WHIRLPOOL CORPORATION

Material Cost Reduction Approach to PLM Value

Abstract
Value can be derived from Product Lifecycle Management (PLM) Systems through improving speed to market, reducing quality costs, improving productivity and material cost reduction. In this session, we will discuss why material cost reduction should be addressed early in a value based PLM deployment and how to execute a material cost reduction strategy. Many PLM systems are justified by the forecasted value obtained by reducing material costs through component rationalization and reuse. However, little provision is made for people being able to find and reuse components. After all, how can you reuse a component if you cannot find it? Since material cost reduction has a direct relationship to profit and loss, it should influence the order in which process changes are deployed. Component rationalization and reuse requires classification and attribute data. Using this data, common components are identified, price variances calculated, data shared with supplies and prices negotiated resulting in lower material costs. A strategy for controlling new part number creation also must be deployed to prevent part proliferation after a component rationalization project.

WHIRLPOOL CORPORATION CONFIDENTIAL

Whirlpool is the #1 major appliance company leading a $120B industry.

$18+ billion in revenues in 2010 Products sold in more than 130 countries
World headquarters in Benton Harbor, Michigan

71,000 employees

66 manufacturing and technology centers

WHIRLPOOL CORPORATION CONFIDENTIAL

March 2011

We grew by acquisition...

Acquisitions Drive Growth

JV Inglis (Canada) JV Brasmotor (Brazil)

KA Purchase JV w/ Philips Roper Brand

China JVs & Purchases JV in Mexico JV in India

Acquired Maytag Polar (Poland) Whirlpool Mexico

Sales

$2.3M
(1942)

$1.1B
(1970)

$3.4B
(1985)

$8.2B
(1995)

$20B
(2007)

WHIRLPOOL CORPORATION CONFIDENTIAL

Many brands and associated products were integrated into one global company.

BEDROOM(S)

Clothes revitalization Room air conditioning Dehumidifiers Air coolers

KITCHEN / DINING OUTDOOR

Grills Cooking centers

LAUNDRY ROOM
Washer, dryer, sink Clothes revitalization Laundry storage solutions

GARAGE
Storage Appliances Workstations Flooring

Refrigeration Dishwasher Cooking

Ventilation Portables Cookware

BASEMENT
Storage Water filtration
WHIRLPOOL CORPORATION CONFIDENTIAL

HVAC Freezers

Air treatment
4

March 2011

We have over 4000 people developing products in 26 countries. Product Development Center Foot Print

WHIRLPOOL CORPORATION CONFIDENTIAL

Innovation is core to our corporate strategy. From a sea of white To a field of innovation

WHIRLPOOL CORPORATION CONFIDENTIAL

March 2011

For example, continual innovation is essential to improving appliance efficiency.

ANNUAL AVERAGE KILOWATT-HOUR USAGE: AVERAGE WATER USAGE IN GALLONS PER CYCLE: Clothes Washers:

69% Reduction

Initiatives:
2000 2001 2003 2004 2006 2007 2008 2009 Integrated Home Solutions; green building Front-load laundry; Low- and zero-energy homes and communities Energy monitoring; GHG reduction pledge Grid-friendly appliances Connected appliances GREENKITCHEN; LEAF House; revised GHG pledge Green Touch for Builders Thermally-connected appliances Smart grid-connected appliances
7

Dishwashers:

61% Reduction

WHIRLPOOL CORPORATION CONFIDENTIAL

Innovation and variation increases demand for new components which we now avoid with our material strategy.
Forecasted Total Component Growth
50 40 30 20 10 0 2006 2007 2008 2009 2010

Features and Product Count

400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 -

Component Count

Started material cost reduction project

60

Total Components

New Componts
New Features / Product New Products / Year

Actual Total Component Growth

160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 2006 2007 2008 2009 2010 60 50 40 30 20 10 0

Features and Product Count

Component Count

Total Components New Components New Features / Product New Products / Year

WHIRLPOOL CORPORATION CONFIDENTIAL

Our PLM strategy was to apply information technology capabilities to materials, product architecture and products.
Materials
Component rationalization

