Strategic Sourcing at Whirlpool China: Finding the Ideal Supplier
(5 pages of text)
It was April 10, 2011, when the head of Whirlpool’s Asia International Procurement Office in Shanghai was informed by his colleagues that the company was about to launch a new energy-efficient refrigerator model in just six months. For the new refrigerator model, the basic difference was in the motor; the current AC motor would need to be replaced with a DC motor, which was more efficient but also more expensive. He would have to find a suitable supplier of DC motors in a very short time. Delayed sourcing of components would cause delays in the production of a new refrigerator and result in a later launch of new products. Within the home-appliance industry, the fierce level of competition meant that any delays in launching new products would result in a loss of sales. How should Whirlpool go about the process of finding a suitable supplier for the required DC motor parts? Should the company explore the possibility of developing its current supplier, or should it quickly engage an existing supplier of DC motors?
This case is written for a graduate or MBA course in purchasing and/or supply management, especially one related to setting up or designing a new supply chain. The case gives students a chance to develop their analytical and decision-making skills on a complex strategic sourcing decision. This case should motivate students to think about the important dimensions of strategic sourcing in order to identify, evaluate, and select an optimal supplier. Overall, the case involves the following issues:
- Strategic sourcing: searching, evaluating, and selecting suppliers.
- Single sourcing versus multiple sourcing: pros and cons.
- Technology sourcing versus raw material sourcing.
- Supply risk management: hedging and alternative suppliers, mitigating supply chain disruptions.
- Supplier evaluation and supply-balanced score cards, key performance indicators (KPIs), supplier performance measurement.
- Supplier performance improvement and development.
- Supplier quality management: total quality management (TQM), supplier certification (ISO 9001 and TS16949).
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