In each major European market, Whirlpool had a country sales office which handled sales generation and forecasting, order processing, billing and collection. They served 2 types of customers – direct consumers who purchases appliances for their homes and contractors who needed built-in appliances for new home constructions and kitchen remodeling. Success in these 2 markets depended on product quality, price, availability, and on-time delivery. Currently, with the wide scope of Whirlpool’s operations, it has disjointed information systems implemented in the various business units which hamper the company’s success in meeting its customer and operations requirements. To remedy this, Whirlpool is evaluating the plan to implement a company-wide enterprise resource planning system, called Project Atlantic. The cost of Project Atlantic is sizeable both in financial and non-financial terms. A rigorous capital investment appraisal, both quantitative and qualitative need to be conducted before embarking on the project (Case Resource).
Question 1: Summarize the main factors that Whirlpool Corp needs to take into account when deciding whether to invest in the enterprise resource planning (ERP) systems named Project Atlantic. Your summary should include:
- The BENEFITS to be gained from the system
- The COSTS likely to be incurred by its implementation and maintenance
- The RESOURCES to be used in its implementation and maintenance
Whirlpool Corp's Project Atlantic is an undertaking to design and implement an enterprise resource planning (ERP) system that would allow the company to better serve its consumer and contract markets for appliances, as well as reduce its inventory by 12 days of sales. Enterprise resources are the manpower, machines and materials necessary for business operations and which have to be properly allocated and utilized to achieve business objectives. The main factors that Whirlpool Corp needs to take into account to decide whether to invest in Project Atlantic are the benefits that can be derived from the project; the costs of design, implementation and maintenance; whether benefits outweigh the costs and when will the company get payback from the ERP systems; how long will the process of designing and implementing take and what external and internal resources are necessary; and what changes need to be undertaken by the company to enable the new systems to fit in, how will these changes affect concerned employees, and how shall changes be handled in the least obtrusive way (Wailgum, 2008).
The benefits expected from Project Atlantic include:
Working capital reduction through reduction of the number of days of inventory by making the supply chain transparent and efficient;
Revenue and gross margin increase through increase in product availability through a more visible supply chain more visible and integrating sales forecasting and inventory management;
Cost savings through simplification of customer orders processes and the accounting function - reducing the number of order desk employees and finance employees; reduction of warehouse space due to the decrease in inventory levels; reduction of customer returns; reduction of bad debt expenses and information systems expenses
Increased efficiency in the distribution process by allowing country sales offices to monitor products throughout the supply chain;
Allow the company to build products to specific orders from contractors
Projected Atlantic is expected to reduce 12 days of inventory in each wave of implementation yielding a total of USD 34.3 million inventory savings. It is also expected to improve product availability which will increase sales equivalent to 25% of the improvement and increase company profitability by the