Whirlpool Reverse Logistics Case Studies Examples

Introduction

The Whirlpool Corporation is the largest manufacturer and marketer of the world in home appliances and is an American multinational organization. The company has been operating for 100 years. The company has an annual revenue of more than US$ 20 billion, with more than 67,000 employees and more than 70 manufacturing hubs across the globe. The company’s operations are widespread in more than 12 countries under 13 different brand names.

Major Concern – Ontario Legislation for Waste Diversion

Whirlpool Corporation was the market leader in household appliances in Canada with items including dryers, cooking ranges, clothes washers, etc. The Waste Diversion Act (WDA) was introduced in 2002 which was the main legislation introduced in Ontario in order to manage waste, reduce it, recycle or reuse the waste to accord to waste diversion program. This program came in collaboration with government departments and municipal representatives in order to effectively operate waste diversion program. This new legislation required that all the manufacturers of appliances must take responsibility for the end of life EOL recycling and collection of waste products. The Whirlpool Corporation was explained regarding the extended producer responsibility (EPR) – the new legislation. With the acceptance of this new legislation, all the appliance manufacturers along with Whirlpool will have to manage and if not then pay to manage a complicated model that involved reverse logistics. There were three main options to choose from that will be discussed further, and Whirpool had to decide one suitable option that met its needs and requirements.

Manufacturer Issues

There were three major issues all appliance manufacturers had to address before discussing the three available options and which suitable option to choose from. The first major issue was how to comply with the legislation. It required tracking down of the old appliances throughout their life-cycle in order to ensure that their diversion targets were satisfied and fulfilled. The data management and tracking of electronic appliances was the most integral part of the newly approved ERP framework. However, it was also stated that many companies underestimated the severity of the compliance issue. The reason being, the new ERP legislation required to locate around 75 percent or more diversion targets and various penalties and fines was imposed if the diversion targets were not met by a business.
The second major concern that was important to be identified before analyzing the three available options was that the manufacturers had to compete with unregulated recyclers based on their economic interests. The new Ontario legislation banned the discarding of appliance waste in water, but it did not make harvesting of valuable commodities such as plastic and steel illegitimate. It was economically viable for scavengers to collect and recycle the old appliances waste; it was a concern that the new Ontario legislation would affect this business model.
The third major concern was the continuous improvement in the vicinity of waste material. Different manufacturers had vigorous processes implanted that operated for the balance of ozone depleting substances during the manufacturing process. This worked with permission of provincial laws and government agencies that required recyclers efficiently to manage ozone depleting substances of major concern at EOL.

Issues with Whirlpool Corporation and three possible solutions

Even if the issues were resolved as far, the entire appliance industry was concerned, they still existed for WhirLpool Corporation. There were three major options to choose from:

Join Industry Funded Organization (IFO)

Establishment of their own Industry Funded Organization (IFO) in order to meet the guidelines of EPR themselves, through a closed loop system or,

Join Industry Funded Organization (IFO)

An Industry Funding Organization (IFOs) is industry organizations that operate independently and are created by WDO so that they manage, fund and properly establish the waste management system in Ontario. An Industry Funding Organization (IFOs) does not receive any funding or assistance from taxpayers or government organizations. Hence, they are only answerable and accountable to WDO. The fees and all financial expenses of this organization are covered by industry, which is utilized for collection of waste products, transporting this waste to a suitable area and appropriate recycling the waste or disposal of designated material. The benefit of joining an IFO was that they managed every confidential business information on behalf of their stewards. If Whirpool, shifted its core responsibility to IFO, it would be able to focus on its current business responsibilities without having to worry about the new legislation in place.
This step involved some major issues as well. According to the company, they significantly invested in research and development so that designed product was more environment-friendly, green and easy to deconstruct. Under IFO, all the expenses were averaged through stewards in industry on weight or per piece basis. This would result in the company losing its competitive advantage as the competitors who have created their products to be more recyclable as compared to Whirpool, will be able to benefit from the underserved cost benefit due to greener design whereas, their less recyclable and green design will financially impact other companies under IFO. This will in turn encourage many competitors to not spend on research and development of designing greener products and rely merely on continuous product improvement of companies like Whirlpool that have joined IFO to decrease their overall IFO costs and not take appropriate steps to improve their designs. Another issue with IFO was that it required an additional 20 percent upfront amount in the Blue Box program in order to make continuous improvement and further investment in IFO.

