Operational Examples - Mohawk Industries
Operational improvements are important for ensuring the growth and profitability of a company. Mohawk Industries has incorporated a market-driven approach in its operations which has allowed the company to focus on meeting the needs of its target clients. It has also embraced efficiency, differentiation, and portfolio diversification as key ingredients for growth.
Market-driven Operational Approach
- When a firm adopts a market-driven approach in its operations, its strategy is driven by vertical market segments. This approach allows a company to have streamlined operations that are less costly.
- The firm is also able to provide specialized solutions to specific customer segments.
How Mohawk Industries Uses a Market-driven Approach in its Operations
- Mohawk Industries uses its vertically integrated manufacturing and distribution processes to aligning itself with consumer demand for its products. With high inflation slowing the U.S. market in 2018, the company matched the production of ceramic tiles and luxury vinyl tile (LVT) with the reduced demand for the products.
- In 2019, the company increased the manufacturing of carpet tile and LVT products owing to the increased demand for these flooring styles by commercial clients.
- The company produces green products for their architecture and design consumers who are keen on getting quality, affordable, and sustainable flooring solutions.
- In the retail space, Mohawk Industries produces Red List-Free flooring products that promote healthy homes and a cleaner environment. They are also safe to manufacture and install.
Stirring Growth Through Improved Efficiency, Differentiation, and Diversification
- Operational efficiency measures the costs incurred when doing business, in which low costs signify a higher efficiency. To achieve this, companies seek to manufacture products using the lowest costs possible.
- Differentiation involves making a company's products unique and different from those of its competitors with the sole aim of attracting more clients. Companies use differentiation by developing products with unique features, quality, and prices.
- On the other hand, diversification is a risk management strategy where firms strategically invest in multiple products to minimize risks in the event the market for a certain product is not performing well. A well-diversified product portfolio can stir the growth of a company over time.
How Mohawk Industries Uses this Operational Improvement
- To improve its product mix, in 2018 Mohawk Industries invested $1.5 billion towards new product development, improving production, cost-saving initiatives as well as buying back shares. While these funds were to be invested across the Mohawk group, some funds were used to start quartz countertop production in the U.S.
- The firm injected $10 million capital to incorporate a new extrusion compounding line in its Glasgow, VA factory in an effort to diversify its products.
- By adopting the zero waste to landfill (ZLF) program, the company was able to save $4.3 million in costs which would have otherwise been used for landfills, hauling waste, and water treatment before discharging to public sewer systems.
- In addition to these investments, Mohawk Industries embraced various innovations that differentiate their products from those of its competitors in the market. For example, by embracing the Living Product Challenge in 2018, the company was able to produce high-quality products such as the SmartStrand carpets with less energy and low emissions using recyclable materials. These materials are recycled from 6.6 million plastic bottles every year.
- Mohawk Industries projected that by 2020, it was to start to realize increased volume and efficiency in production due to these investments.