Whirlpool is investing $52 million to build a state-of-the-art manufacturing plant in Argentina.
The plant will export 70% of its washing machines to neighboring countries such as Brazil, Uruguay, Paraguay, Bolivia, and Chile. Whirlpool’s facility location decision in Latin America reflects a near-shoring practice that utilizes local resources to produce output close to the final destination.
This post is based on the Bloomberg article, Whirlpool Touts Bet on Troubled Argentina as Others Steer Clear, by Carolina Millan and Daniela Sirtori-Cortina, October 21, 2022, and the YouTube video in the Spotlight. Image source: Africa Studio/Shutterstock
1. What factors were considered in Whirlpool’s decision to build a manufacturing plant in Argentina?
Guidance: The factors include market demand in Latin America, cost savings, and financial advantages. Currently in Latin America, washing machine demand is met by imports. By manufacturing washing machines in Argentina and exporting them to neighboring countries, Whirlpool can better serve customers in Latin America.
Additionally, Whirlpool can save on land costs, transportation costs, labor costs, and taxes with their manufacturing facility in lower-cost Argentina. Furthermore, the strong dollar makes it unattractive for Whirlpool’s washing machines made in the US to be sold in Latin America.
2. What is near-sourcing, and what are its impacts on Whirlpool’s washing machines operations?
Guidance: Near-sourcing is a supply chain strategy that uses local suppliers and resources to produce output close to the final destination. By practicing near-sourcing, Whirlpool is able to shorten the supply chain, reduce transportation costs and time, reduce pollution from transportation, reduce supply chain inventory, reduce the risk of disruptions, and increase responsiveness.