The competition was immense and this led to depleted margins for Whirlpool. Whirlpool had to necessarily counter this threat. The main issues that were causing the problem for Whirlpool include the following:
1. Cost of the spares was a major concern for the company since most of the Asian companies could produce the same products with similar features for much lesser price. This was compounded by other raw material costs as well leading to a larger end user price which immediately required the attention of the company.
3. In addition to these, Whirlpool also felt that the service support was an unique selling proposition since most of the Asian companies did not have an elaborate service network. In case of Whirlpool they had operations in 170 countries which made it easy and they wanted to make it more effective.
It is important that these issues are addressed in their ERP solution. The ERP solution was expected to provide a solution to these key issues. Primarily, it was expected to reduce the cost of production:
1. By increasing the production and thereby reducing the cost of production of every unit.
2. Reducing the stock on hand and the inventory, both raw material, intermediate and finished goods. This was expected to bring down the holding cost of the product as well. This would also reduce the cost of production.
3. Optimizing the manpower usage in the company, thereby ushering in more efficiency in the company that would increase the productivity and therefore, reduce the cost of production.
4. The company also concentrated on bringing in new products that would change the market situation.
5. The company also tried to build relationships with various vendors across the globe which would result in outsourcing some of the products that these people can produce for much lesser. This will again bring down the price of the product further.
6. The transportation cost and the raw material cost though they have increased, optimizing the supply and by clubbing together supplies, moving them to the nearest point for fabrication work would all bring down the cost of production.
All this would bring down the cost of the end product for the customer. This was what the customer expects. Also cutting down the cost of production would improve the profit margins that the company had. Implementing ERP would bring down the material movement; reduce the stock holding costs in terms of both raw materials and finished goods. There will also better production planning. All this would help in reducing the cost of production further and increasing the margins the company had. ERP is expected to bring down the number of people involved in the business as well. This also will add to the reduction in the cost of production. Apart from this, ERP is also expected to provide better services to the customers by enhancing status access on spares availability and the movement of returned goods for servicing.
Before implementing the ERP, it is essential to mark out the Key Performance Indicators that would form a measure of the gain. In order to clearly appreciate the improvements that have happened in the working of the company, the following key performance indexes are suggested at Whirlpool. The indicators are defined for the production / operation division. The effects of these KPIs in the rest of the four functions are also analyzed below. These KPIs will help the management in drawing out their requirements as well.
The following KPIs are suggested for the performance monitoring of the Production Division in the company.