Today's manufacturing industry faces multiple challenges: on the one hand, the rapid development of emerging technologies is reshaping traditional production and operation models; On the other hand, the diversification and personalization of consumer and customer needs also put forward higher requirements for manufacturing enterprises. In this context, high-end transformation has become a key strategy for manufacturing enterprises to enhance their competitiveness and achieve sustainable development.
The Boston Consulting Group, abbreviated as BCG, is a well-known United States business management consulting firm recognized as a pioneer in the field of strategic management consulting. BCG Henderson Institute is the Boston Consulting Group's strategic think tank dedicated to using visionary insights to explore and develop valuable insights into novel business, technology, and science.
Recently, BCG Henderson Institute interviewed Fu Xu, President of Midea Group's Intelligent Manufacturing Research Institute, Cai Yaowu, General Manager of Household Air Conditioner Thailand Factory, Lin Taien, Chief Product Officer and Board Secretary of Ander Zhilian, Li Jingheng, Director of Digital Intelligence R&D of Ander Zhilian, and Song Yineng, Product Director of Meiyun Intelligent Manufacturing, to analyze the "secrets" of Midea Group's step-by-step move towards high-end manufacturing.
In the field of manufacturing, the importance of R&D has become a consensus of enterprises, but how to build an effective R&D organization, division of labor and set the corresponding return on investment requirements to achieve the best results is still a challenge for many enterprises, and it is a test of their strategic determination to adhere to long-term investment in R&D.
BCG Henderson Institute:
What kind of R&D system and mechanism has Midea built to consolidate its advantages in product technology?
Midea Group:
Since 2014, Midea Group has built a "four-level R&D system" for product technology, which consists of two levels of the Central Research Institute and two levels of business divisions. Academia Sinica focuses on disruptive and forward-looking generic research. This type of research usually has a long payback period, taking 3 to 5 years, or even longer. The Group does not have strict requirements for the payback period for this part of the research, encourages the culture of scientists, provides an innovation platform that allows trial and error, and even cancels the previous low-performance appraisal system to protect the Group's long-term technical reserves and innovation foundation; At the same time, the two divisions are responsible for individual research and product development that are closer to the market, and the Group usually requires such research to recover costs within three years, closely linked to performance, and the topics are directly related to manufacturing and user needs. Through the separation of basic research and product development in organizational setting and performance appraisal, the balance between long-term sustainability and short-term operational efficiency of R&D is ensured, and a solid guarantee is provided for the realization of the innovation goal of the R&D model of "three generations" (research generation, reserve generation, and development generation).
BCG Henderson Institute:
What are the measures to promote R&D breakthroughs in manufacturing technology?
Midea Group:
Under the manufacturing system of Midea Group, there is an intelligent manufacturing research institute focusing on the research and development of manufacturing technology. The institute consists of three research institutes, among which the Advanced Technology Research Institute focuses on key manufacturing processes and materials to develop cutting-edge process technologies; Focusing on production line and equipment automation, the Intelligent Equipment Research Institute independently develops and designs various automation equipment to meet the needs of factories while developing automation solutions; The Institute of Intelligent Manufacturing Algorithms focuses on the breakthrough of a new generation of digital technology and its application research in intelligent manufacturing, improves the digital and intelligent management level of factories, and uses algorithms to mine the value of data around various data such as production, quality, and equipment.
The production process of a manufacturing enterprise is crucial to achieving its output value, and the quality and cost-effectiveness of its products are often reflected in this link. At present, many manufacturing enterprises mainly rely on third-party equipment suppliers for their production equipment, which is costly. second, it cannot meet the customized needs of enterprises in a timely manner; Third, the maintenance response time is long, which affects the production efficiency; Fourth, it may lead to the risk of production data leakage.
BCG Henderson Institute:
What is the proportion and effectiveness of Midea's self-developed production equipment?
Midea Group:
At present, Midea Group's self-developed production equipment focuses on high-tech production lines, such as electronic production lines, which account for nearly 60% of self-developed equipment, and the future goal is to exceed 80%. These self-developed production line equipment not only cost much lower than the external purchase price, but also can be customized according to the specific needs of Midea Group, with a short technology iteration cycle, timely maintenance response, zero delays, and a root cause to avoid the possible risk of production data leakage.
