1. General Electric:
Major Appliance Business Group

2. GE Overview
Introduc
tion
Issue
Analysis
Decision
Analysis
Conclusi
on
Major Appliance Business Group (MABG)
Kitchen appliances
Refrigerators
Home laundry appliances
Ranges
ovens
Microwaves
Disposal
units
Dishwashers
Dishwasher Performance (1973-1979)
250,000
235,078 3.5%
220,407
200,000
150,000
194,168
168,190
3.2%
3.0%
2.8%
138,726
100,000
2.1%
2.5%
2.3%
2.2%
2.0%
50,000
0
2,913
1975
1976
Sales
4,466
3,700
1977
NetIncome
6,171
1978
Net Income to sales
7,522
1.5%
1979
1

3. Background
Introduc
tion
Issue
Analysis
Decision
Analysis
Conclusi
on
Early
1970s
Dishwashers had quality problems despite market shares exceeding 20%
Medium Quality(Rust, Noise and High energy use)
1971
Deployed PermaTuf A as new high end model
1973
Deployed PermaTuf B as core of GE line and Model C as low-cost version
1976
Introduced GSD 1050 (Model A)
Lower than planned
Additional $4M investment
1978
Dec
1979
1980
Nov
1980
Introduced GSD 1200, GSD 1000, and GSD 900 (Model B)
Lower than
planned
Ready to crate Model C as low-end dishwasher
Approved for $28M investment for Project C
Recession year
• Lower volumes and profits than planned
• Layoffs in Louisville of 17% (almost 2,000 employees)
Decide which modifications Tom needs to execute
2

4. Goal of this project
Jack Welch Request
Introduc
tion
Issue
Analysis
Decision
Analysis
Conclusi
on
Became CEO in 1981
 A world class product design and a world class factory
 Automation and manufacturing competitiveness in quality and cost
 Addressing workforce issue
 A model for worker involvement and significantly improved worker attitudes
and value-added
Goal of Project C
 A chive worldwide dishwasher industry leadership in product quality and
profitability
 Achieve world class leadership in process quality, productivity, and quality of
work life; and
 Achieve increased job security through high quality, low cost products that
gain increased market share
If project C becomes a model for GE business
and provide strong Financial return, Jack is willing to consider more capital.
3

5. Issue
1.
2.
3.
4.
5.
Introduc
tion
Issue
Analysis
Decision
Analysis
Conclusi
on
Improving the quality of the factory environment
Skills training in technical problem solving
Revision in GE’s management information and support systems
Adding a value engineering development cycle
Drop (postpone) construction of the integrated computer control room
Issue
“Which modifications should be applied for Project C?”
Project
C
To be World Class
Dish Washer
Manufacturer
4

6. Options
Introduc
tion
Issue
Analysis
Decision
Analysis
Conclusi
on
3) Go back to the board of
directors for authorization
of budget increase
1) No change…..Wait until project
C is completed in mid-1983
2) Go ahead now…..increase
no more than $2.8 million (10%)
5

7. Decision Criteria
Introduc
tion
Issue
Analysis
Decision
Analysis
Conclusi
on
Issue: Which modifications should be applied for Project C?
Original project C
Modification
was approved by the board
of directors in 1979
What What shouldbe
should be
considered?
considered?
Current situation
 Jack Welch’s vision
 Recession
 Lay off
How to evaluate
each criteria?
6

8. Decision Criteria
Introduc
tion
Issue
Analysis
Decision
Analysis
Conclusi
on
Project C aims at
Worldwide leadership in
product quality and
profitability
World class leadership in
process
quality, productivity, and
quality of work life
Job security through
high quality, low cost
products, increased
market share
All should be achieved for the success of Project C !
1) Product / process quality
Reducing complaints?
Reducing cost, Increasing sales?
2) Timeliness
Not causing delay for Proj. C?
3) Positive impact on HRM
Improving motivation,
Increasing skilled workers?
7

9. Decision Criteria
Introduc
tion
Issue
Analysis
Decision
Analysis
Conclusi
on
The decision for the possibility of the success for Project C should be
made based on both qualitative and quantitative evaluations
What should be
considered?
Quantitative
Approach
↓
Profitable?
How to
How to
evaluateevaluate
each
for each criteria?
criteria?
1) Product / process quality
2) Timeliness
3) Positive impact on HRM
Qualitative
Approach
↓
Positive impact?
8

