---
title: "T+3: Midea's \"Yijin Jing\""
description: "This article explores Midea's T+3 model, a customer-order-driven production system that transformed its value chain from push to pull, achieving significant operational improvements. It details the model's rationale, implementation, challenges, and success factors, emphasizing its role as a comprehensive business model innovation."
author: "精亦诚刘欣"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2022-01-29"
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---

# T+3: Midea's "Yijin Jing"

> This article explores Midea's T+3 model, a customer-order-driven production system that transformed its value chain from push to pull, achieving significant operational improvements. It details the model's rationale, implementation, challenges, and success factors, emphasizing its role as a comprehensive business model innovation.

Source: Excellent Operations Practice (ID: yunying-pub)

The best embodiment of Midea's full-value-chain excellent operations capability is none other than T+3.

There are many articles online about Midea's T+3, and I have read quite a few. Some are well-written, but some are regrettable. Regrettable is one thing; the main issue is over-interpretation or over-generalization, which can cause practical misguidance. For example, some believe that Midea's implementation of T+3 led to increased stockouts, that Midea shifted inventory pressure to suppliers, or that T+3 is just a supply chain strategy. These biased views are harmful to the management practice of T+3.

**The implementation of T+3, for Midea, went from initial pain and disruption, to strengthening and building, and now to a complete transformation.**

Although T+3 did not change Midea's management mechanism or cultural genes, it comprehensively transformed the operation model of the entire value chain. Figuratively speaking, **T+3 is a set of "Yijin Jing" (a classic martial arts tendon-strengthening manual) that Midea practiced to reshape itself.**

As a former Midea insider who has also done external management consulting for many years, I happen to have both internal and external perspectives. Next, through answers to 6 questions, let's delve into Midea's T+3 together.

1. Why did Midea launch T+3?
2. What exactly is Midea's T+3?
3. What are the results of Midea's T+3?
4. What challenges did Midea's T+3 face?
5. What did Midea do during the T+3 process?
6. Why was Midea able to make T+3 successful?

Let's look at each one.

## **Why did Midea launch T+3?**

Midea launched T+3 not out of a flash of inspiration or to be mysterious, but based on a judgment of changes in the market environment.

Hemingway said, "An egg, broken from the outside is food; broken from the inside is life."

Midea realized that if it did not proactively break from the inside, it would be broken from the outside by the market and become food for the environment.

**The old era ended, and the old model became invalid.**

This was Fang Hongbo's judgment after he took charge of Midea in 2012, regarding the development of China's home appliance manufacturing industry over more than 30 years.

This basic judgment can be further summarized as the traditional home appliance industry's "1234": 1 invalid, 2 disappearances, 3 changes, and 4 drawbacks.

**1 invalid**

Mass manufacturing, mass inventory pushing, and mass distribution—this extensive and single production-sales model has become increasingly ineffective.

**2 disappearances**

**Scale advantage:** The advantage of high-speed growth in scale has disappeared. In the past, domestic market and overseas exports grew by more than 30% annually for two to three decades. Now growth has hit a ceiling, and the problems masked by high-speed growth are exposed.

**Cost advantage:** The low-cost advantage based on factor costs has disappeared. Costs of materials, labor, factory, land, equipment, etc., have risen year by year, including many hidden costs. The cost advantage is gone forever.

It is precisely with the disappearance of scale and cost advantages that the traditional production-sales model has become invalid.

**3 changes**

The market has shifted from incremental competition to stock competition.

Online platforms are developing rapidly, impacting offline systems.

Personalized consumption patterns are emerging, with multi-variety, small-batch replacing few-variety, large-batch.

**4 drawbacks**

With the disappearance of original advantages and the emergence of new changes, the drawbacks of the traditional production-sales model are becoming increasingly prominent, mainly in four aspects: **low efficiency, high inventory, increased costs, and channel sluggishness.**

**If you keep walking on the old path, you will never reach a new place.**

Midea's promotion of T+3 is not about being unconventional, but about reforming the old and establishing the new. It is a self-revolution to proactively bid farewell to the old era and actively embrace new changes.

## **What exactly is Midea's T+3?**

To summarize in one sentence, **Midea's T+3 is a model that is user-demand-oriented and efficiently fulfills customer orders.**

"T" means cycle. Midea divides the process from customer order to delivery into 4 cycles: **Order (T cycle), Material Preparation (T+1), Production (T+2), and Delivery (T+3).**

For these 4 cycles, Midea internally requires each cycle to be completed in 3 days, so customers receive goods in just 12 days from order placement.

Of course, initially, the cycle was not set at 3 days but 7 days, because achieving 7 days per cycle was already considered good.