Architecture

Product
Bill of material creation for CAD, parts, assemblies

Processes

New item creation and reuse Data development Collaborative Classification

Module and interface and role governance Item classification

Target costing
Cost modeling Change management

Capabilities

Managing classification, attributes and data

Search & find Workflow Component cost reduction

Managing architecture Managing roles

Managing BOMs Managing Costs

Benefits

Complexity reduction

Predictable costs Sustained cost control

Timeline 2008 - 2009

WHIRLPOOL CORPORATION CONFIDENTIAL

2009 - 2010

2010 - 2013
9

Material management resulted in reductions in platform and component count and improved components per product.
Materials
Component rationalization
New item creation and reuse Data development Collaborative Classification Managing classification, attributes and data Search & find Workflow Component cost reduction
2007 2007 A 2008 2009 2008 A 2009 P 2010 2010 P 2011 2011 P 2012 2012 P Goal Goal 2007 2007 A 2008 2008 A 2009 2009 P 2010 2010 P 2011 2011 P 2012 2012 P Goal Goal

Measurements
Platform Count Product Platforms

Targets

40% reduction

Part Number Count Total Components

35% reduction

Configurability # Components / Product

25% improvement

2008 - 2009
WHIRLPOOL CORPORATION CONFIDENTIAL
2007 2007 A 2008 2009 2010 2011 2008 A 2009 P 2010 P 2011 P 6/16/2011 2012 2012 P Goal Goal

10

Material cost reduction contributed to actual savings to fund Architecture the rest of the PLM strategy.
Materials
Component rationalization
New item creation and reuse Data development Collaborative Classification Managing classification, attributes and data Search & find Workflow Component cost reduction
Module and interface and role governance Item classification

Results: 40% reductions in platforms 35% reduction in Components 25% improvement in # components / product 20% average reduction in component cost Net Cash from Operating Activities

Managing architecture Managing roles

Complexity reduction

2009 - 2010

Product
Bill of material creation for CAD, parts, assemblies
Target costing

2009 $1.5B 2010 $1.1B

Cost modeling
Change management

Managing BOMs Managing Costs

2008 - 2009
WHIRLPOOL CORPORATION CONFIDENTIAL 6/16/2011

Predictable costs
Sustained cost control

2010 - 2013

11

Using our component rationalization approach we lowered material costs and reduced the total number of components.
Materials
Initial Go

Changes to Existing Product

Determine Best Cost Country Sourcing

Structure Data

Component rationalization
New item creation and reuse Data development Collaborative Classification Managing classification, attributes and data Search & find Workflow Component cost reduction

Validate Specifications

Rationalize Components

Establish Cost Targets

Apply Competitive Intelligence

Determine Supplier Strategy

Changes to New Product

Changes to Supply Chain

Component cost count, volume by supplier

Glass component cost by diameter analysis

Part Number Count Total Components

2008 - 2009
WHIRLPOOL CORPORATION CONFIDENTIAL 6/16/2011

2007 2007 A

2008 2009 2008 A 2009 P

2010 2010 P

2011 2011 P

2012 2012 P

12

Goal Goal

Indentifying similar items was essential to determining PO cost change opportunities.

Similar Component Cluster Analysis

WHIRLPOOL CORPORATION CONFIDENTIAL

6/16/2011

13

Addressing material costs resulted in an average savings opportunities of 10%.

Materials
Component rationalization
New item creation and reuse Data development Collaborative Classification Managing classification, attributes and data Search & find Workflow Component cost reduction
Valves Steel Coils Flow Rates, Brackets Gages, Grades, specs 141 1008 74% 60% 36 402 12-18 % 3-5 % Material

Small Sample of Material Savings

Savings Opportunity (hard savings only)

Consolidation Lever

Complexity 2009

Complexity 2011

Resins

Colors, Filler, Specs

384

39%

233

4-8 %

Tier II Electronics Wire Harness Components Brand Badges

Mounting, Ratings Wire Gage, Terminals Housings

2901 2743

74%

754

10-12 %

56%

1783

9-12 % 10-20 %

Common Technology, Adhesive

326

77%

76

2008 - 2009
WHIRLPOOL CORPORATION CONFIDENTIAL

Component rationalization benefits are sustained by reinforcing reuse which requires search and find capability. Reuse
Part Count

Materials
Component rationalization
New item creation and reuse Data development Collaborative Classification Managing classification, attributes and data Search & find Workflow Component cost reduction

160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 2006 2007 2008 2009 2010

