“Treat others as you would have them treat you”
If you want to organise the supply chain properly, you have to take responsibility for the whole chain, end-to-end, says John van Dongen. This is the case at Electrolux Home Products. To achieve the best results, the director Demand Flow Planning & Scheduling Europe stresses the need for a fusion between mission and strategy; a continuous improvement process; and an optimum balance between service and cost. John van Dongen adds that this entire concept is dependent on good people management. It’s not without reason that he was voted Supply Chain Professional 2009 on account of his excellent knowledge and management qualities.
Interview by Edith Kok and Helen Armstrong
The Swedish firm Electrolux, along with Whirlpool and Bosch/Siemens, is a world leader in large and small household appliances. Electrolux introduced the first “lightweight” vacuum cleaner in 1919 and in 2010, had a turnover of around EUR 11 billion. The multi-national’s most recognised brands are Electrolux, Zanussi and AEG, which are present in about 150 countries with a turnover split of 38% in Europe, 32% North America, 16% Latin America, 8% Asia and a further 6% in the professional category.
Last year, the company generated a record operating income of EUR 679 million (6.1% margin); which is tremendous if you compare it to the figure a couple of years ago. Namely in 2008, when the operating margin was just 1.5 % worldwide and 0.0% in Europe. Whilst the recession could partly be blamed for this fall, Electrolux took it as a sign to execute a reorganisation programme including numerous cost-saving activities. After more than two years of decline, total demand for products within Europe increased by 2% in 2010. This went hand in hand with a recovery from the recession leading to the margin in Europe rising to 6.8%. Electrolux employs 52,000 people in 60 countries, with sales extending to 150 countries.
In an attempt to cut costs, the company chose to capitalise on its shared global strength and scope. In early 2009, it set up a new global operations department and centralised its R&D. Purchasing and manufacturing were also centralised in order to unlock synergies, increase modularisation and optimise global purchasing. These initiatives are expected to generate annual cost savings of approximately SEK 2.0-2.5 billion (EUR 209-261 million*), with full effect as of 2015.
Costs for the global initiatives are estimated at approximately SEK 500 million (EUR 52 million*) per year for 2011 and 2012. This turnaround in the company’s operating margin in Europe has partly been attributed to the massive reduction in the company’s stock. Since 2007, stocks of products and component parts have been reduced by around 50%. The man responsible for this was John van Dongen, director Demand Flow Planning & Scheduling Europe. He is in charge of 350 employees in the 16 European production units. He oversees another 350 employees from the demand-flow department within the 35 European sales organisations, and for the last six months, he has been based at Electrolux’s European head office in Brussels. He recently moved to the south of the Netherlands to be closer to the office.
How did you deal with the economic decline of 2008 and Electrolux Europe’s profit of 0.0%?
“It’s our job to support the business by making sure we keep operating costs as low as possible. In 2008, this meant increasing our cash flow and reducing the cost of ordering and the cost of stock. Then it was a case of balancing this with the level of service. We measure this by how often the product reaches the customer at the time agreed, which we managed successfully in 2009 and in 2010. The market in Europe has since stabilised, even grown by 2% thanks largely to growth in Eastern Europe which grew by 13% last year. We have also reduced our stocks dramatically, which was appreciated by the stock market and is something we are still trying to optimise even further.”