Closed Loop System

The closed loop system was the section option which required that Whirlpool Corporation develops its own organization that was funded by the company itself to collect its appliances which would economically benefit the company in return. The closed loop system is considered to be a sustainable approach to managing the life-cycle of the product and also manage the materials that are not consumed safely. This means that waste products cannot be easily deconstructed or eliminated through biodegradation or recycled back to manufacture a similar product.
If Whirlpool Corporation utilizes the closed loop system, it will help in gaining complete control of the consumer products and overall consumer and company costs. However, it demands extra costs as compared to IFO as the manufacturer has to incur all the additional costs, even if the closed loop system, is designated to the third party to be accomplished. The closed loop system will help Whirlpool retain complete responsibility for its product design, reuse and waste management. This would also protect the product design and will balance the level of competition.
The negative impact of closed loop system was that it would completely, strain the logistics network of Whirlpool Corporation that is used to selling and distributing electronic appliances only. Even though the management was well aware that IFO was an expensive option to implement, but asking their retailers to collect products and return them back to Whirlpool will result in a good amount of resistance from their customers. The second issue in implementation of closed loop system was that the vehicles that were used to deliver products to retailers and the vehicles that retailers used to deliver products to customers, did not have the capability to collect old appliances. Lastly, the regional distribution centers of the company were not designed to handle large-scale returns and waste products currently.
The last option with Whirlpool Corporation was to fight the ERP legislation. The reason that this option was in place was there was a significant amount of relevant data in place that presented the options that industry was working towards improvement of waste management and that this legislation was not required. According to the company statistics that almost 95 to 99 percent of household appliances that were discarded are being recovered from landfills or the company can choose to accept that this new legislation must become effective from 2010. Another reason to fight this legislation was that when the appliances were recycled at the end of their life-cycle, the scrap price was paid to the company for glass and metals. A third major reason to fight this legislation was that the company would find it difficult to locate the old appliance as serial number technology was different from every manufacturer which made the tracking process relatively difficult.

Final Recommendation

The final recommendation to Whirlpool Corporation would be to implement closed loop system. The major benefit of this was that it would help Whirlpool in gaining complete control of the consumer products and overall consumer and company costs. The closed loop system can be used with similar rules and procedures as implemented within the company itself, even if the task is assigned to third party. This will result in an expansion of the overall logistics system along with the development of new serial numbers and tracking system. Once the closed loop system will be in place, there will be minimal operational cost. Through this program, the retailers and customers can be rewarded for returning the old appliance back to Whirlpool for recycling.

Conclusion

The Whirlpool Corporation is the largest manufacturer and marketer of the world in home appliances and is an American multinational organization. The company has been operating for 100 years. The Waste Diversion Act (WDA) was introduced in 2002 which was the main legislation introduced in Ontario in order to manage waste, reduce it, recycle or reuse the waste to accord to waste diversion program. With the acceptance of this new legislation, all the appliance manufacturers along with Whirlpool will have to manage and if not then pay to manage a complicated model that involved reverse logistics. There were three main options to either join IFO, to establish their own IFO through closed loop system or to fight the new ERP legislation and Whirpool had to decide one suitable option that met its needs and requirements. The final recommendation was to implement closed loop system which is considered to be a sustainable approach to managing the life-cycle of the product and also manage the materials that are not consumed safely.

Reference

The Whirlpool Corporation: Reverse Logistics