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    Jhead Tristine Encina
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    General Electric's (GE) decision to bring appliance manufacturing back to the United States from locations with lower costs like Korea, China, and Mexico has been touted as reversing the trend of offshoring jobs. In the 1950s, GE's Appliance Park in Louisville, Kentucky employed over 23,000 workers but by the 2000s most production had moved overseas. In 2008, during the economic downturn, GE leadership considered selling or spinning off the appliance business. However, Dirk Bowman convinced GE Chairman Jeff Immelt that manufacturing in the U.S. could save on transportation and labor costs. GE invested $1 billion to insource production. The challenges were significant as GE aimed to overhaul production across multiple product

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    General Electric's (GE) decision to bring appliance manufacturing back to the United States from locations with lower costs like Korea, China, and Mexico has been touted as reversing the trend of offshoring jobs. In the 1950s, GE's Appliance Park in Louisville, Kentucky employed over 23,000 workers but by the 2000s most production had moved overseas. In 2008, during the economic downturn, GE leadership considered selling or spinning off the appliance business. However, Dirk Bowman convinced GE Chairman Jeff Immelt that manufacturing in the U.S. could save on transportation and labor costs. GE invested $1 billion to insource production. The challenges were significant as GE aimed to overhaul production across multiple product

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    841 views2 pages

    09 Activity 1

    Uploaded by

    Jhead Tristine Encina
    General Electric's (GE) decision to bring appliance manufacturing back to the United States from locations with lower costs like Korea, China, and Mexico has been touted as reversing the trend of offshoring jobs. In the 1950s, GE's Appliance Park in Louisville, Kentucky employed over 23,000 workers but by the 2000s most production had moved overseas. In 2008, during the economic downturn, GE leadership considered selling or spinning off the appliance business. However, Dirk Bowman convinced GE Chairman Jeff Immelt that manufacturing in the U.S. could save on transportation and labor costs. GE invested $1 billion to insource production. The challenges were significant as GE aimed to overhaul production across multiple product

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    of 2

    BM1902

    Names _______________________________________________ Section ___________Date___________

    ACTIVITY
    Insourcing at GE: The Real Story
    General Electric’s (GE) “insourcing” of appliance manufacturing to the U.S. has been trumpeted as a major
    reversal of the trend of sending jobs abroad to lower cost locations, and has been characterized in the press
    as a kind of “onshoring” story. First, a little relevant history: In the 1950s economic expansion drove growing
    demand for appliances. To meet this demand, GE created GE Appliance Park in Louisville, Kentucky, which
    reached a peak of 23,000 employees in 1973. In the early 2000s, as part of a huge offshoring trend in the
    business economy, GE shifted manufacturing to suppliers such as Samsung and LG. But these suppliers became
    competitors and ever-harder to work with. Then at the end of 2007, the housing market crashed. By the
    summer of 2008 GE leadership wanted to sell the appliances business or spin it off.
    During that difficult time, Dirk Bowman, former GE Appliances General Manager of Manufacturing, went to
    GE Chairman Jeff Immelt with a proposal. Bowman aimed to increase manufacturing capability and bring
    manufacturing jobs back to the U.S. from Korea, China, and Mexico. Immelt asked why production should be
    put in old factories in a union environment. Dirk’s answer was: “We can save on transportation and be closer
    to our customers. We can have engineering work more closely with production. We can work smarter than
    Korea, China, and Mexico, using 15-20% of the labor they use.” Immelt was convinced, and GE Appliances
    engage in a $1 billion or 50-billion-peso investment.
    The challenges GE faced were daunting. If the goal was to leapfrog the competition in every product line while
    revitalizing U.S. manufacturing, management had to take a big swing. The investment plan envisioned 11 new
    product platforms in six (6) different manufacturing sites. The workplace was divided into functional areas; no
    one knew how to work together. All the laboratory equipment had been given away. The only people left were
    tough survivors, so the bench was not deep. The company needed to rebuild expertise and capabilities. It
    needed to recruit huge numbers of people in a short period of time. It needed to invest in new development
    labs and to co-locate teams.
    In the summer of 2009, management decided to bring production of a water heater back to the U.S. from an
    Asian contractor. In connection, the company introduced a new cross-functional team structure for
    improvement which they call the “Big Room”. Managers seated together with a common goal to work on the
    value stream from consumer research to testing. They put the schedule up on the wall so everybody knew
    what was happening. There was a diagram of the production flow and a cardboard mockup of the factory
    layout which also showed how the equipment would look. At 7:45 a.m. each day leaders met, then at 8:00
    a.m. everyone met to review the prior day, and what they would do that day. Then at 4:15 p.m. everyone met
    again to review what they’d done. The water heater that resulted was a new design, with better performance:
    20% fewer parts and 50% less labor. Inventory was reduced 60%, labor efficiency improved 30%, time-to-
    produce was reduced 68%, and space required for the line came down by 80%.

    Answer the following: (3 items x 10 points)


    1. Describe the internal and external customers of GE involved in the given case study.
    2. Identify the advantages and disadvantages of the insourcing decision of GE relevant its company
    operations.
    3. Explain how GE managed to implement its insourcing decision successfully.

    09 Activity 1 *Property of STI


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    BM1902

    Names _______________________________________________ Section ___________Date___________

    Rubric for grading:


    CRITERIA PERFORMANCE INDICATORS POINTS
    Content Provided pieces of evidence, supporting
    8
    details, and factual scenarios
    Grammar Used correct grammar, punctuation,
    1
    spelling, and capitalization
    Organization Expressed the points in clear and logical
    1
    of ideas arrangement of ideas in the paragraph
    TOTAL 10

    Reference:
    Power, B. (2013). Insourcing at GE: The real story. Retrieved June 3, 2019, from
    https://hbr.org/2013/07/insourcing-at-ge-the-real-stor.

    09 Activity 1 *Property of STI


    Page 2 of 2

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