Innovative initiatives by Whirlpool Corp and Becton Dickinson’s International Distribution Services have demonstrated how a quick-response perspective can enable the “mass customization” of products and services. Whirlpool developed a network of integrated logistics centers and a “Quality Express” transportation fleet to cut its order cycle period from two weeks to 24 hours.
Today’s most innovative companies are rapidly embracing mass customization. It gives them the freedom to incorporate greater variety and individuality into their products and services while maintaining profitable price points. That’s according to Mass Customization by B. Joseph Pine II.
In my last column, 1 noted the universal concern for dramatically improving (i.e., reengineering) business processes that tie supply chain partners together, particularly order management. Responses to that column confirm that companies of all stripes are targeting order management links for strengthening.
A fundamental method Pine cites for achieving mass customization is providing quick response (QR) throughout the value chain. The vision of QR is to have “the right product, at the right place, at the right time, at the right price,” which requires maintaining a supply chain perspective of company processes while linking them electronically. Readers have provided the following examples of how taking a QR path can lead to mass customization.
Maintaining a supply chain perspective. In the late 1980s, Whirlpool Corporation’s inability to meet service requirements of long-standing customers like dealers and contractors began to undermine business. Home centers and globalization threatened traditional distribution channels. Whirlpool senior management’s supply chain reengineering initiative linked plants with dealers and, ultimately, with consumers. Whirlpool’s vision was to supply any customer, any day, with as little as a single unit of product within 24 hours. That’s a tall order considering that more than three million units of 950 different models are produced annually in Whirlpool’s five major US plants and are inventoried in hundreds of dealer warehouses.
Using cross-functional teams, Whirlpool took a total supply chain perspective and challenged old axioms like a full dealer is a happy dealer.” The team identified an opportunity to leapfrog competition by integrating and outsourcing all regional logistics activities. Using a network of strategically located, integrated regional logistics centers and its “Quality Express” transportation fleet, Whirlpool slashed order cycle time from 14 days to 24 hours, significantly reduced costs, and took large quantities of inventory out of the supply chain. Furthermore, improved service levels have delighted customers, raising Whirlpool’s service rating to first in its industry. Whirlpool’s Quality Express program is an outstanding example of vision-driven supply chain reengineering.
Information cornerstone. Pine also states that the key to success in providing QR throughout the supply chain is making critical information available to all parties through constant communication linkages, common databases, and multi-functional and cross-functional teams.
Tom McDonnell, manager of information technology in Becton Dickinson’s (BD) International Distribution Services, shows us how this theory works. The company’s Worldwide Interco Logistics Information System (WILIS) closes information gaps in the supply chain and dramatically improves customer service.
For many years, BD’s overseas operations had difficulty competing. Maintaining safety stock and tracking orders through manufacturing, freight consolidation, loading, and shipping phases Of the replenishment cycle proved difficult. High inventories, poor service, and recurring “air shipments” were often blamed on information gaps. Like many companies, status reports, telephone calls, and faxes substituted for a tracking mechanism.
BD overcame its shortcomings by reengineering the process of communicating supply chain information. The result: the WILIS system which serves 83 overseas users – (mostly inventory planners, administrators, and traffic coordinators – who collectively make several thousand inquiries monthly from their desktop personal computers or terminals. WILIS makes BD personnel available 24 hours a day to customers anywhere in the world, substantially improving customer service while eliminating costs associated with premium transportation.
Whirlpool and BD are two among many good examples of supply chain innovation that would make excellent subjects for future discussions. I encourage you to send me details on your experiences as well as input on the following topics:
* What seem to be your company’s major stumbling blocks to improving your ability to customize goods and services? * What recommendations do you have for increasing the pace of change? * How has your organization taken advantage of technology and information to improve its logistics processes?
I know many of you have made great progress in these areas and I hope you will be willing to share your lessons learned.
Kallock is chairman and a founder of Cleveland Consulting Associates, the supply chain management practice of CSC Consulting, and is a national leader in the field of distribution planning and operations. He was awarded the Council of Logistics management’s Distinguished Service A ward, based on his 20-plus years of solving complex logistics problems for more than 200 major companies – both shippers and carriers. He has also lectured and published articles on the subject of reengineering business logistics, and is an expert in the use of information technology.