Whirlpool case final solution.xls

(1)

WHIRLPOOL EUROPE

Harvard Business School Case N9-202-017

Case Software 2-202-711 (3rd edition; Revised 5/20/02)

This case was prepared solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.

(2)

Location Products

Amiens France Washers and Dryers Norrkoping Sweden Microwave Ovens

Poprad Slovakia Washers

Neunkirchen Germany Dishwashers Schorndorf Germany Washers

Cassinetta Italy Refrigerators and Cooking Appliances

Naples Italy Washers

Siena Italy Chest Freezers

Trento Italy Refrigerators and Freezers Isithebe South Africa Refrigerators and Freezers Source: Company documents.

(3)

Wave West Wave South Wave Central Wave North

Belgium Italy Czech Republic Denmark

France Portugal Hungary Finland

Netherlands Spain Poland Ireland

Plus: Warehouse Slovakia Norway

Mgt and Physical Dist. Sweden

United Kingdom Source: Company documents.

Exhibit 2A Project Atlantic Implementation Groupingsa

(4)

West South Central North Start Date: May-99 May-00 Mar-01 Jan-02 End Date: Apr-00 Feb-01 Dec-01 Aug-02

Source: Company documents.

(5)

Wave DSI Units Sold

West 45 73.5% 2,271,139 477,784 58,859 418,925

South 51 83.1% 1,415,949 283,549 46,241

Central 67 76.8% 977,665 185,625 43,678

North 55 83.2% 1,443,156 280,901 29,818

Exhibit 3 1997 Data for Whirlpool Europe Product

(6)

(7)

Improvements by Year by Wave Wave 2000 2001 2002 2003 2004 2005 West 25% 40% 35% South 35% 40% 25% Central 40% 40% 20% North 40% 40% 20%

(8)

Margin Improvements by Year by Wave 2000 2001 2002 2003 2004 2005 West 0.06% 0.25% 0.25% 0.25% 0.25% 0.25% South 0.10% 0.25% 0.25% 0.25% 0.25% Central 0.13% 0.25% 0.25% 0.25% North 0.13% 0.25% 0.25%

Source: Company Documents

(9)

2000 2001 2002 2003 2004 2005

Order Desk Headcount 0 190 411 442 474 506

Finance Headcount 81 135 216 324 405 405

Warehouse Space 18 72 155 230 274 288

Bad Debt Expense 102 512 922 1,024 1,024 1,024

Information Systems 420 840 840 1,280 1,280 1,280

621 1,749 2,544 3,300 3,457 3,503

Source: Company Documents.

(10)

2006 2007 537 569 405 405 288 288 1,024 1,024 1,280 1,280 3,534 3,566

(11)

Wave DSI Units Sold

West 45 73.5% 2,271,139 477,784

South 51 83.1% 1,415,949 283,549

Central 67 76.8% 977,665 185,625

North 55 83.2% 1,443,156 280,901

Improvements by Year by Wave

Wave 2000 2001 2002 2003

West 25% 40% 35%

South 35% 40% 25%

Central 40% 40%

North 40%

Margin Improvements by Year by Wave

2000 2001 2002 2003 West 0.06% 0.25% 0.25% 0.25% South 0.10% 0.25% 0.25% Central 0.13% 0.25% North 0.13% 2000 2001 2002 2003

Order Desk Headcount 0 190 411 442

Finance Headcount 81 135 216 324

Warehouse Space 18 72 155 230

Bad Debt Expense 102 512 922 1,024

Information Systems 420 840 840 1,280

Total 621 1,749 2,544 3,300

BENEFITS

Revenue and Gross Margin Increase I) Increase in Product Availability

Wave Product Availability Units Sold

West 73.5% 18.5% 2,271,139 477,784

South 83.1% 8.9% 1,415,949 283,549

Central 76.8% 15.2% 977,665 185,625

Exhibit 3 1997 Data for Whirlpool Europe

Product

Availability (000s US$)Revenue

Exhibit 4 Improvements in DSI and Availability by Year and Wave

Exhibit 5 Margin Improvements by Year by Wave

Exhibit 6 Forecasted Other Expense Savings by Year (000s US$)

Increase in Prod.

