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One imagines a typical shopper, pausing in the aisle and mulling over whether to buy a particular brand of toothpaste. In really, such decisions are driven by factors ranging well beyond the moment of impulse.
Consider Whirlpool Corp., the iconic appliance maker. Certainly the company gives a great deal of thought to how its products appeal to the individual consumer. But larger economic trends are at play as well.
Whirlpool, for one, is highly susceptible to the ups and downs and the housing market, which accounts for a large portion of its sales. By monitoring licenses for new construction, the company can learn months in advance when and where its products will be needed, says Michelle VanderMeer, senior director of North American logistics. It can also plan in conjunction with the service partners who provide critical last-mile delivery to construction sites, as well as to retailers’ distribution centers.
Between 50 and 60 percent of the company’s sales come through large retailers, but the construction market still accounts for a big chunk of the business. “It’s a pretty healthy split,” says VanderMeer. “A lot of builders buy through big-box retailers as well.”
General economic trends are, of course, crucial to the company’s health. An improving economy means growing consumer confidence, and with that comes a boost in discretionary spending, such as home remodeling projects.
Consumers hardly lack for choices in the world of large appliances, and cost is a huge factor in their decision. Nevertheless, Whirlpool hasn’t joined the stampede of America manufacturers looking to cut costs by shifting production to China. (And back, if the reshoring trend is real.)
The company does some sourcing overseas, but it maintains “a very, very heavy” domestic manufacturing footprint, particularly in the Midwest, VanderMeer says.
Lots of manufacturers have tried to hang on to local production, whether out of patriotism or a desire to spruce up their public image. Over the last couple of decades, that choice has become more difficult to justify, given the wide disparity of labor rates between Asia and the U.S.
Not a problem for Whirlpool, apparently. “We’re actually seeing that it’s a competitive advantage to manufacture here in the U.S.,” says VanderMeer. “We’ve got a great, talented workforce.” In fact, the company recently brought back some production from Germany. (Which is hardly a paradise of cheap labor, of course.)
With Whirlpool under constant pressure from competitors who manufacture abroad, smart logistics management becomes an important weapon in its struggle to control costs. The company’s products are relatively lightweight, cubing out trucks without approaching vehicle weight limits. Whirlpool is addressing the problem by working with other shippers that can fill out the loads with smaller, heavier items.
One major partnership is with ceramic tile maker Dal-Tile Corp. An average truckload of Whirlpool appliances weighs around 23,000 pounds, VanderMeer says. That leaves room for Dal-Tile’s product to ride on the floor of the trailer. The arrangement covers shipments from Mexico into Texas and other long-haul destinations.
“We take 70 percent of the cube and pay 50 percent of the freight,” says VanderMeer. Whirlpool is open to similar deals with other shippers, although there must be a marked difference in freight characteristics, as well as a commonality of lanes.
Over the past five years, Whirlpool has moved to centralize its freight-planning efforts, through reliance on a load-control center that covers all of North America. Run by Penske Logistics, the operation allows Whirlpool to plan both stock and customer shipments in the same department. The program has made possible more continuous moves, and has sharply reduced empty backhaul miles.
Whirlpool contracts directly with carriers for both inbound and outbound shipments, in addition to relying on a dedicated fleet of trucks operated by Penske in the Ohio region. The company negotiates annual contracts to ensure sufficient capacity and service.
Sustainability is another key aspect of the company’s logistics operation. Whirlpool is a member of the U.S. Environmental Protection Agency’s SmartWay Transport Partnership, which aims to slash transportation-related emissions. In 2010, 87 percent of the company’s carrier partners were SmartWay participants; by 2012, the number had exceeded 99 percent.
“It becomes part of our booking criteria,” says VanderMeer. “When we do a formal bid, one of our requirements is that people are actively using the SmartWay certification. At the end of the day, if they don’t quite have it, we give preferential treatment to SmartWay partners.”
On the facilities side, seven of Whirlpool’s distribution centers are LEED-certified for “green” design and operation. Annual electricity savings in those buildings amount to more 8 million kilowatt hours – the equivalent of 17,000 refrigerators running for a year. In addition, the D.C.s are saving 750,000 gallons of interior water each year, and some 4 million gallons of exterior water, in part through the collection of rainwater.
A growing emphasis on intermodal transportation yields both economic and environmental benefits. VanderMeer says the company is looking to convert as much of its freight from over-the-road as possible. Currently it’s relying on rail-truck combinations for 27 percent of movements, and 55 percent of miles shipped. That’s saving the equivalent of 7.3 million gallons of diesel fuel per year.
A small percentage of freight moves on straight rail, taking advantage of the rail sidings at big-box retail distribution sites. At the same time, Whirlpool is studying the use of trucks powered by natural gas for short hauls in Ohio. “I think we’ll be able to announce a [CNG-powered] micro fleet within the next couple of months,” VanderMeer said.
Whirlpool’s final-mile service is handled by J.B. Hunt Transport, Inc., which took over the company’s local distribution network five years ago. “They no longer just put our freight through that network,” says VanderMeer. “They also haul other shippers’ freight. The operation is truly shared.” And, like Whirlpool’s other key logistics relationships, it goes a long way toward satisfying that complex phenomenon known as customer demand.