10. Quantitative approach
Introduc
tion
Issue
Analysis
Decision
Analysis
Conclusi
on
50000
40000
30000
$000s
20000
10000
0
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
-10000
-20000
-30000
Market Share Impact
Product Cost Savings
CF
Investment etc.
Cumulative CF
Original Project C IRR (w/o any modifications) = 6.1%
Increases? or Decreases?
9

11. Decision Analysis (1)
Introduc
tion
Issue
Analysis
Decision
Analysis
Conclusi
on
Qualitative
Modification 1 is recommended from the qualitative perspective
1) Improving the quality of the factory environment
(1)
Quality
(2)
Time
(3)
HRM
Increase workers’ motivation
Positive
Strong support from Project C members in
dishwasher business
Positive
High motivation improves product process quality
Positive
No delay for the project C
Positive
The Union would press other plants to set similar
facilities
Total
Negative/
Positive
Positive
Positive
Positive
10

12. Decision Analysis (1)
Introduc
tion
Issue
Analysis
Decision
Analysis
Conclusi
on
Quantitative
Modification 1 is recommended from the quantitative perspective
Investment
Return
• $1.5 mil
• Provided a quality environment
consistent with product & process quality
+17% increase* of labor, service call
reduction costs, and warranty savings
50000
40000
30000
$000s
20000
IRR increases to
10000
0
-10000
1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989
-20000
-30000
Market Share Impact
Product Cost Savings
CF
Cumulative CF
Investment etc.
9.4%
(*) additional investment $1.5 mil /
product & process development
investment $9.0 mil of Project C
11

13. Decision Analysis (2)
Introduc
tion
Issue
Analysis
Decision
Analysis
Conclusi
on
Qualitative
Modification 2 is recommended from the qualitative perspective
2) Skills training in technical problem solving
(1)
Quality
Skilled workers reduce product defect
(3)
HRM
Positive
Insurance for smoother product ramp-up 1983 and
beyond
(2)
Time
Positive
Support from manager, union, and skilled worker
since being trainee motivates workers
Positive
No delay for the project C
Positive
Workers in other plant might migrate to dishwasher
plant
Total
Negative
Positive
Positive
Neutral
12

14. Decision Analysis (2)
Introduc
tion
Issue
Analysis
Decision
Analysis
Conclusi
on
Quantitative
Modification 2 is recommended from the quantitative perspective
Investment
Return
• $1.5 mil
• Added a higher paid job
category
• Insurance for a smoother product
ramp-up in 1983 and beyond
50000
40000
0.8 mil increase of
labor cost*
+20% increase** of labor, service call
reduction costs, and warranty savings
30000
$000s
20000
IRR increases to
10000
0
1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989
6.6%
-10000
-20000
-30000
Market Share Impact
Product Cost Savings
CF
Cumulative CF
Investment etc.
(*) $0.25 (labor cost / hour) * 8 (hours) *
200 (days) * 200 (employees)
(**) additional investment $1.5 mil to 20%
employees / quality related training $1.5 mil
13

15. Decision Analysis (3)
Introduc
tion
Issue
Analysis
Decision
Analysis
Conclusi
on
Qualitative
Modification 3 is NOT recommended from the qualitative perspective
3) Revision in GE’s management information and support systems
(1)
Quality
Integrating information from accounting, material
tracking to quality reporting
(2)
Time
(3)
HRM
-
-
-
Not essential to Project C
Negative
Adding complexly and work load
Negative
Causing delay for the project C
Total
Negative
Neutral
Negative
Negative
14

16. Decision Analysis (3)
Introduc
tion
Issue
Analysis
Decision
Analysis
Conclusi
on
Quantitative
Modification 3 is NOT recommended from the quantitative perspective
Investment
Return
• $2.8 mil
• Additional time commitments
• The activities of Project C would be
complemented
No financial positive effects
50000
40000
30000
$000s
20000
IRR decreases to
10000
0
1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989
-0.1%
-10000
-20000
-30000
Market Share Impact
Product Cost Savings
CF
Cumulative CF
Investment etc.
15