(12)

North 83.2% 8.8% 1,443,156 280,901

Unit Price 201.02771669

Wave ₂₀₀₀ ₂₀₀₁Additional Products Available₂₀₀₂ ₂₀₀₃

West 105040 168064 147056 0

South 0 44107 50408 31505

Central 0 0 59442 59442

North 0 0 0 50799

Wave ₂₀₀₀ Additional Products Available (Cumulative)₂₀₀₁ ₂₀₀₂ ₂₀₀₃

West 105040 273104 420161 420161

South 0 44107 94515 126019

Central 0 0 59442 118884

North 0 0 0 50799

Wave ₂₀₀₀ ₂₀₀₁Additional Products Sold (Cumulative)₂₀₀₂ ₂₀₀₃

West 26260 68276 105040 105040

South 0 11027 23629 31505

Central 0 0 14861 29721

North 0 0 0 12700

Wave ₂₀₀₀ Additional Revenue from increased sales₂₀₀₁ ₂₀₀₂ ₂₀₀₃

West 5278997 13725392 21115987 21115987

South 0 2216673 4750013 6333351

Central 0 0 2987374 5974748

North 0 0 0 2553006

Wave Profit Margin 1997 ₂₀₀₀ ₂₀₀₁ Pofit Margin Improvement₂₀₀₂

West 0.12 0.0006 0.0025 0.0025

South 0.16 0.0010 0.0025

Central 0.24 0.0013

North 0.11

Wave ₂₀₀₀ ₂₀₀₁ Profit from increased sales₂₀₀₂ ₂₀₀₃

West 653495.73 1733402.39 2719562.88 2772352.84

South 0.00 363710.35 791254.36 1070839.19

Central 0.00 0.00 706819.73 1428576.32

North 0.00 0.00 0.00 274323.79

II) Increase in Gross Margins

Additional Profit from Increased Profit Margin on the existing (base) sales

Wave 2000 2001 2002 West 477,784 286670.4 1481130.4 2675590.4 South 283,549 0 283549 992421.5 Central 185,625 0 0 241312.5 North 280,901 0 0 0 Revenue (000s US$)

(13)

2000 2001 2002 2003 Total Profit Increase 940166.13 3861792.14 8126961.36 12187982.85

Inventory Savings 2000

Wave DSI New DSI Profit Margin

West 45 42 483,063 0.124

South 51 51 283,549 0.163

Central 67 67 185,625 0.235

North 55 55 280,901 0.106

2001

West 45 37.2 491,509 0.126

South 51 46.8 285,766 0.164

Central 67 67 185,625 0.235

North 55 55 280,901 0.106

2002

West 45 33 498,900 0.129

South 51 42 288,299 0.167

Central 67 62.2 188,612 0.237

North 55 55 280,901 0.106

2003

West 45 33 498,900 0.131 South 51 39 289,882 0.169 Central 67 57.4 191,600 0.239 North 55 50.2 283,454 0.107 Revenue (000s US$) Revenue (000s US$) Revenue (000s US$) Revenue (000s US$)

(14)

2004

West 45 33 498,900 0.134

South 51 39 289,882 0.172

Central 67 55 193,093 0.242

North 55 45.4 286,007 0.110

2005

West 45 33 498,900 0.136

South 51 39 289,882 0.174

Central 67 55 193,093 0.244

North 55 43 287,284 0.112

Savings due to reduction in Returns Wave ₂₀₀₀ ₂₀₀₁ Products Sold₂₀₀₂ ₂₀₀₃

West 2297399 2339415 2376179 2376179

South 1415949 1426976 1439578 1447454

Central 977665 977665 992526 1007386

North 1443156 1443156 1443156 1455856

Wave ₂₀₀₀ ₂₀₀₁Percentage Reduction in Returns₂₀₀₂ ₂₀₀₃

West 1.00% 2.00% 2.00% 2.00%

South 1.00% 2.00% 2.00%

Central 2.00% 2.00%

North 2.00%

Wave ₂₀₀₀ ₂₀₀₁Savings due to Reduction in Returns₂₀₀₂ ₂₀₀₃

West 689219.71 1403649.07 1425707.51 1425707.51 South 0.00 428092.71 863746.59 868472.32 Central 0.00 0.00 595515.30 604431.61 North 0.00 0.00 0.00 873513.46 Total 689219.71 1831741.78 2884969.40 3772124.90 Revenue (000s US$) Revenue (000s US$)

