Electrolux 2005 Annual Report Download - page 18
Download and view the complete annual report
Please find page 18 of the 2005 Electrolux annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Large cost reductions in production
and purchasing
In recent years, Electrolux has achieved substantial cost
savings in both production and purchasing. Within production,
plants have been relocated, global production platforms
have been established, the number of platforms has been
reduced, and a greater share of production is now in low-
cost countries. In terms of purchasing, savings have been
obtained primarily through better coordination at the global
level. The cost-cutting program was intensified in 2005.
Lower production costs
The restructuring program that was launched in 2005
involves relocation of production to countries with lower
cost levels. The program is proceeding according to plan.
The total cost through 2008 is estimated at SEK 8–10 billion,
and the program is expected to generate annual savings of
SEK 2.5–3.5 billion from 2009 onward. We expect that about
half of production in high-cost countries will be affected.
In 2005 decisions were taken to close plants in Fuenmayor,
Spain (refrigerators), Parabiago, Italy (lawn mowers), and
Nuremberg, Germany (washing machines, dishwashers and
tumble- dryers). During the first quarter of 2005, the vacuum
cleaner plant in Västervik, Sweden, and the cooker plant in
Reims, France, were closed. An investigation is in progress
regarding the compact appliances plant in Torsvik, Sweden.
It has also been decided that production will be cut back at the
refrigerator plants in Florence, Italy, and Mariestad, Sweden.
During the year, new plants were opened in Juarez, Mexico
(refrigerators), Siewerz, Poland (tumble-dryers), Zarow,
Poland (dishwashers) and Rayong, Thailand (professional
washing machines).
In 2005 a global program for more efficient production
was launched at all major Group plants. It is based on
proven techniques for improving production that have been
developed both within and outside the Group.
Global product platforms
Programs for improving production are paralleled by reduc-
tions in the number of product platforms. In 2005 we intro-
duced several global platforms for side-by-side refrigerators,
top freezers, front-loaded washing machines and stand-
alone dishwashers.
Reducing the number of product platforms generates
benefits that include enabling greater standardization of
components, fewer product variants and simpler production.
It also gives the Group a more powerful negotiating position
for large-scale purchasing, and reduces the number of spare
parts in inventories. Work on creating global product plat-
forms will therefore continue to receive high priority.
Production costs in specifi c regions
Estimated landed cost for two different appliances
Washing machines for the
EU market
Western
Europe
China Eastern
Europe
Production region
Freezers for the US market
US China Mexico
Production region
It is often less expensive to produce large household appliances close to the
end-user market, rather than transport them from e.g. China.
Materials and
components
Direct salaries
and overhead
Logistics
14 Electrolux Annual Report 2005
A growing share of our indoor products are produced in
low-cost countries.
Production in low- and high-cost countries
%
100
80
60
40
20
0
Low-cost
High-cost
Indoor products
Cost-efficiency