BCG Henderson Institute:
How to achieve such a high proportion of self-developed equipment?
Midea Group:
In 2019, Midea Group established the Intelligent Manufacturing Research Institute, with the main goal of promoting the technological upgrading of the manufacturing system. The Intelligent Equipment Research Institute under the Intelligent Manufacturing Research Institute focuses on the automation research of production lines and equipment around a number of different technical fields such as mechanical design, electrical systems, and industrial vision. In addition, Midea Group's self-developed and self-made equipment solutions give full play to the advantages of technology integration, such as the integration of industrial robots, three-dimensional warehouses and other industrial equipment of KUKA, which plays a key role in the work with high repetition and high precision requirements, and helps to achieve a high degree of automation and intensification of the self-developed production line.
As technological innovation continues to drive the development of the industry and consumer needs become increasingly personalized, the market has put forward unprecedented high standards for the resilience and responsiveness of manufacturing companies' supply chains. Faced with the extreme challenge of cost-effectiveness, supply chain management urgently requires breakthrough thinking and innovative practices.
BCG Henderson Institute:
What innovative measures does Midea have in building a highly resilient supply chain, and what are the specific results?
Midea Group:
The key to Midea Group's supply chain advantage lies in the implementation of an innovative "one-stock" strategy. The strategy is that Midea Group integrates the scattered inventory of different sales channels and geographical regions through Ande Zhilian, a core member of its digital sector, to build a unified and efficient inventory management system. Based on the intelligent operation middle platform and system integration service technology, the optimal order routing and distribution rules are set to realize real-time monitoring and intelligent allocation of inventory, and send them to the nearest target inventory address to achieve rapid response to market demand. It took nearly 4 years for Midea to integrate more than 3,000 agent warehouses into about 140 Midea collaborative warehouses for unified warehouse distribution. This strategy reduces inventory overstock and handling, covers larger order volumes, and greatly improves efficiency. Today, Midea Group's inventory turnover days have been successfully shortened from 51 days to 35 days; The number of loading and unloading of goods has been shortened from more than 6 times to 2-3 times; The warehouse area has decreased by 70%, which is a significant advantage over competitors. In addition, this strategy also reduces the distance between brands and users to the extreme, and has become an important means for Midea Group to directly connect with end customers and understand the first-line market demand under the current DTC (Direct-to-Consumer) model.
BCG Henderson Institute:
What are the main levers to achieve the "one inventory" strategy?
Midea Group:
The key to the implementation of the "one inventory" strategy lies in a "chain master" enterprise like Midea Group, which occupies a core position in the industrial chain and has a strong channel voice, extensive physical outlets and advanced warehousing and logistics capabilities. Based on its own advantages, the "chain master" enterprise can lead the redistribution of dealer profits, the implementation of nationwide unified warehouse distribution, and the unified management and optimal allocation of inventory. Under this strategy, there is a clear division of roles and tasks between the "chain owner" and the distributor – the "chain master" company is responsible for inventory management and distribution, while the distributor only needs to focus on customer operation and sales. This intensive division of labor model also reflects the refined operation of supply chain management after the development of the manufacturing industry to an advanced stage.
Talent is a solid foundation and driving factor for enterprises to achieve high-end. However, due to historical evolution, support policies, industrial support, environmental protection requirements, etc., the headquarters of many manufacturing enterprises are often not located in talent-intensive areas, so how to attract and retain talents has become a major challenge.
BCG Henderson Institute:
What is the current talent density and talent echelon of Midea?
Midea Group:
At present, Midea Group has gathered more than 23,000 core technical personnel, including 20 strategic cooperation academicians, more than 500 foreign senior experts, and more than 7,000 top industry talents such as doctors and masters. This high talent density has laid a solid foundation for Midea Group's continuous innovation and high-end transformation.
BCG Henderson Institute:
As a manufacturing company headquartered in non-first-tier cities, how does Midea attract and retain talents?