17. Decision Analysis (4)
Introduc
tion
Issue
Analysis
Decision
Analysis
Conclusi
on
Qualitative
Modification 4 is recommended from the qualitative perspective
4) Adding a value engineering development cycle
(1)
Quality
Improving product quality, reducing defect
→Reducing costs, Gaining market share
(2)
Time
Positive
Supported by workers in plant
Positive
Causing delay of 3-4 months
Total
(3)
HRM
Negative
Positive
Negative
Positive
16

18. Decision Analysis (4)
Introduc
tion
Issue
Analysis
Decision
Analysis
Conclusi
on
Quantitative
Modification 4 is recommended from the quantitative perspective
Investment
Return
• $1.2 mil
• Would add 3 to 4 months
• $1 per unit of product cost savings
• Additional market share gains of up to 0.5%
50000
Delay of
positive effects
40000
30000
$000s
20000
IRR increases to
10000
9.0%
0
1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989
-10000
-20000
-30000
Delay considered
Investment etc.
CF
Cummulative CF
17

19. Decision Analysis (5)
Introduc
tion
Issue
Analysis
Decision
Analysis
Conclusi
on
Qualitative
Modification 5 is recommended from the qualitative perspective
5) Drop (postpone) construction of the integrated computer control room
(1)
Quality
Can be added later if necessary
(2)
Time
(3)
HRM
Positive
Unsure the value of control room
Positive
Saving $ 1 Mil
Already publicized, accepted by the union
Total
Negative
Neutral
Positive
Neutral
18

20. Decision Analysis (5)
Introduc
tion
Issue
Analysis
Decision
Analysis
Conclusi
on
Quantitative
Modification 5 is recommended from the quantitative perspective
Investment
Return
• The cancellation of publication
• $1.0 mil
No any costs
50000
40000
30000
$000s
20000
IRR increases to
10000
0
1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989
8.5%
-10000
-20000
-30000
Market Share Impact
Product Cost Savings
CF
Cumulative CF
Investment etc.
19

21. Recommendation
Modification
Introduc
tion
Qualitative
Issue
Analysis
Decision
Analysis
Conclusi
on
Quantitative
Additional
Investment
1
Improving the quality of the factory
environment
YES
YES
1.5 mil
2
Skills training in technical problem
solving
YES
YES
1.5 mil
3
Revision in GE’s management
information and support systems
NO
NO
4
Adding a value engineering
development cycle
YES
YES
1.2 mil
5
Drop (postpone) construction of the
integrated computer control room
YES
YES
-1.0 mil
3.1 mil
3) Go back to the board of directors for
authorization of budget increase
>$2.8Mil
20

22. Execution Plan
Introduc
tion
Issue
Analysis
Decision
Analysis
Conclusi
on
Short term
1. Prepare recommendation to senior management and the
board. In this recommendation, additional costs, resource
allocation, and risks should be completely included.
2. Assign team members to be in charge of each change.
3. Communicate and get an agreement from union.
4. Get commitment with all team members involved.
Mid term
1. Implement changes with PDCA cycles.
2. Hold a monthly status meeting with senior management and
the board.
21

23. Future GE
Introduc
tion
Issue
Analysis
Decision
Analysis
Conclusi
on
To improve the processes and products to be a World Leader
22

24. 23

25. Positive impact on HRM
Preferable decision (working environment) will be supported by the Union
Herzberg's motivation-hygiene theory
Mod. 2
Motivation






Mod. 1
Hygiene factors






Achievement
Recognition
Satisfaction
Responsibility
Promotion
Skill Development
Management objective
Supervisor
Human relationship
Working condition
Compensation
Benefit package
Drawing proactive
participation the job
Solving and preventing
dissatisfaction of the job
24

26. GE applied Cellular approach
Process Improvement 1
Line approach
Workers do the same process
➔Product quality is consistent
➔Easy routine work
Cellular approach
Workers assemble 1 product by themselves
➔Required various skills
➔Easy to adjust the number of workers
depending on demand
25

