Helping Create a New Business Model for One of Our Customers
Overview
One of the largest appliance manufacturers in the world, Whirlpool, has been a Kenco customer since 1979. Today, Kenco manages five regional distribution centers (RDCs) across North America, totaling 4.5 million square feet for Whirlpool.
In the summer of 2016 Kenco’s Canada location started a refurbishment program for Whirlpool. It was a rudimentary project that used pilfered parts from returned damaged goods; and “Frankenmashed” a working unit for resale. It is a brilliant concept, but it was not being executed to the fullest potential.
Challenge
Kenco’s customer initially had the process of grading and testing with the option to buy the units outsourced to a 3rd party vendor. The cost to Whirlpool for this service was $28 per unit. The result of this process was only 6% of the total of units returned were refurbished.
Kenco suggested to bring this service in-house and develop standard work for the new process to grade, test, and refurbish eligible units to create a leaner and more efficient working environment, as well as creating testing areas at the warehouse. By developing a new layout and moving the refurbish department close to the warehouse store, Kenco’s goal was to reduce travel time waste and increase utilization of the dock doors through this process.
Kenco then performed elemental time studies using Quetech software to accurately determine how much labor/time it took to test each gas or electrical unit.
Also, Kenco used a document to aid employees to classify the damaged units into five categories – the first category (A) would be no repair, the fourth category (D) is beyond repair, and the fifth category is the finished goods received. Please see below examples of classification of categories B-D.
Finally, Kenco created clean, well-organized, and efficient work/testing stations for each technician working on a unit. Thus, allowing the technician to perform not only cosmetic repairs but also technical repairs of the units; increasing the potential of volume to turnover and improve sales revenue for Whirlpool.
Results
The 2017 results compared to 2016 results were remarkable. For the same period in 2016, Kenco was able to increase the number of units refurbished from a total number of returned units from 6% to 24.8% in 2017. The cost per unit reduced from $28 to $12.40 and with the new average price of $762 to sell a unit, resulted in a profitable sales revenue for Whirlpool. The combined savings was $1.7M for this period. The projected annual savings and profit projected for full layout implementation and capacity of 250 units per week at this site is $6.7M.
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