated the human and financial resources required to attain a common global process. The result was a significant—but achievable—savings story.

Determining Best Practices

The next step in the supply chain globalization process was to identify best practices. This effort began with a review of Whirlpool's current practices, which then were compared against those of world-class companies. Unlike most conventional benchmarking exercises, this effort focused primarily on industries different from our own. We felt that we could get a far more detailed understanding of non-competitors' operations than would have been possible with the competition.

To identify true best practices, reviews were held with durables and non-durables manufacturers, and with consumer and industrial companies. The result was somewhat surprising: We identified several companies that had achieved world-class performance in limited aspects of the supply chain, but none that we felt were world class across the supply chain. (This observation has since been supported by research performed at Michigan State University under the sponsorship of the Council of Logistics Management.) In any event, this "outside the box" approach to benchmarking helped to develop a more robust best-practice target for Whirlpool.

Several existing practices within the company were found to be near world class, and these were obvious candidates for internal transfer. However, in some areas we determined that Whirlpool did not have a good practice. In those cases the benchmarking exercise became a platform for developing new best-in-class or world-class practice. These would be piloted in one business, then transferred across the company.

It is important to distinguish between best in class and world class. A world-class process is truly state-of-the-art in all respects. Best in class, by comparison, reflects the best process given any number of constraints. It is a process incrementally better than most.

In some cases, world class should be the goal. In others, best in class is a more appropriate objective. The difference can be illustrated by comparing product availability in two industries—pharmaceuticals vs. appliances. Pharmaceutical products are small in physical size, and have high dollar density and low material costs (relative to price). Because of these characteristics, companies in this industry can achieve near—100-percent availability by warehousing their products in a few central locations and express shipping daily as needed. This can be viewed as world-class performance.

By contrast, major appliances are large and bulky. They have relatively low dollar density and high material costs. To maintain even 90+ percent availability requires multiple regional warehousing locations and daily truck shipments. To gain a competitive edge in this industry, a company needs to design its supply chain so as to achieve an availability record that is best in class among all the competition.

Best in class can be determined by benchmarking, understanding competitive conditions, determining customer requirements, and by looking forward—not just assessing today's environment. Throughout this exercise, it is important to evaluate both how much you can afford to do and how much you can afford not to do.

Implementation: Planning and Prioritization

Whirlpool recognized early on that senior management sponsorship was crucial to making significant process changes. These changes are complex and can be costly. The senior executive needs to provide guidance to the project team and help it stay the course. Without that support, failure is destined. Either the changes never will be implemented or too much capital (both economic and political) will be expended.

Process ownership and stewardship at the local operating level is very important, too. Local management must understand the nature of and rationale for the change. They must provide adequate staffing and funding.

Execution of the globalization strategy also requires a project team with the proper mix of skills. That mix must bring an understanding of how the business operates today, clarity on the objectives of the new world-class approach, and a thorough understanding of the new business process. This suggests that both those responsible for implementing change and those who will operate under the new process on a day-to-day basis be included on the project team.

Importantly, the team must have the authority to implement true business change. It requires a direct pipeline to the senior management sponsor to overcome resistance and other barriers to change.

The global change-management team drives the new world-class approach and maintains global commonality of the process. The team should provide an unbiased position—without regard to prior practices. It needs to provide advance communication regarding the nature of the change and the related business drivers. It also should communicate success stories from other users to demonstrate the viability and effectiveness of the new process.

Implementation: True Buy-In Needed

Whirlpool's experience in globalizing supply chain processes underscored the fact that successful implementation of the changes demanded full and widespread buy-in. That level of commitment must exist within the project team, at the local or regional business unit management level, and among senior management. Change cannot be forced down from the top without creating anarchy. Nor can it be driven from the bottom of the organization without senior management's support and understanding.

In any significant change-management effort, it is easy to be caught up in the process and expand the project to related (or even unrelated) areas. This temptation must be resisted; project scope needs to remain focused. Without properly controlling scope, the project will flounder. Cost and timing projections will be missed. And benefits will be delayed, diluted, or even lost.

It's equally important to stay the course. The project must be seen through to conclusion in order to achieve the benefits projected. At times it may be necessary for the senior management sponsor to maintain momentum or overcome roadblocks that stand in the way of the project's completion.

To build true buy-in, people need to be involved in the change process early on. It's not fair to "surprise" those whose daily activities will be affected by the change. At Whirlpool, we have found several steps to be beneficial in achieving buy-in:

• Identify the need to change. What are the shortcomings of the current process? Where are we at a competitive disadvantage?
• Encourage participation in the review of alternatives.
• Build the recommendation as a team. Listen to concerns and objections, and address them in the final proposal.
• Recognize that different regions (or plants) have different strengths and skill sets to contribute. Leverage these across the enterprise.
• Show overall company commitment to a successful implementation.
• Be sure that line management is involved in the recommendation, not simply aware of it.
• Be sure to demonstrate benefits at the income statement and/or balance sheet level.