60 50 40 30 20 10 0

Features and Product Count

Total Parts New Parts

New Featur

New Produc

Robust Attribute Search and Find

2008 - 2009
WHIRLPOOL CORPORATION CONFIDENTIAL

Most companies load existing components into their PLM which results in inadequate search and find and limits reuse.
Materials
Component rationalization
New item creation and reuse Data development Collaborative Classification Managing classification, attributes and data Search & find Workflow Component cost reduction
Part Number 4619-640-39641 4619-640-49541 4619-640-49541 4619-641-89271 4619-641-89272 4619-644-174 4619-644-17481 4619-644-17481 4619-644-17482 4619-656-98011 4619-656-98011 4619-670-03651 4619-670-03652 4619-670-03652 4619-670-03741 4619-670-03741 4619-670-04821 4619-670-04821 4619-677-40381 4619-677-40381 4619-677-40391 4619-677-40391 4619-677-41671 4619-677-41671 4619-677-50061 4619-677-50061 4619-688-93231 4619-688-93231 4619-688-98531

In most PLM implementations, try finding a bearing that meets specific requirements: outside diameter, race, material, etc. B e a rin g
Type part drawing assembly part part drawing drawing part part drawing part part drawing part part drawing drawing part drawing part drawing part drawing part part drawing drawing part part Status Description released FC BALL BEARING ASSY JET CHEF released BEARING SUPT&THERMO ASSY(SERVI released BEARING SUPT&THERMO ASSY(SERVI released TT BEARING released TT BEARING A6 released BEARING SUPPORT released BEARING SUPPORT released BEARING SUPPORT released BEARING SUPPORT released BALL BEARING released BALL BEARING obsolete BALL BEARING HOLDER released BALL BEARING HOLDER released BALL BEARING HOLDER obsolete BALL BEARING HOLDER 1 released BALL BEARING HOLDER released BEARING HOLDER released BEARING HOLDER released TT BEARING PF obsolete TT BEARING PF released TT-BEARING PF obsolete TT-BEARING PF released TT-BEARING PF obsolete TT-BEARING PF released BEARING released BEARING released TURNTABLE BEARING FUZZY released TURNTABLE BEARING FUZZY 6/16/2011 released TT-BEARING ASSY

People cant reuse what they cant find!

2008 - 2009
WHIRLPOOL CORPORATION CONFIDENTIAL

16

A new item creation process enabled by a workflow limits component proliferation.

Materials
Component rationalization
New item creation and reuse Data development Collaborative Classification Managing classification, attributes and data Search & find Workflow Component cost reduction
Engineer Needs Part

New Item Creation Workflow

Part Preference

Competitive DB Cost Parts

W12345678

Attributes:
Involute Pitch Dia # teeth 12 mm

Yes

Engineering Notice

BOM Release
Preferred Part Found

Approvals based on Preference Level

Consult part catalog

NO

Part Doesnt Exist

DFR
Part logged into Catalog
Attributes: 120V

Part Complete with Attributes Technical Data Updated

Global EN

Global Part Master

ECR
W12345678
Request for New / revision to part

W12345678 Part Release EN Design Part Approval by Global Module Owner

GLOBAL Item # assigned (GIN)

Request for Change

2008 - 2009
WHIRLPOOL CORPORATION CONFIDENTIAL 6/16/2011 17

A data development process with classification and attribute management is required for component rationalization.
Materials
Component rationalization
New item creation and reuse Data development Collaborative Classification Managing classification, attributes and data Search & find Workflow Component cost reduction Classification Structure Data is extract from drawings and entered into the database

2008 - 2009
WHIRLPOOL CORPORATION CONFIDENTIAL 6/16/2011 18

Collaborative classification and attribute management is used to facilitate organization agreement.

Materials
Component rationalization
New item creation and reuse Data development Collaborative Classification Managing classification, attributes and data Search & find Workflow Component cost reduction Classification Structure

Basic Functional Requirements Controlled, yet flexible classification structure development Simple process and workflow Role definition Status and security Inheritance

2008 - 2009
WHIRLPOOL CORPORATION CONFIDENTIAL 6/16/2011 19

Our strategy was to apply information technology capabilities to materials for a value based approach to PLM deployment.
Materials
Component rationalization

Architecture

Product
Bill of material creation for CAD, parts, assemblies

Processes

New item creation and reuse Data development Collaborative Classification

Module and interface and role governance Item classification

Target costing
Cost modeling Change management

Capabilities

Managing classification, attributes and data

Search & find Workflow Component cost reduction

Managing architecture Managing roles

Managing BOMs Managing Costs

Benefits

Complexity reduction

Predictable costs Sustained cost control

Timeline 2008 - 2009

WHIRLPOOL CORPORATION CONFIDENTIAL

2009 - 2010

2010 - 2013
20