However, from the customer's perspective, completing 4 cycles would take at least 28 days, nearly a month to receive goods, which was too long. To improve customer experience and quickly meet market demand, each cycle was finally set at 3 days.

The above content was explored by the Little Swan Washing Machine Division starting in 2012. After nearly 3 years of practice, the results were exceptionally significant. Then, from the end of 2015, Midea vigorously promoted it across the entire group.

Although there are objective differences within the Midea Group, such as product differences between large and small appliances, and obvious seasonal differences between air conditioners and washing machines, after overcoming various difficulties, the T+3 model was successfully replicated in all divisions.

To better understand the T+3 model, let's analyze it from bottom to top, from three levels: **production-sales model, business model, and commercial model.**

**Level 1: T+3 is Midea's new production-sales model**

Midea's traditional production-sales model was a layer-by-layer distribution, payment-and-stock-pushing model, a push-based reserve order model, and a production-based-on-sales model.

In contrast, the T+3 model is a pull-based customer order model, a sales-based production model.

The T+3 model subverts the traditional production-sales model. To summarize in one sentence: **from production-based-on-sales to sales-based production.**

**Level 2: T+3 is Midea's innovative and transformative business model**

To achieve T+3, i.e., to complete each cycle in 3 days, Midea carried out various innovations and transformations in multiple business links, including **marketing, R&D, supply chain, production, and logistics.**

The above diagram shows the business model changes from factory to distributor; arrows indicate changes in connection relationships, and shape sizes indicate changes in importance.

Let me give a few more examples, some not shown in the diagram.

For example, on the **marketing side**, it changed from sales branches dealing with distributors to headquarters directly dealing with distributors, and from varied sales policies to unified management of one inventory pool.

On the **R&D side**, it changed from passively accepting product development tasks to platform integration, SKU simplification, and promoting CDOC and other source management methods.

On the **supply chain side**, it changed from multiple materials, long cycles, and high inventory to refined material management and differentiated supply.

On the **production side**, it changed from aggregated scheduling by product type to production based on customer orders, small batches, and multiple batches.

On the **logistics side**, it changed from agents' multiple warehouses in multiple locations to direct shipment from production line and shared inventory in collaborative warehouses.

I will elaborate on specific practices later.

In short, Midea's T+3 innovatively transformed the business model through two-way pressure from production and sales.

**Level 3: T+3 is a commercial model of full-value-chain collaboration built by Midea**

On the basis of promoting business model transformation, T+3 further built a commercial model of full-value-chain collaboration for Midea.

There are many high-sounding definitions of commercial model, but I prefer the most straightforward: how a company makes money.

Midea's original way of making money was through continuously amplified scale effects and tangible low factor costs, i.e., maximizing the two advantages of the home appliance manufacturing industry mentioned earlier. Of course, this money was not easy to earn.

**T+3, on the other hand, rebuilds a new cost advantage through efficiency-driven.**

Simply put, it is not about regional transfer or cost shifting, but about making money through efficiency.

According to Fang Hongbo, "Midea's transformation and upgrading chose the most difficult path."

The efficiency-driven achieved by T+3 is the excellent operational efficiency of the entire value chain, not only including Midea itself, but also incorporating upstream suppliers and downstream distributors, promoting overall collaboration. Suppliers gradually implement T+3, and agents transform into operators.

What T+3 ultimately builds is a new commercial model of full-value-chain collaboration for Midea.

From the analysis of the above three levels, we can understand that Midea's T+3 is not a self-proclaimed theory or a conventional methodology, but **a high standard and strict requirement for itself, a model that starts from the customer's perspective, forces capability improvement, and is driven by full-value-chain efficiency.**

Only by understanding this model can the specific methods within it be effective.

## **What are the results of Midea's T+3?**

The results of Midea's T+3 are very significant, mainly reflected in three aspects: **operational results, capability improvement, and mindset change.**

**1. Operational results**

(Data from annual reports; pre-change data are from 2012. Post-change data: Little Swan is from 2015, Midea Group is from 2020, because Midea Group only began promoting T+3 at the end of 2015, so 2015 data is not used.)

From the comparative data in the above chart, it can be seen that whether it is the Little Swan Washing Machine Division, which first implemented T+3, or the Midea Group after promotion, **whether it is warehouse area, market share, turnover rate, net profit margin, or cash flow, there have been significant improvements.**

In fact, many other operational data also improved significantly, such as a decrease in sluggish inventory, an increase in same-day completion rate, simplification of product platforms, and an increase in direct shipment from production line. Since Midea Group is a listed company and has not disclosed these data, I am not at liberty to disclose them here.

