Haier, the Kingdom of the Home Appliances

        Haier is the one of the largest white goods and other home appliances company in the world; they overtook Whirlpool in 2009 to become the #1 brand of major appliances. 30 years ago, Haier started as a small company in Qingdao China. In the beginning, they almost went bankrupt, but today, Haier’s market value is more than 18.2 billion US dollars. (Who is Haier) Also Haier is the first Chinese company has come to the US and builds a factory here.

        One unique concept about their supply chain management system is that they use an ‘order oriented production, sorting and distribution system’. The basic idea is that production and the ordering of new parts is based on new orders. The biggest benefit of this concept is that they do not have big inventories, which has lowered their holding costs and their inventory turnover rate is faster than other firms in their industry. With this system, they can respond to changes in demand very fast, which helps with new innovations and their ability to meet the costumer’s needs and wants. Also, this has been an effective way to gain market share, so that Haier keeps its world leading position.

        To optimize their supply chain, they cut their suppliers. They have reduced their suppliers from 2,336 to only 840 suppliers around the world; and many of the selected suppliers have their own production factories near Haier’s industrial park. This helps Haier save about $1.6 million in transportation costs each year. Haier suppliers cooperate with Haier for new product developments to achieve a win-win effect.

        Since Haier only purchases the material that their customer orders dictate, they have reduced their inventory turnover time from 30 days to 12 days, and reduced half of their warehouse area, so they are fast moving flows of their products, capital, inventory and cash-on-hand. The most important result, they get from this concept is flexibility. But if they only produce based on orders, how can they deliver on time? They make up that time with their logistics expertise and advanced tracking system. In China, they have 6 factories and 42 logistic centers, and over 16,000 vehicles. This allows them to promise delivery in 8 hours in major cities, such as Beijing, Shanghai, and Guangzhou, 24 hours outside of major cities, and 48 hours nationwide. To ensure the customer will be satisfied with their service and products, they use a barcode tracking system to give the customer a worryless shopping experience.

        Haier’s most serious threat is their supplier risk. Since they have reduced their suppliers, if any of their suppliers fail or have trouble keeping up with demand, they may have serious delays on their orders.

 More information links:

• http://www.haier.com/us/
• https://www.youtube.com/user/haieramerica/featured

Reference:

• http://www.ceibs.edu/barcelona_c/images/20110329/31019.pdf
• https://supply-chain.org/f/5-A%20General%20Model%20of%20Supply%20Chain%20Visibility_0.pdf
• http://iimm.org/pdf/Qi%20Yan.pdf