With individual team members often reporting to different line organizations that have different priorities and measurements, the task of evaluating and rewarding a project team's performance has become one of the great management challenges of the late 20th century. Yet for a global effort like Whirlpool's to be effective, the team members must have common objectives. The measurement and reward system also must be team-focused—with extra recognition built in for exceptional contributors. An experienced project manager can facilitate achievement of this team structure.

The team also needs adequate resources to realize the desired result in the desired timeframe. One key lesson learned at Whirlpool was that when purchasing software (rather than developing it in house), team resources still are required to nurture and feed that software vendor relationship. This often requires a full-time staff; it cannot be an afterthought for an already overworked team member.

Implementation: The Cultural Challenges

Although the project management and change-management challenges are common to any project and any location, additional challenges arise when implementing the changes cross-culturally. These run the gamut from decision-making styles to computer literacy.

Though management practice is changing in the Western Hemisphere, there remains some semblance of hierarchy. Decisions reached by someone in authority typically are implemented by those reporting to that authority.

Yet in other cultures, particularly those in the Far East, consensus decision-making is more prevalent. Compared to the West, these cultures spend more time in the decision-making process and generally have far greater debate and discussion. Once a group consensus is reached, however, every member of the team understands the decision and promptly implements the plan. The result is often a shorter, more effective execution process. Yet to someone not familiar with this form of decision-making, the consensus approach may seem laborious. Cultural sensitivity is important.

Americans often pride themselves on fast decision-making, criticizing other cultures for their inability to reach decisions. Those other cultures, for their part, often view Americans as being in too much of a hurry, and not taking time for adequate reflection and review. Again, cultural sensitivity is paramount to succeeding in a cross-cultural environment. Taking the time to find the keys to the hearts and minds of each team member can help reconcile these differing views. Maintaining a focus on the business process at hand provides a common focal point for a cross-cultural team. The process transcends culture; organizational behavior does not.

Our Western "norms" can provide yet another form of bias. The vast majority of business people in the West are computer literate, and most are familiar with the concepts of Windows and a mouse. For some at Whirlpool, it was a rude awakening to learn that parts of the world still function with "dumb" terminals. Even more surprising was the discovery that in certain areas, such as China, computers are an unfamiliar tool altogether!

These cultural differences can be overcome through training and education, yet project plans and timetables must be altered to allow for these added steps. Expectations on the pace of benefit achievement may need to be adjusted as well to allow for the new tools and business processes to take effect.

Sometimes even the fundamentals of Western business pose barriers. As Whirlpool opened its Chinese joint ventures, for example, we found that the concept of making a profit was unfamiliar to many in a country where the heritage is production to quota—not to the benefit of shareholders. Because of this historical perspective, our partners did not immediately see the need for productivity-enhancing tools. Again, project schedules had to be adjusted to allow for appropriate training and education.

Communicating Effectively

Communications are central to any change management effort. In a project to globalize a large company's supply chain, they become absolutely critical. In the case of Whirlpool these changes will ultimately affect the day-to-day responsibilities and activities of two-thirds of our 61,000 people. Thus, it is important to develop effective communications so that:

• Those directly involved in the changes understand the full scope of the supply chain processes and the need for consistent processes around the globe.
• The general company population is familiar with the change agents and project teams, and understands why the changes are being implemented.
• The general population understands that the company's business objectives cannot be met using existing processes and tools.
• Effective supply chain processes will allow improved company performance and achievement of bold, new business objectives.
• Once all of the pieces are in place, the entire organization will be energized.
• Supply chain processes will help the company to become a true global enterprise and obtain competitive advantage.
• People understand why scarce resources should be focused on the supply chain rather than other possible initiatives. Substantial human, financial, and information systems resources are required to bring about change.

An effective communications program will help everyone understand and support the project's objectives. Individuals will be encouraged to take ownership demonstrably and with pride. As the business situation evolves, things change. Other issues may demand people's attention and the focus of those not directly involved in the project shifts. Effective communication reinforces the objectives and advantages of the supply chain projects to the organization. As the benefits are realized (and grow from pilot to full implementation), the message is reinforced.

In a global, multicultural organization certain other communications issues arise. Language barriers, to cite one example, may be greater than perceived. Project teams must realize the difference between being heard and being understood. Understanding is often improved through repetition of key points.

Project teams also must focus on the real—vs. the apparent—barriers. To illustrate, when implementing a warehousing system in the Netherlands, we were concerned about teaching lift truck drivers enough English so that they could operate truck-mounted terminals. Upon reflection, though, we realized that the drivers needed to recognize only eight basic words or phrases. In less than a day they were taught the meaning of "go to," "pick up," "drop," and so forth. They quickly became as proficient in their use of the terminals as any driver whose native tongue is English.