But one point to illustrate is that T+3 improved Midea's operational results comprehensively.

**2. Capability improvement**

We often hear about building agile organizations, and **T+3 is Midea's agile value chain.**

As the saying goes, "In martial arts, only speed is unbeatable."

The implementation of T+3 greatly enhanced the overall rapid response capability of Midea's value chain.

**Meeting orders no longer relies on high inventory, but on fast capability.**

The market environment and user needs are changing rapidly. The T+3 model enables Midea to have the **capability to respond to change with change and to counter speed with speed.**

**3. Mindset change**

User-centric, customer-oriented.

This is easier said than done.

The traditional production-based-on-sales model paid lip service to "customer orientation" while actually doing enterprise-centric actions.

**If knowledge and action are not unified, the mindset has not changed.**

**The process of promoting T+3 is a process of using behavioral change to drive mindset change.**

In this process, from inside to outside, from top to bottom, it was discovered that "customer orientation" had previously only stayed in the mind but was not truly implemented. So the underlying mindset was still old, outdated, and original.

T+3, through actual behavioral change, truly achieves user-demand orientation and customer-order instruction, constantly challenging inherent thinking and forcing the abandonment of thinking inertia.

The biggest benefit of T+3 is not the operational results and capability improvement mentioned earlier, but the mindset change across the entire value chain, because it continuously affects future operational models.

## **What challenges did Midea's T+3 face?**

The challenges Midea faced in implementing T+3 were unprecedented, prominently manifested as 5 major challenges, which can be described as "passing five hurdles."

**1. Short-term performance decline, bringing operational pressure**

Originally, by stocking and pushing goods, distributors' warehouses could be filled in advance. To meet performance targets, everyone would sell products even at discounts, regardless of whether they were needed by users.

After switching to the T+3 model, during a period when user needs could not be accurately grasped, market forecasts were poor, and backend response capabilities had not yet improved (and this transition period was not short, measured in years), a certain degree of sales decline was inevitable. Whether one can endure the pain and **withstand this operational pressure is the first hurdle in implementing T+3.**

Many companies retreat and fail at the first hurdle of T+3. No wonder Fang Hongbo said, "Midea's T+3 model, competitors may not learn it in at least three years; this is our competitiveness."

**2. Internal team's instinctive doubt and work inertia**

Two to three decades of layer-by-layer distribution and payment-and-stock-pushing practices have formed deep-rooted instincts and inertia within the internal team. T+3 aims to subvert the original practices. The internal team may not say it openly, but psychologically they instinctively doubt it. Even during the implementation process, they continuously face the impact of original work inertia.

**One's own people became the second hurdle.**

**3. External partners' discomfort and backlash**

External partners mainly include suppliers and agents.

When dealing with suppliers, Midea is still the client, so suppliers naturally cooperate more.

However, when dealing with agents, agents need to transform into operators. This evolves from initial discomfort to later strong backlash. Whether this step can be taken is indeed the **third hurdle, which is even more difficult.**

**4. Product trade-offs and reshaping**

The implementation of the T+3 model can be said to have re-examined and redefined products. How to make trade-offs for old products, and how new products truly start from user needs, the resulting product-side transformation and reshaping are unprecedented.

The CDOC methodology later adopted by Midea R&D is closely related to the pressure from the T+3 model, but that is a later story.

In short, **products are the fourth hurdle that cannot be bypassed.**

**5. Gap in flexible production capability**

Earlier we mentioned the three "mass" aspects: mass manufacturing, mass inventory pushing, and mass distribution.

The first "mass" is mass manufacturing. Every factory and every production line, in their bones, wish they could produce only one product all day, without changing lines or switching production. This is the single-variety mass manufacturing mindset.

But the T+3 model, through reverse pressure, completely breaks the original mass manufacturing illusion, requiring factories to respond agilely and produce flexibly. **The capability gap in between is the real fifth hurdle.**

**To pass the five hurdles, one must cut down six generals.**

If Midea did not make great efforts, use painstaking work, and take real action, it would fall on the road to T+3.

Let's now look at what Midea did during the process of promoting T+3.

## **What did Midea do during the T+3 process?**

Let's first look at a diagram about the key points of the T+3 process. To pull the production-sales value chain end-to-end, every link, including marketing, R&D, supply chain, and manufacturing, must be optimized to the extreme.

(Key points of the T+3 process)

It seems that the overall response speed changes from slow to fast, a quantitative change. But to achieve this quantitative change in speed, it is not simply a matter of speeding up actions in the original links. Instead, many "qualitative changes" must accumulate to finally produce the "quantitative change" in response speed.

Of course, shifting from production-based-on-sales to sales-based production is itself a qualitative change.

