Electrolux has been shaping the home appliance market for more than 100 years during which time it has grown to become one of the World’s biggest appliance manufactures by units sold. It’s leading portfolio brands such as AEG, Frigidaire, and Electrolux are familiar to households across the globe.
Electrolux although a global business has traditionally operated with a regional model, placing P&L responsibility in the direct hands of each regional unit. The challenges of the pandemic have highlighted shortcomings within the supply chain operations. Havard Jorgensen, VP Group Operations Supply Chain Development is tasked with leading the global supply chain transformation program as part of the Electrolux 2025+ Supply Chain (SC) Strategic Ambition. He outlines the task at hand, and why now is the time to act.
Hi Havard, what does your role as VP of Group Operations Supply Chain Development entail?
In my role I lead the Supply Chain Development and transformation plan towards our 2025+ Strategic Ambition. Focus is on an end-to-end (E2E) supply chain capability and performance in the business requirements towards our digital supply chain, and how we fulfil these. It captures our overall capability building, key global process optimisation, and our drive towards advanced analytics to make better and faster decisions. Another top priority is our journey to become more resilient and improve our operational risk management.
You joined in April 2020 and in the space of 12 months have seen your responsibilities change as you now drive a global supply chain transformation. What brought about the requirement to transform?
Electrolux operates through our four regional business areas, each with its own P&L responsibility. They have historically been operating independently, but over the last years the global roles have expanded in scale and responsibility, and now also the Supply Chain business.
The last two years events with subsequent disruptions has demonstrated very clearly that we need to run our supply chain differently and drive scale, build capability and take a full global E2E supply chain approach to our business. With our global scale, suppliers across the world, and significant level of global flows of components and finished goods, a different operating model is required to excel beyond what we have managed to date.
The transformation has been laid out in a 5-year plan with the primary goal of creating a truly global supply chain function. What will this transformation be based around?
The Electrolux supply chain function has a clear intent of becoming a consumer driven supply chain network. One that supports profitable growth, and can cope with events, market opportunities and risks. That will master different existing and future business models and channel requirements. Lastly support innovation, strive for sustainability, and cost efficiency competitiveness.
The plan focuses on seven critical capabilities and four enablers. We will work with these areas through a number of different workstreams. In large we see the work develop across 3 waves:
Supply chain foundation and performance where we implement and accelerate common solutions and focus on key business needs such as OEM flows, Direct to Consumer flows, resilience, and support of business growth.
Simplification and connectivity with suppliers and customers where we successfully address complexity, seamlessly connect with our customers and suppliers, managing demand and supply chain changes efficiently.
Digital and prescriptive supply chain network where eventually our supply chain is a consumer centric network which is fully digitally enabled and orchestrated based on process and decision automation.
The transformation will see significant financial investment over the 5-year period. How important will supplier collaboration and external expertise be to the success of the project?
Within the complexity of today’s global supply chain networks, collaboration with external partners is not only a must, but something we from Electrolux truly want.
We see this across a wide range of areas and allow me to mention a couple of key areas.
Electrolux purchase a significant amount of components and where the structure is setup with Tier 1, Tier 2, and Tier 3 suppliers. Building transparency and process optimisation across this chain can only be done through collaboration with the suppliers involved.
Sustainability is in the Electrolux strategy. We bring in external expertise to support our quest to reduce water and energy usages from our appliances. We also aim to cut our Co2 emissions from our operations and logistics. For instance, we are now bringing together partners to move faster on our journey to roll out electrification in road transport, or in the case of Latin America primarily Biogas. We are collaborating directly with the truck manufacturers as AB Volvo and Scania. We are inviting them to work with our transport carriers, software developers and knowledge experts such as Einride to identify and implement the right solutions. None of us can make this journey alone, so we want to collaborate.
Beyond our own factories, we also operate with a large number of OEM producers. Within this sourcing operation, deep cross functional collaboration with the OEM producers is absolutely key for our success.
A last example is the digitalization of our supply chain, where we want to work together with software providers to pull on the right expertise to ensure we setup our systems and processes in the right way. For example, a couple of years ago we started co-developing the Luminate Control Tower with Blue Yonder.
Another example here could be our collaboration with HCL Technologies, where they in addition to running our Global Engineering Centre, also support in activities related to our Supply Chain Transformation.
Often with such transformation programs the initial stages see the biggest upheaval and quick wins. What are the priorities in the short term and where do you hope to be in 2 years’ time?
I think we can say that there are four workstreams that command a higher priority.
Our global end-to-end planning capability is a critical step.
Transformation for our OEM supply chain setup and the integration of this with the balance of our supply chain processes.
Strengthening the resilience performance to reduce time to awareness, increase time to survive and reduce time to recover will be a key priority.
Lastly, when going through such transformation, we need to ensure we have the right organisational setup to support it, and this is one of the first steps that need to get in place.
In two years’ time, we hope to have made strides within our end-to-end planning capability and that our OEM SC is performing at desired levels. We have implemented a SC resilience model that significantly reduces the impact caused by numerous disruptions to our SC.
We will also have made important changes to our systems infrastructure, and this will be an enabler for further improvements in processes, automation, analytics, and ways of working.
In order to achieve a truly global synergised supply chain within a business that has thousands of suppliers and SKU’s will be a challenge. What areas would you suggest as the biggest challenge to the program?
Yes, it is a great challenge we have ahead of us. We talk about how we need to perform and transform. Over the past 18 months or so our organisation has been heavily focused on the day-to-day performance. Global dynamics around ocean transport capacity, North America transport crisis, component and sub-component shortages are complex and tough to manage. Striking the right balance and energising the organisation to continue to perform whilst at the same time transform is probably the biggest challenge.
At the heart of our supply chain transformation is the access/availability, standardisation, and use of data. There are a number of challenges related to this area, with different levels of maturity across the organisations. The impact this has on the speed and effectiveness of the transformation through it’s different phases is a challenge that we want to master.
Our Sustainability ambition and strategy is very important to us. Within the complexity and breadth of our operations there is no silver bullet to Co2 emission reduction. We have done a lot already, and we shall accelerate further. We need to work on several fronts simultaneously (i.e. types of fossil free fuel), collaborate, dare to fail and be prepared to learn as we go. Whilst direction from company leadership is clear it remains a challenge to establish this agile and open approach throughout the organisations and geographies.
You are an experienced supply chain executive who has had a great career working across numerous industries. In your career you have seen the gradual evolution of the function. If you had a crystal ball, what would you suggest as the main influences of the future of global supply chains?
The “Nostradamus in me” would be careful in making predictions. However, I do believe there are some dynamics that I think will influence a lot.
Disruptions to the supply chain, big or small in scale, broad or narrow impact, will be experienced more frequently. At the core of how companies need to adapt to this is improving the capabilities to become aware faster, to have a structure to increase the time they can survive and reduce the time it takes to re-bounce and recover. Lastly, building a structure that reduces the impact – both frequency and depth.
Companies more capable to do this will have done better in utilizing big-data and applying advanced analytics. They will have found the right balance between people and systems, in sync with AI and automation progresses.
To end, I also believe that consumers during the pandemic have experienced and learned that the supply of goods can be interrupted and delayed. Even to the point that they can acknowledge why and accept it. However, consumers will not be equally forgiving towards lack of visibility and transparency and bad quality and timeliness of information. Companies that can perform successfully and excel with the right consumer communication and relation, will be more successful.