Language is not the only communications obstacle a global supply chain team faces. Character sets can sometimes pose an equal challenge. The Chinese worker who just learned about Windows and a mouse (and now understands the profit motive) still must learn to deal with a Roman character set on the personal computer. Or more likely, U.S.-based Whirlpool must learn how to adapt software tools to work with a Chinese character keyboard. That same Chinese worker now has a set of user documentation written in Mandarin, not English.

Time and cost increase the project implications of the language barrier. For one thing, training materials have to be translated. And because most Western subject matter experts do not speak the local language, they must use translators, thereby slowing the pace of training. Although skilled translators are available, they are scarce—and therefore, expensive. Finally, few translators are skilled in technical terminology. As a result, they may need to seek frequent clarification, causing additional delays. Projects typically take 20 to 25 percent longer to implement where English is not the common language among the users and project team.

In many cultures, the basis for confidence is the personal relationships among project team members. Not surprisingly, then, changes in the team's makeup can be extremely disruptive. American companies in particular can unwittingly aggravate this condition with their frequent reorganizations and promotions—all of which result in changes to the team's composition. It's important that these personal relationships be initiated in person. They then can be maintained electronically (via videoconference, e-mail, and phone), and periodically supplemented by face-to-face meetings.

The distance barrier faced by multi-continent teams must be overcome creatively. Frequent air travel cannot be the only answer. Teams must be able to share information and ideas quickly and electronically. At Whirlpool, videoconferences have become a favored means of maintaining the effectiveness of global teams without constant costly and time-consuming travel. They are used for regular team meetings, issue resolution, and even training. But, again, we don't forget the in-person meetings. If they are ignored or dramatically cut back, the project is placed in jeopardy.

Other means of communication come into play as well. Effective global teams must become comfortable sharing ideas and solving problems via e-mail, fax, and phone. Team members need to develop a 24-hour operation mentality. This is not to suggest that any one individual actually work such hours. Rather, it's a recognition that some business somewhere around the world is operating every hour. When holding team videoconferences between the United States and Asia, then, teammates must recognize that the meeting by necessity will take place during the "off work" time for at least one party. Recognizing this and sharing the disruption of personal time goes a long way toward maintaining harmonious team relations.

Ongoing Sharing of Best Practices

Once a globalization project has been effectively executed in multiple locations (within a country or across countries), there is an opportunity to share best practices, new ideas, and solutions to problems across the geographically disperse users. There's often a temptation to let the users form an informal network on their own. But Whirlpool's experience suggests a better answer: regular, formal user group meetings.

User groups can be an effective means of driving continuous process improvement. They can foster worldwide development of new and creative processes and systems for operating the business, thereby creating continuous improvement. User groups assure global consistency and integrity in processes. They also can be used to design, prioritize, and budget for systems enhancements that can be leveraged across many users, while supporting development of new capabilities.

Whirlpool's globalization effort reinforced the notion that no one part of the enterprise has all of the answers. This became evident at a recent user group meeting at which the European team was outlining new systems enhancements it felt were needed to boost productivity. As the requirements were dissected, the U.S. members of the group recognized that they had previously solved an identical problem without costly enhancements. The real issue was training. The knowledgeable core users in the United States promptly scheduled a training trip to Europe, and resolution of the problem was under way.

Exhibit 5 portrays the organization of a typical Whirlpool user group. The global process owners and the various users participate in the group. They share new ideas and approaches, debate new requirements and changes to the business process, and manage a global enhancement budget.

A Journey Worth the Effort

Where is Whirlpool today? The company is in the midst of its journey toward a globally integrated supply chain. We have designed a global process and reached concurrence that this will be the future process across the enterprise. The "What" portion of Exhibit 4 is operational in North America and parts of Europe and Asia/Pacific. The "Plan" process is operating in North America, Sweden, Argentina, and parts of China. The "Move" process has been implemented in North America and parts of Europe. Rollout of the remaining areas is ongoing at this time.

Will the journey end? Can it end? The answer to both questions is no. Business processes and technology in the supply chain arena are evolving so quickly that by the time one plan is in place, other plans will need to be developed to achieve an even higher state of integration.

What has Whirlpool learned so far? Globalization of the supply chain is crucial. Globalization is hard work. Building buy-in is key. You cannot over-communicate. Cultural differences are real. User groups add real value. These are valuable lessons learned on the sometimes challenging supply chain journey.

Yet despite the challenges encountered, the journey is well worth the effort in terms of the global leverage that can result. Consider the following examples based on a hypothetical company with $10 billion in sales:

• If region-by-region implementation of supply chain initiatives costs 0.5 percent of sales and global leverage can cut that cost in half (a conservative estimate in Whirlpool's experience), the savings are $25 million.
• If ongoing operating costs of those initiatives are 0.25 percent of sales on a region-by-region basis and global leverage can reduce that by 30 percent (again conservative), the savings are $5 million annually.

Given these kinds of numbers, the value of investing in the global supply chain journey quickly becomes clear.