Execution to increase competitiveness
How we drive profitable growth
Execution to increase competitiveness
With drivers that prepare us for the future
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Electrolux is developing new modularized product architectures to drive targeted profitable growth and further improve efficiency and quality. Investments in automated and digital manufacturing enable an even more competitive product offering.
The Electrolux global product architecture and automation program is instrumental to driving consumer-relevant product innovations as well as to increase productivity, flexibility and product speed to market. This allows the delivery of competitively priced, high-quality products for both the mass and the premium segments.
Investments in the re-engineering program are expected to amount to a total of SEK 8bn over 4-5 years from 2018. All investments have been announced and relate to the U.S. manufacturing operations in Anderson and Springfield, two facilities in Italy and Hungary as well as two facilities in Brazil. The re-engineering program, together with streamlining measures, is expected to result in cost efficiencies of SEK ~3.5bn by 2024. The investments will also open growth opportunities through the manufacture of innovative products.
Efforts to drive profitable growth and reduce costs focus on three main areas: Product architecture for consumer-relevant innovations, Strategic sourcing and the Automation and digitalization of operations. These areas are supported by a strong focus on continuous improvements and quality.
- Increased pace of consumer-relevant innovations.
- Higher R&D agility and lower product cost.
- Improved flexibility and economies of scale.
Modularization increases the pace of innovation as it unlocks resources for investment in consumer-relevant innovations. Modularization reduces product costs and the product development spend through standardized global modular platforms for new products. Global modular platforms facilitate the spread of successful launches from one market to another, with adaptations to local preferences. Such adaptations are crucial as consumer needs and preferences vary considerably between different parts of the world. Experience shows that modularization can reduce the time from product development to market for a new product by 20–30% and that the investment cost decreases by 15–20%.
Competitiveness is enhanced as new products are to a greater extent designed to allow a higher degree of automation and flexibility in their production. Importantly, modularization leads to increased flexibility by allowing the customization of products using a limited number of standard components. Modular design also increases economies of scale in the sourcing of components.
- The single most important initiative to reduce product costs.
- Global bundling of volumes and focusing on partnership with fewer suppliers.
Strategic sourcing entails a mix of several initiatives to further leverage the company's global scale. This includes further global bundling of volumes as more products are built on shared modules resulting in closer collaboration with fewer suppliers. Longer contracts enable these suppliers to invest in a more efficient production set-up, creating a win-win situation in terms of shared reduced costs.
The global purchasing function coordinates and administers approximately 95% of all direct material purchasing. This is a significant increase compared to the approximate 65% coverage the previous year, and is a result of a reorganization of the function to further leverage the company's global scale. The Electrolux Responsible Sourcing program supports a global effort to make the right decisions on suppliers and promote the sustainability performance of the supply base.
Automation and digitalization of operations
- Strengthening cost competitiveness through improved efficiency.
- Quality gains.
- Digitalization optimizes manufacturing processes.
Production competitiveness is strengthened through increasing the level of automation, primarily resulting in efficiency improvements. In 2019, investments under a comprehensive re-engineering program were primarily carried out at the refrigerator plants in Anderson, U.S., and Curitiba, Brazil, focusing on increasing automation. The Anderson plant will be at the forefront in the appliance industry with an automation level of around 35%, compared with less than 10% prior to the investment. The ongoing re-enginering investment program in the Group is expected to increase capacity utilization by around 20% in 2022 vs 2016.
Products developed to be produced in automated factories need to be robust, and this is reflected in the higher quality of finished products. Quality is further boosted by the fact that quality control carried out by robots is fast and accurate as well as suitable in hazardous environments, thus reducing health and safety risks for employees. This will drive further improvement in quality, building on the strong performance in recent years. In 2019, product quality reached a new record level with a service call rate (SCR) of 2.9%. The Group has ambitious long-term goals to continue to improve quality and drive global quality efforts through the Committed to Quality program.
Sustainability is an important transformational driver to increase efficiency. Electrolux has a clear agenda to improve operational resource efficiency. The average energy consumption per unit produced in 2019 had been reduced by 44%, compared with 2005. The target for 2020 is a 50% reduction.
The digitalization of manufacturing increases efficiency and flexibility. Electrolux is building a digitally controlled and managed environment within factories that monitors operational information in real-time, including data from robots and machines but also from employees. The real-time data is available on a range of devices, including smartphones and tablets, which speeds up reaction times. The factories Kinston, U.S., and Sao Carlos, Brazil, were the first Electrolux fully-connected manufacturing shop-floor pilots in 2018, which have been further developed. In 2019, the Industrial IoT model was further rolled out at our Anderson factory and in 2020 the roll-out will continue across other factories as part of a multi-year plan.
Digital processes for closer collaboration with the company's suppliers and retailers help reduce costs, improve quality and increase flexibility. As part of the digital transformation, Electrolux is building a digitally integrated value chain where sourcing, manufacturing processes and supply chain interact with the market to meet just-in-time product demand.