Outsourcing in GE AppliancesOral Presentation on the outsourcing topic in Supply Chain Management module.Presented by: Andre Bina PossattoProfessor: Alexa Kirkaldy

IN

GE and GE Appliances

GE GE Appliances

Created in 1892 by a merging[1]. Manufactures a big range of

different kinds of electric products[2].

8th in Fortune’s 500 list of biggest American companies[3].

Started manufacturing in other countries around 30 years ago trying to make the business more profitable. Used both joint ventures and outsourcing to emerging markets[4].

Grew due to demand for appliance products in the economic expansion of the 1950’s[5].

Based on Appliance Park, Kentucky. Decline of the site after numerous

outsourcings, leaving many of the assembly lines unused for years[4, 5].

Considered selling the business in 2008[4, 5].

Now a symbol of America’s manufacturing renaissance and insourcing. But how?

Recent movement that consists in taking outsourced parts of the supply chain back to the company’s ownership.

“The reversal of outsourcing, transfers jobs from a domestic or foreign contractor or supplier to the internal operations of a business”[6].

Different from reshoring: “Viewed as the reversal of outsourcing and includes transferring operations from a foreign location (a company’s resident global operations or a third-party contractor) back to the country of origin”[6]. But…

In a lot of the cases insourcing and reshoring come together, attaching both of then to the same trend.

Introduction to Insourcing

Wages and oil prices Basically all the risks of outsourcing in the literature. Difficult to inovate in process and products when design

and manufacturing are oceans apart[4]. Hidden costs[12].

Main Drivers to insourcing

From an attempt of selling to $1 billion in investment ($800 million in Appliances Park). Why?

Insourcing at GE Appliances: Why

Strenghts:-Investment capacity-Innovation tradition

Weakness:-The size makes it slow-Work force was not skilled at that time

Opportunities:-Vacant facilities-State incentives in the US-American Universities and skilled work force avaliable

Threats:-Old suppliers-High costs in Asia-Trend shifts

SWOT of GE Appliances

60% less inventory[4]. 68% reduction in production

lead-time[4]. Labor efficiency improved by

30%[4]. Redesign of all appliance

products[14]. Total cost of ownership smaller

than in China[14].

Insourcing at GE Appliances: How and results

Uses more technology.

Lean approach to

manufacturing.

Few well trained

employees can work

better and innovate.

Team mentality

and ownership

Colaboration with unions.

[1] http://www.ge.com/about-us/history/1878-1904 acessed in 18/11/2013 at 17:30.

[2] http://www.ge.com/products/ acessed in 18/11/2013 at 17:34. [3]http://money.cnn.com/magazines/fortune/fortune500/?

iid=F500_sp_toprr acessed in 15/11/2013 at 02:42. [4]Immelt, J. R., The CEO of General Electric on sparking an

American manufacturing renewal, Harvard Business Review, 43-46, March 2012.

[5]Power, Brad, Insourcing at GE: The real history, Harvard Business Review Blog Network, 2013. Avaliable in: http://blogs.hbr.org/2013/07/insourcing-at-ge-the-real-stor/ acessed in 15/11/2013 at 3:42.

References

[6]Burton, T. T., Outsourcing revisited, Industrial engineer, 34-39 May 2013.

[7]http://www.clb.org.hk/en/content/wages-china acessed in 15/11/2013 at 03:12.

[8]http://www.forbes.com/sites/billconerly/2013/05/01/oil-price-forecast-for-2013-2014-falling-prices/

[9]http://www.china.org.cn/opinion/2012-02/13/content_24624457.htm acessed in 15/11/2013 at 02 53.

[10] http://rupabose.com/2010/10/25/asia-upward-wage-pressure/ acessed in 15/11/2013 at 04:21.

References

[11]Goel, A. K., Moussavi, N., Srivastsan, V. N., Time to rethink offshoring?, McKinsey Quaterly, 4, 108-111, 2008.

[12]Porter, M. E. and Rivkin, J. W., Choosing the United States, Harvard Business Review, 80-93, March 2012.

[13]Vitasek, K., Ledyard, M. and Manrodt, K., Vested outsourcing: five rules that will transform outsourcing, 1st

edition Palgrave Macmillan, New York, 2010. [14]Moser, H., Manufacturing, Economic Development journal,

12, 5-12, 2013. [15]Alini, Erica, Assembly Line Renaissance, Maclean's, Vol.

124 Issue 29/30, 54-54, 8/8/2011.

References

[16] http://www.bloomberg.com/news/2013-05-14/ge-s-last-consumer-stand-gets-1-billion-plus-new-chief.html acessed in 19/11/2013 at 10:04.

References

Thank you for the Attention! Questions?

EXTRA! Profit Appliances: 316 million$ Revenue: 8b$ (4% profit margin) Last link tot he consumer. Brand equity.

GE and GE Appliances

GE GE Appliances

Created in 1892 by a merging[1]. Manufactures a big range of

different kinds of electric products[2].

8th in Fortune’s 500 list of biggest American companies[3].

Started manufacturing in other countries around 30 years ago trying to make the business more profitable. Used both joint ventures and outsourcing to emerging markets[4].

Grew due to demand for appliance products in the economic expansion of the 1950’s[5].

Based on Appliance Park, Kentucky. Decline of the site after numerous

outsourcings, leaving many of the assembly lines unused for years[4, 5].

Considered selling the business in 2008[4, 5].

Now a symbol of America’s manufactruing renaissance and insourcing. But why?

Recent movement that consists in taking outsourced parts of the supply chain back to the companies ownership.

“The reversal of outsourcing, transfers jobs from a domestic or foreign contractor or supplier to the internal operations of a business”[6].

Different from reshoring: “Viewed as the reversal of outsourcing and includes transferring operations from a foreign location (a company’s resident global operations or a third-party contractor) back to the country of origin”[6]. But…

In a lot of the cases insourcing and reshoring come together, attaching both of then to the same trend.

Introduction to Insourcing

Main Drivers to insourcing (1)

Wages[7] Oil Prices[8]

Basically all the risks of outsourcing already discussed in the literature.

Difficult to inovate in process and products when design and manufacturing are oceans apart[4].

Hidden costs[12].

Main Drivers to insourcing (2)

Hidden Costs

Other companies: Catterpillar, Apple, Ford, New Call Tellecon[14, 15]...

Companies

Created in 1892 by the merging of Edison General Electric Company and the Thomson-Houston Company [1].

Manufactures a lot of different kinds of electrical product, from lamps to turbines[2].

8th in Fortune’s 500 list of biggest American companies with a gross revenue of 146, 9 bU$ and profit of 13,641 bU$[3].

Started manufacturing in other countries around 30 years ago trying to make the business more profitable. Used both joint ventures and outsourcing to emerging markets[4].

GE: history and outsourcing

Demand for appliance products in the economic expansion after World War II[5].

Used to be based on Appliance Park, Kentucky. The site had peaked with more than 20.000 employees in early 1970’s[5].

Decline of the site after numerous outsourcings, leaving many of the assembly lines unused for years[4, 5].

Considered selling the business in 2008[5]. Now a symbol of America’s manufactruing renaissance and

insourcing. But why?

GE Appliances

GE and GE Appliances Insourcing Main drivers to insourcing Insourcing at General Electric References Questions and answers

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