Operational excellence

Electrolux continuously strives for operational excellence by optimizing production, leveraging its global scale and strength, reducing tied-up capital, improving efficiency within sales and administration as well as work to become more resource efficient.

Competitive manufacturing 

Since 2004, Electrolux has gradually restructured its production through a program for optimizing the manufacturing footprint. The production program is expected to be completed in 2016. About one-third of the Group’s manufacturing has been moved, primarily from Western Europe and North America, to new production centers. About 20 plants have been closed, several plants have been downsized and new production centers have been opened, mainly in low-cost areas, see page 35. These new production centers have been established both to reduce costs and to support strategic growth markets in Asia, Mexico, Latin America, Eastern Europe and Northern Africa. In 2014, about 70% of the manufacturing was carried out in low-cost areas, compared with 28% in 2004. In 2014, total capacity utilization exceeded 60% and, when the manufacturing footprint project is completed, utilization will be increasing with an ability to temporarily increase production to meet demand peaks. 

In 2014, refrigerator production was concentrated in the Asia/Pacific region to Rayong in Thailand. The cooking plant in L’Assomption, Quebec, Canada, was closed and production transferred to the new plant in Memphis, Tennessee, in the US. 

In Europe, discussions were initiated with employee representatives regarding production in Mariestad, Sweden, and in Schwanden, Switzerland. A decision was taken to cease Electrolux production at the plant in Schwanden. In addition, a number of structural measures was implemented to reduce overhead costs, primarily within Major Appliances Europe, Middle East and Africa.

A number of programs aimed at enhancing efficiency is ongoing within the Group. The Electrolux Manufacturing System (EMS), which was launched in 2005, has been implemented at all production units. The program focuses on continuous improvements in terms of product quality, costs, inventory optimization, occupational safety and environmental impact. 

The EMS continued to make a positive contribution during the year. The manufacturing cost per manufactured unit for major appliances has declined significantly since 2010 and, since 2005, energy use per unit produced has decreased by 42%. Through the Green Spirit program, which is an integral part of the Electrolux Manufacturing System, targets are set to continuously reduce resource use and waste. Improved energy efficiency lowers energy costs by more than SEK 375m a year, and means a reduction in emissions by 200,000 tons of carbon-dioxide compared with 2005. The Green Spirit program aims to reduce energy usage by more than 50% by 2020, as a part of the 50% CO2 target.

Economies of scale in global operations 

The major activities to leverage and benefit from the scale of the Group are: 

• Coordinated purhasing for raw materials, components and finished products. The global purchasing function coordinates and administers more than 60% of all purchasing. 
• Faster and more efficient processes for product development through global, cross-border units for product development, design and marketing. 
• Lower product development and product costs by using standardized global modular platforms for new products. The target is to reduce time-to-market by 30% and reduce the number of variants by 20%. 

In 2014, the efficiency initiatives continued, while modularization accelerated and now covers more product groups. Modularization has led to a greater efficency not only in product development and marketing but also in production, since fewer production platforms are required. The next step in modularization is to create a more efficient way to automate and configure products. 

Capital efficiency 

For several years, Electrolux has worked intensively to reduce tied-up capital in the Group. In addition to Group-wide measures to streamline and optimize manufacturing, each business area is working on reducing working capital to release resources that can instead be invested in growth activities. The work focuses primarily on four areas: trade receivables, accounts payable, inventory and purchasing. The working capital program has resulted in an increase in the capital-­turnover rate and a reduction in structural working capital. 

The structure of Group capital expenditure has also changed over the last five years to more expansionary investments and fewer maintenance investments. Investments in product development have more than doubled and investments in plants have been reduced. 

Efficient sales and administration 

Efficiency within sales and administration is driven by items including shared IT systems and service centers for finance and accounting. Efficient, shared processes are being developed for the launch of new products. Legal entities are reviewed and merged continuously to create shared infrastructures for all regions.

Resource efficiency

Electrolux is committed to sustainable growth and, accordingly, efficient use of resources comprises a key component of its streamlining initiatives. Through the Green Spirit program, which is an integral part of the Electrolux Manufacturing System, targets are set to continuously reduce resource use and waste. 

The materials used in household appliances comprise, primarily, steel, plastic and electronic components. Savings in materials are achieved by optimizing the use of materials and their weight, without compromising product performance and quality. 
Electrolux is phasing out chemicals of concern. New scientific findings and stakeholder requirements are used to update the Restricted Materials List (RML). 

The aim is to increase the proportion of recycled materials in new products. Up to 70% post-consumer recycled plastic is used in selected vacuum-cleaner models. 

Energy use and carbon-dioxide emissions have high priority, and Electrolux has targets for absolute and relative reductions. The average energy consumption per unit produced in comparable plants has decreased by 22% during the last five years. 

For society as a whole, over 25% of global carbon-dioxide emissions derives from the transportation sector. Electrolux has set a target for its main markets to annually reduce emissions by 3%. Water shortages are a major problem in many regions. Electrolux has a long-term commitment to help improve management of limited water resources. Two years ahead of schedule, in 2012, the Group achieved the 2014 goal of a 20% reduction in water consumption in operations. 

Together with World Wildlife Fund, Electrolux mapped water-related risks associated with Group factories. As a result, new and more stringent targets are set for factories in water-stressed areas.

Product life cycle

The product life-cycle approach guides the Group in reducing its environmental impact by indicating the degree of impact in the production of raw materials, manufacturing, transportation, use and end-of-life treatment.

The most significant environmental impact for Electrolux is energy and water consumption when products are used. Accordingly, the design and development of products with increased efficiency is a top priority. The impacts from manufacturing and transport are significantly smaller, but still addressed.