Midea Group:
In the base camp of Beijiao Town, Shunde District, Foshan City, Midea adopts the strategy of nesting and attracting phoenixes to solve the worries of talents and attract talents from all over the country to "settle down". Since 1998, with the gradual abolition of welfare housing, Midea began to explore a market-oriented way to solve the housing problem of high-level talents in Shunde, and developed the first residential project with a construction area of more than one million square meters - Foshan Midea Coastal Garden. Since then, Midea has continued to devote itself to building talent residential communities in Shunde, and creating perfect living facilities for these talent communities, including the construction of a number of commercial real estate projects, the investment and holding of Heyou Hospital, and the introduction of a primary school, junior high school and high school affiliated to East China Normal University through financial donations, realizing the connection of the high-quality training chain in the whole school section of Beijiao and solving the enrollment needs of the children of high-level talents. Today, there are about 9,000 talents with a master's degree or above in Beijiao Town, and more than half of them work for Midea Group. In addition, Midea Group has set up offices in first-tier cities such as Shanghai and Beijing to overcome its geographical disadvantages in Shunde, such as planning to build a new Midea Global Innovation Center in Shanghai, with the goal of bringing together about 10,000 high-tech talents in cutting-edge technology fields at the new location in Shanghai by 2025.
In today's wave of brand economy, brand value is the most obvious representation of the high-end level of enterprises. However, in the past few decades since the large-scale development of China's manufacturing industry, it is often known for its scale and price advantages, and under such consumer cognition, the brand of Chinese manufacturing enterprises urgently needs to develop to high-end.
BCG Henderson Institute:
What are the effective measures of Midea in terms of brand image promotion?
Midea Group:
In recent years, Midea has achieved a leap in brand image from many aspects through the acquisition of overseas brands. There are three specific cases worth sharing.
First, the acquisition of Japan's Toshiba's global home appliance sector, through learning its high-end concept and design, combined with the continuous integration of R&D, manufacturing, marketing, etc., to open the high-end home appliance market, and then launch its own high-end AI home appliance brand Colmo, forming the layout of the "Colmo + Toshiba" dual high-end brand line, and the overall retail sales of the dual high-end brands will increase by more than 20% year-on-year in 2023.
Second, the acquisition of Germany heavy robot brand KUKA to achieve "L-shaped" development - vertically, Midea brought KUKA into the Chinese market, in recent years, through localized research and development, manufacturing and marketing, in line with the development trend of domestic new energy vehicles, intelligent manufacturing, etc., KUKA China's market performance has shown a rapid upward trend, and KUKA Germany's headquarters has deepened its trust in Midea; From a horizontal point of view, KUKA complements Midea Group's product line and empowers its intelligent manufacturing, reducing manufacturing costs and improving technical control capabilities by mastering core technologies.
Third, the acquisition of Italy's central HVAC brand Clivet, in order to open up the European heat pump market, in recent years in the context of tight energy supply in Europe, has achieved unprecedented development, at the same time, but also use Clivet's local European R & D base, sales network and other advantages to empower other product lines, such as Clivet's sales network to launch other building software and hardware products.
BCG Henderson Institute:
In terms of brand integration and operation, what challenges does Midea still face?
Midea Group:
Through continuous brand building, Midea Group has successfully achieved a substantial increase in brand value, and achieved double high brand influence and user satisfaction - Midea Group has been listed on the "Most Popular Chinese Brand List" selected by the People's Daily for many times; User satisfaction is over 98%. However, compared with the more aggressive control intervention adopted after the acquisition of domestic brands, Midea prefers to maintain its original corporate culture, business structure and organizational system when absorbing overseas brands, including maintaining the independent operation of the acquired brands in the fields of finance and human resources. Due to the differences in ideas and concepts in different countries and regions, the process of integration will encounter greater cultural conflicts, and forced intervention may face risks such as brain drain and even loss of brand competitiveness. From a long-term perspective, how to find the right balance between maintaining brand independence and maximizing the overall interests of the group, and realize the deep integration of the overall brand and management of the whole group is not only a strategic challenge, but also a test of management wisdom.
Midea Group will continue to explore and practice, take R&D as the drive, quality as the foundation, innovation as its own responsibility, talent as the support, and market-oriented, continuously improve the core competitiveness of the enterprise, and promote the high-quality development of China's manufacturing industry.