Let's look at the four cycles of T+3—**order, material preparation, production, and delivery**—to see what qualitative changes Midea made in each.

**1. T cycle: 3-day order**

Focus on promoting **marketing transformation** and **refined marketing management.**

In **marketing transformation**, it mainly started from four aspects: **assessment, supply price, ordering, and models.**

Rigid task assessment, breaking the concept of peak and off-peak seasons, and changing the assessment caliber from picking goods to distribution.

Unified supply price nationwide for online and offline, adapting to the Internet era with transparent prices.

Encourage customers to order and pick up goods first, forming healthy competition. When I was in the division, I implemented customer order ranking management, regularly publishing the order and payment times of customers nationwide, making the order clear at a glance, forming a competitive atmosphere of first-come-first-served and urge to buy quickly.

Simplify product models, starting from the marketing end, implementing the "explosive product" concept, and making products serialized and family-oriented.

In **refined marketing management**, it mainly started from four aspects: **inventory control, order balancing, guiding customer mindset change, and terminal sales and distribution.**

Strict assessment and control of both own inventory and channel inventory, promoting agents to purchase frequently and sell quickly.

Ordering changed from the previous unfavorable situation of concentrating at month-end and special-price machines, balancing both time rhythm and order structure.

Train and guide customers to place T+3 orders, changing from monthly single orders to multiple orders.

This was also a gradual process. At that time, we first accelerated from monthly plans to ten-day plans, i.e., ordering increased from once a month to three times a month, then accelerated to weekly plans, ordering four times a month, and later to three-day plans, i.e., ordering ten times a month.

This is a very big transformation challenge for customers.

Encourage and help customers to continuously deepen channel expansion and terminal distribution, forming healthy sales.

**2. T+1 cycle: 3-day material preparation**

Focus on changes in **R&D** and **supply chain.**

**On the R&D side, vigorously promote standardization work,** simplify platforms, simplify models, strengthen commonality and modular design, and reduce the number of materials from the source.

Although the characteristics of Midea's various products differ, the simplification range is at least 20%, and more than 50% in some cases.

**On the supply chain side, manage both materials and suppliers simultaneously.**

Conduct detailed classification management of materials, comprehensively review and clean up short-term, medium-term, and long-term materials. At the same time, combined with R&D standardization, greatly reduce SKUs and material codes, reducing the proportion of non-standard materials and medium-to-long-term materials.

In supplier management, clean up sole-supply situations, eliminate supply risks, and continuously optimize the supply chain, forcing suppliers to also implement T+3.

It must be admitted that suppliers cooperating with Midea indeed face great pressure, but those who persist also improve their capabilities greatly. Even if they cannot make big money from Midea, with their upgraded capabilities, they can easily sweep away their original competitors.

**3. T+2 cycle: 3-day production**

Focus on **manufacturing flexibility improvement** and **two-way assessment of production and sales.**

**In manufacturing flexibility improvement,** this is the fifth hurdle we mentioned earlier. To pass this hurdle, Midea made great efforts in **production management improvement, flexible scheduling, manufacturability improvement,** and **quality assurance.**

For example, strict implementation of the 3-day rigid plan, management of material appointments and time-phased arrival. In scheduling, break the original model aggregation method and schedule entirely according to customer orders. Optimize rapid line change and rapid production switch, with dedicated personnel clearing tail numbers and daily clearing and daily settlement.

Implement process improvements to increase production efficiency. Improve quality inspection methods and establish abnormal reaction mechanisms.

I have previously written about Midea MBS, which focuses more on Midea's lean implementation. Much of it is closely related to improving manufacturing flexibility, so I won't repeat it here. (For details, click to read "Midea MBS: Why is this lean implementation the best?")

**In two-way assessment of production and sales,** set order balance indicators for sales, forcing the sales source to change the situation of concentrated ordering and arbitrary order insertion, improving order balance; set order acceptance rate and complete set rate indicators for manufacturing, forcing manufacturing management and planning capability improvement, optimizing production layout, and improving manufacturing flexibility.

**4. T+3 cycle: 3-day delivery**

Focus on **warehouse integration, timeliness improvement, and operation enhancement.**

Continuous inventory control, optimize and integrate warehouses. After compressing warehouse area, force the acceleration of the picking cycle, with the picking cycle improved by at least 50%.

To pursue ultimate timeliness, adopt methods such as complete sets of orders on time, logistics arriving on time, optimizing appointment models, and dedicated logistics lines, even resorting to forced outbound within 48 hours. At the same time, promote direct shipment from production line: after production is completed, inspect directly at the factory, load and ship after passing, without entering the warehouse.