27. GE applied TOC and Throughput
Process Improvement 2
Bottleneck
⇓
TOC is Theory of constraint
Identifying where is the bottleneck of
the task and improve the process.
26

28. Decision Analysis
Decision
Pros

1
Improving the quality
of the factory
environment
Strong support from Project C
members, workers, the union, and
others in DW biz
Increase workers’ motivation
High motivation improve product
quality
No delay for the project C
Cons
 The Union would press other plants to
set similar facilities
(90% of hourly workers)
 Additional cost $1.5 Mil
Y
E
S
 Increase skilled workers
 Improve product quality
 Insurance for smoother product
ramp-up 1983 and beyond?
 No delay for the project C
 Support stuff view as vote of no
confidence?
 Workers in other plant might migrate
to DW plant
 Higher job category required higher
pay
 Additional cost $ 1.5 Mil
Y
E
S
N
O



2
Skills training in
technical problem
solving
3
Revision in GE’s
management
information and
support systems
 Improving GE’s information
support system




4
Adding a value
engineering
development cycle
 Improving product quality, reduce
warranty cost
 Supported by people in Plant
 Cost saving by 1$ per unit
 Opposed by Marketing team
 Additional cost $ 1.2 Mil
 Causing delay of 3-4 months
Y
E
S
5
Drop (postpone)
construction of the
integrated computer
control room
 Supported by operations MNG
 Can be added later if necessary
 Saving $ 1 Mil
 Causing delay of automation
 Already publicized
 Already accepted by the union with
long discussion
Y
E
S
Not essential to Proj. C
Adding complexly and work load
Additional cost $ 2.8 Mil
Causing delay for the project C
27

29. Issue Identifications
(5 Forces Analysis)
Dish washer
market is
“Attractive”.
Entry Barriers
(High)
•
GE’s buying power due
to large amount of
purchases
Large initial investment
($40-50 mil)
Competition
(Low)
Suppliers
(Low)
•
To be World Class Dish
Washer
Manufacturer, high
quality product is
essential.
•
High and stable
market share : 26% in
1979
Buyers
(Strong)
•
•
Building Contractor: Price
Sensitive
Consumers: Long term
reliability, convenience and
performance
Substitutes
(Low)
•
•
Hand washing
Low quality dish
washers
28

30. Internal Issues
Issues
•
•
People
•
•
Products
•
Financials
Actions
Negative power of union
Lack of skills in technical problem
solving
17% Lay-off (almost 2,000
employees) in 1980
Motivation improvement both
from motivating and hygiene
factors
Mid-class product
• Susceptible to scratch
• Excessive noise
• Heavy water user
Product quality improvement
Substantially lower volumes and
profits than planned during 1980 due
to a recession
Cost reduction opportunities
Project C modification!!
In order to cope with these issues, modifications of project C
were identified. Five possible project modifications were
identified for evaluation.
29

31. Decision Criteria
Consider which criteria are strongly related to the success of Project C.
What should
What should be
be
considered?
considered?
How to evaluate
for each criteria?
1) Positive impact on HRM
2) Timeliness
3) Improving product /process quality
4) Positive effects to the market
5) Structure of organization
6) Restructure of product portfolio
30

32. Appendix project C
1979
1980
Market Share
Impact
Product Cost
Savings
1981
1982
1983
1984
1985
1986
1987
1988
1989
706 1,740 2,896 3,873 4,281 4,752 5,260
Investment etc.
-20
-129
CF
-20
-129
-350 2,479 6,777 9,198 12,572 13,743 14,995 16,382
-326 19,674 -3,033 -2,722 -4,030 -6,171 -7,011 -7,882 -8,829
-326 20,024
152 5,795 8,064 10,274 11,013 11,865 12,813
Cumulative CF
-20
-149
-475 -20499 -20347 -14552 -6488
3786 14799 26664 39477

33. Appendix Modification 1
1979
1980
1982
-350
1983
1984
1985
1986
1987
1988
1989
706
Market Share
Impact
Product Cost
Savings
1981
1740
2896
3873
4281
4752
5260
2844
7665 10268 13902 15156 16496 17982
Investment etc.
-20
-129
-326 -21174 -3033 -2722 -4030 -6171 -7011 -7882 -8829
CF
-20
-129
-326 -21524
Cumulative CF
-20
-149
-475 -21999 -21482 -14799 -5666
517
6683
9134 11604 12426 13366 14413
5938 18363 31730 46142