(15)

Other Savings

2000 2001 2002 2003

Order Desk Headcount 0 190 411 442

Finance Headcount 81 135 216 324

Warehouse Space 18 72 155 230

Bad Debt Expense 102 512 922 1,024

Information Systems 420 840 840 1,280 Reduction in Returns 689 1832 2885 3772 Total 1310 3581 5429 7072 COSTS 1999 2000 2001 2002 Capital Expenditure 4300000 8600000 6900000 4100000 Software Licenses 600000 300000 Employees cost 2250000 4500000 6750000 9000000 Consulting Cost 3511200 1663200 1293600 739200 Task force 300000 600000 600000 Maintenance 600000 1200000 1800000 2400000 License Maintenance 100000 200000 300000 Total 11261200 16663200 17543600 17139200

Income Statement (Without ERP)

1999 2000 2001 2002

Benefits

Gross Margin 178596000 178596000 178596000 178596000

Profit before Tax 178596000 178596000 178596000 178596000

Tax (@40%) 71438400 71438400 71438400 71438400

Profit After Tax 107157600 107157600 107157600 107157600

Net Cash Flows 107157600 107157600 107157600 107157600

Present Values 98309724.7706422 90192408.046 82745328.48 75913145.397

Income Statement (With ERP Implementation)

1999 2000 2001 2002 Benefits Gross Margin 178596000 179536166 182457792 186722961 Inventory Savings 0 3478881 11925712 22107816 Other Savings 0 1310220 3580742 5428969 Costs 11261200 16663200 17543600 17139200 Depreciation 860000 2580000 3960000 4780000

Profit before Tax 166474800 165082067 176460646 192340547

Tax (@40%) 66589920 66032827 70584258 76936219

Profit After Tax 99884880 99049240 105876387 115404328

(16)

Present Values 92426495.412844 85539298.03 84813843.92 85141608.165

Comparison between ERP Implementation & Without ERP

With ERP Without ERP Benefit of ERP Implementation(in mn)

Project upto 2005 598311595 539319146.72 59

Project upto 2007 735346333.195218 642436268.6 93

(17)

58,859 46,241 43,678 29,818

2004 2005

20%

40% 20%

Margin Improvements by Year by Wave

2004 2005 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 2004 2005 2006 2007 474 506 537 569 405 405 405 405 274 288 288 288 1,024 1,024 1,024 1,024 1,280 1,280 1,280 1,280 3,457 3,503 3,534 3,566 BENEFITS

Revenue and Gross Margin Increase

2000 2001 2002 2003 2004 2005 25% 40% 35% 35% 40% 25% 40% 40% 20% Margin (000s US$)

(18)

40% 40% 20%

Additional Products Available

2004 2005

0 0

29721 0

50799 25400

Additional Products Available (Cumulative)

2004 2005

420161 420161 126019 126019 148605 148605 101598 126998

Additional Products Sold (Cumulative)

2004 2005

105040 105040

31505 31505

37151 37151

25400 31749

Additional Revenue from increased sales

2004 2005

21115987 21115987 6333351 6333351 7468435 7468435 5106013 6382516

Pofit Margin Improvement

2003 2004 2005

0.0025 0.0025 0.0025

0.0013 0.0025 0.0025

Profit from increased sales

2004 2005

2825142.81 2877932.78 1086672.57 1102505.95 1804391.49 1823062.58 561412.61 717722.06

Additional Profit from Increased Profit Margin on the existing (base) sales 2003 2004 2005

3870050.4 5064510.4 6258970.4 1701294 2410166.5 3119039 705375 1169437.5 1633500 365171.3 1067423.8 1769676.3

(19)

