Enterprise Resource Planning

Enterprise Resource Planning





Enterprise Resource Planning

Introduction

Whirlpool Corporation is a worldwide leader in the home appliance industry. Its main products include microwave ovens, dishwashers, refrigerators, freezers etc. It has made its presence felt strong in the European market, offering 6900 different SKU's, thus catering to a wide diversity of different European countries. This has resulted in Whirlpool owing a 13% European market share. Customers include consumers who purchase stand-alone appliances, and contractors who purchase built-in appliances.

Problem

Whirlpool Europe is a very large organization that functions its operations in 11 plants, two central and 12 regional distribution centers, and a country sales office in each major European market. Currently, the company operates stand-alone information systems in each of these plants, distribution centers, and sales offices. So, information sharing across these functions or organizations becomes an obstacle and results in inconsistent information being shared. Whirlpool Europe is considering implementing Project Atlantic, an enterprise resource planning (ERP) system, to allow the smooth flow of information across the entire organization, thus improving operating effectiveness and efficiency in its overall operations. But before making any final decision, the company needs to evaluate the financial aspects of this significant investment plus take into account qualitative issues that can arise during and after its implementation.

Project Analysis

Appliances fall in the category of innovative products that change with the technological advancements in the industry. It is essential to incorporate these technology changes in the products in order to remain competitive. As the company is frequently coming up with improved products, it is difficult to predict the demand pattern of such innovations, thus making it difficult to forecast demand. One of the key success factors in such market is product availability. In light of large number of SKU's and high demand uncertainty, the company keeps its inventories high to avoid loss in sales due to stock-outs. The current information system does not allow integration of sales and manufacturing, which makes accurate sales forecasting difficult at manufacturing level. This leads to high unnecessary inventory, and in some cases, stock outs. At the same time, as products are being manufactured in 11 different countries and distributed through 12 distributors, the absence integrated information system does not allow the sales people to see inventory at plant or distributor level, thus creating difficulty in committing and meeting delivery dates. Moreover, as the plants do not have information of inventory at distributor level, they may not be able to replenish inventory in time, which leads to product unavailability. This accentuates the need for an integrated information system.

Project Atlantic aims to make the company more responsive to the demand uncertainty. ERP offers system integration and smooth flow of consistent information across the entire supply chain, thus ensuring better and accurate demand forecast. Accuracy in forecasting provides incentive to keep low inventories, thus reducing inventory carrying costs. Moreover, reduction in inventories frees additional warehouse space that can be discarded or used for other purposes.

The increase in inventory visibility helps to recognize bottlenecks in the system, which helps ...