34. Appendix Modification 2
1,979 1,980 1,981 1,982 1,983 1,984 1,985 1,986 1,987 1,988 1,989
Market Share
Impact
Product Cost
Savings
706 1,740 2,896 3,873 4,281 4,752 5,260
Investment etc.
-20
-129
CF
-20
-129
Cumulative CF
-20
-149
-350 2,597 7,210 9,793 13,395
-326 21,174 -3,033 -2,722 -4,030 -6,171
-326 21,524
270 6,228 8,659 11,097
-475 21,999 21,729 15,501 -6,842 4,255
14,665 16,024 17,529
-7,011 -7,882 -8,829
11,935 12,894 13,960
16,190 29,083 43,043

35. Appendix Modification 3
1979
1980
-20
-129
CF
-20
-129
Cumulative CF
-20
-149
1982
1983
1984
1985
1986
1987
1988
1989
706
Market Share
Impact
Product Cost
Savings
Investment
etc.
1981
1,740
2,896
3,873
4,281
4,752
5,260
-350 2,479 6,777 9,198 12,572 13,743
-326 22,474 -3,033 -2,722 -4,030 -6,171 -7,011
-326 22,824
152 5,795 8,064 10,274 11,013
-475 23,299 23,147 17,352 -9,288
986 11,999
14,995 16,382
-7,882 -8,829
11,865 12,813
23,864 36,677

36. Appendix Modification 4
1979
Market Share Impact
Product Cost Savings
Delay considered
Investment etc.
CF
Cummulative CF
IRR
-20
-20
-20
1980
1981
1982
-129
-129
-149
-350
-248
-326 -20,874
-326 -21,122
-475 -21,597
1983
1984
1,588
2,828
2,779
7,467
2,992
8,566
-3,033 -2,722
-41
5,844
-21,638 -15,795
1985
4,213
10,039
13,098
-4,030
9,068
-6,727
1986
5,487
13,611
17,684
-6,171
11,513
4,787
1987
6,065
14,782
20,337
-7,011
13,326
18,112
1988
6,732
16,034
22,206
-7,882
14,324
32,436
1989
7,452
17,421
24,258
-8,829
15,429
47,866
10
690
11
761
12
866
14
866
15
866
16
866
2,829
-350
2,479
7,128
-350
6,778
12
80
9,548
-350
9,198
13
173
12,922
-350
12,572
14
173
14,092
-350
13,742
15
173
15,346
-350
14,996
16
173
16,731
-350
16,381
10
11
12
13
15
16
17
3,129
300
7,818
690
13
10,389
841
14
13,961
1,039
15
15,131
1,039
16
16,385
1,039
17
17,770
1,039
1,983
1,525
0
1,984
1,650
0
1,985
1,810
0
1,986
2,000
0
1,987
2,000
0
1,988
2,000
0
1,989
2,000
0
0
Product cost savings
cost savings for Tuf C vs. Pla
volume
cost savings for Tuf C vs. Tuf
B
volume
Total
Penalty
UP cost savings for Tuf C vs.
Pla
UP cost savings for Tuf C vs.
Tuf B
UP total
Margin
9
300
Market share
Market size
Market share

37. Appendix Modification 4
1979
Market
Share
Impact
Product
Cost
Savings
Investmen
t etc.
CF
Cumulativ
e CF
IRR
1980
1981
1982
1984
1985
1986
1987
1988
1989
706
-350
1983
1,740
2,896
3,873
4,281
4,752
5,260
2,479
6,777
9,198 12,572 13,743 14,995 16,382
-20
-20
-129
-129
-326 -18,674 -3,033 -2,722 -4,030 -6,171 -7,011 -7,882 -8,829
-326 -19,024
152 5,795 8,064 10,274 11,013 11,865 12,813
-20
-149
-475 -19,499 -19,347 -13,552 -5,488
8.5%
4,786 15,799 27,664 40,477