2004 2005 15989157.69 19302409.07 Inventory Savings 59,799 423,264 52183.212 48704.3312 3478.8808 46,241 237,308 33158.10411 33158.10411 0 43,678 141,947 26056.02466 26056.02466 0 29,818 251,083 37834.42466 37834.42466 0 3478.8808 62,074 429,436 52944.14699 43767.16152 9176.985479 46,888 238,877 33377.39203 30628.66563 2748.726402 43,678 141,947 26056.02466 26056.02466 0 29,818 251,083 37834.42466 37834.42466 0 11925.71188 64,254 434,646 53586.47269 39296.74664 14289.72605 48,025 240,274 33572.57866 27648.00596 5924.572705 44,626 143,986 26430.35123 24536.83353 1893.5177 29,818 251,083 37834.42466 37834.42466 0 22107.81645 65,501 433,399 53432.70214 39183.98157 14248.72057 49,013 240,869 33655.69894 25736.71096 7918.987987 45,812 145,788 26761.04761 22926.62884 3834.418761 30,457 252,997 38122.76197 34795.68456 3327.077408 Margin

(000s US$) COGS (000s US$)

Inventory Before ERP (000s US$) Inventory After ERP(000s US$) Change in Inventory(00 0s US$) Total Inventory Savings Margin

(000s US$) COGS (000s US$)

Inventory Before ERP (000s US$) Inventory After ERP(000s US$) Change in Inventory(00 0s US$)

(20)

29329.20473 66,749 432,151 53278.9316 39071.21651 14207.71509 49,738 240,145 33554.43867 25659.27663 7895.16204 46,652 146,442 26881.06192 22066.54337 4814.518553 31,447 254,560 38358.38272 31663.10137 6695.281348 33612.67703 67,996 430,904 53125.16106 38958.45144 14166.70961 50,463 239,420 33453.1784 25581.8423 7871.336094 47,135 145,959 26792.45055 21993.80269 4798.64786 32,305 254,978 38421.36017 30038.51795 8382.842218 35219.53579

Savings due to reduction in Returns Products Sold 2004 2005 2376179 2376179 1447454 1447454 1014816 1014816 1468556 1474905

Percentage Reduction in Returns

2004 2005

2.00% 2.00%

Savings due to Reduction in Returns

2004 2005 1425707.51 1425707.51 868472.32 868472.32 608889.76 608889.76 881133.33 884943.26 3784202.92 3788012.85 Total Inventory Savings Margin

(000s US$) COGS (000s US$)

Inventory Before ERP (000s US$) Inventory After ERP(000s US$) Change in Inventory(00 0s US$) Total Inventory Savings

(21)

Other Savings 2004 2005 2006 2007 474 506 537 569 405 405 405 405 274 288 288 288 1,024 1,024 1,024 1,024 1,280 1,280 1,280 1,280 3784 3788 3788 3788 7241 7291 7322 7354 COSTS 2003 2004 2005 600000 300000 3000000 3000000 3000000 400000 400000 400000 4000000 3700000 3400000

Income Statement (Without ERP)

2003 2004 2005 2006 2007 2008 2009 2010 178596000 178596000 178596000 178596000 178596000 178596000 178596000 178596000 178596000 178596000 178596000 178596000 178596000 178596000 178596000 178596000 71438400 71438400 71438400 71438400 71438400 71438400 71438400 71438400 107157600 107157600 107157600 107157600 107157600 107157600 107157600 107157600 107157600 107157600 107157600 107157600 107157600 107157600 107157600 107157600 69645087.52 63894575.71 58618876.8 53778786.05 49338335.83 45264528 41527090 38098248

Income Statement (With ERP Implementation)

2003 2004 2005 2006 2007 2008 2009 2010 190783983 194585158 197898409 197898409 197898409 197898409 197898409 197898409 29329205 33612677 35219536 35219536 35219536 35219536 35219536 35219536 7072125 7241203 7291013 7322013 7354013 7354013 7354013 7354013 4000000 3700000 3400000 3400000 3400000 3400000 3400000 3400000 4780000 3920000 2200000 820000 0 0 0 0 218405312 227819038 234808958 236219958 237071958 237071958 237071958 237071958 87362125 91127615 93923583 94487983 94828783 94828783 94828783 94828783 131043187 136691423 140885375 141731975 142243175 142243175 142243175 142243175 135823187 140611423 143085375 142551975 142243175 142243175 142243175 142243175

(22)

88275752.54 83841997.07 78272599.85 71542029.16 65492709 60085054 55123903 50572388

Comparison between ERP Implementation & Without ERP

Benefit of ERP Implementation(in mn) 59

93 134