In operation enhancement, strictly control and regularly report on overdue orders not picked up and on-time arrival rates, with monthly rolling reviews, effectively accelerating inventory turnover and improving logistics dispatch timeliness.

Above, we have explained the four cycles of T+3 one by one.

It should be said that these four cycles were particularly difficult during implementation. Some have compared and said that among the four cycles, the hardest is the second cycle, 3-day material preparation, because the supplier response cycle is difficult to achieve.

But in my understanding, 3-day material preparation is indeed difficult, but it is not the hardest among the four cycles.

In the material preparation link, as I mentioned earlier, both materials and suppliers can be managed simultaneously, with materials refined to the smallest granularity. After all, Midea is the client, and suppliers will try every means to cooperate.

**If I were to say the most difficult part of T+3, I think it is the marketing end, not the supply chain.**

Because this involves the transformation of external customers, from agents to operators.

First, the agent warehouse and the sales branch warehouse are merged, and the ownership of goods is transferred.

Second, the warehouse directly transfers and ships to outlets, and the flow of goods does not pass through the agent. Although the agent operates with light assets, which has some benefits, the significant reduction in turnover changes the agent's profit model.

We say that **the biggest resistance to reform is touching interests.**

However, if the marketing end does not change, T+3 cannot be implemented.

To achieve the marketing end transformation, Midea spent several years doing a lot of work. In addition to ensuring customer income, it continuously adopted measures such as customer integration, regional direct operation, setting benchmarks, and communication, and finally achieved the opening of the marketing end. The difficulty and pain are not just "a long story" but "a thousand stories."

## **Why was Midea able to make T+3 successful?**

The difficulty of promoting Midea's T+3 is far higher than MBS. Some models have already reached 6-9 days. To summarize the reasons for Midea's success, there are at least 6 points.

**1. Good piloting, making facts speak louder than words**

**The credit for promoting T+3 across the group goes first to the Little Swan Washing Machine Division.**

It was the washing machine division that, through its own exploration and practice, successfully implemented the T+3 model, summarized the methodology, and with solid facts, set a benchmark for other Midea divisions, proving that T+3 can definitely succeed.

Although T+3 encountered various obstacles in different divisions during group promotion, they still gritted their teeth and persisted, even if it meant losing skin, because there was always a successful model in front of them.

**2. The decisiveness and firmness of the top leader**

Without Fang Hongbo's forceful promotion, T+3 would not have blossomed across the group.

When Fang Hongbo heard the washing machine division report on the T+3 model, he keenly realized that this was a concrete practice for Midea's transformation and immediately required vigorous promotion and implementation across the group. This prompted all divisions to go to the washing machine division to learn, and after returning, they continuously trained and practiced.

**3. High-level organizational guarantee**

Each division established a high-level project team when implementing the T+3 model.

From the domestic marketing general manager, R&D director, supply chain director, to factory manager, financial director, etc., the cross-functional project team, from team leader to members, were all held by the first responsible person of each department.

**4. Strict assessment and internal PK**

Every month, strict assessments were conducted on various T+3 indicators, including T+3 order proportion, inventory-to-distribution ratio, direct shipment rate from production line, etc. More than a dozen indicators were analyzed and reviewed one by one, and improvement measures were formulated.

At the same time, each month, each project team reported to the division general manager, and each general manager reported to the group. The group repeatedly ranked and PK'd the promotion status and assessment indicators of each division, so that no project team could afford to relax.

**5. Strong brand power and product power**

Midea was able to pull through the value chain, promote agent transformation, and supplier cooperation. Strong brand power played a significant role at this time, which enabled most external partners to follow the transformation under pressure and pain.

Midea's investment in R&D greatly enhanced product power, truly meeting user needs. This played a huge role in the marketing, supply chain, and manufacturing ends of T+3.

**6. IT system consolidation and empowerment**

IT systems played an important role in T+3's continuous implementation and upgrading.

For example, the marketing end previously only connected with a few hundred agents, but now it connects with tens of thousands of outlets. Without IT system support, this would be impossible.

Now it has fully achieved, driven by the T+3 order model, connecting online and offline.

It has realized the combination of five dimensions: full-value-chain digital operation, intelligent scheduling, industrial AI, full-process digital logistics management, and Internet data SaaS platform.

(Image from Midea official website)

**Final words:**

Leaving the comfort zone is always painful, let alone a model transformation that is disruptive and self-subverting.

**The T+3 model is Midea's proactive step out of the comfort zone, forcing itself to practice the "Yijin Jing."**

Without this spirit and action of self-denial and self-reshaping, there would be no outstanding performance, let alone long-term development.

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