The document discusses Whirlpool's operations in Europe. It summarizes that Whirlpool formed a joint venture with Phillips in 1989, bought out Phillips' stake in 1991, and created many pan-European appliance brands. It operates 11 manufacturing plants and 12 distribution centers across Europe and Africa. The document then analyzes Whirlpool's delivery route and identifies that having many regional distribution centers leads to inefficiencies. It proposes a project called "Atlantic" to consolidate distribution to increase efficiency and enhance deliverability.
The document discusses Whirlpool's operations in Europe. It summarizes that Whirlpool formed a joint venture with Phillips in 1989, bought out Phillips' stake in 1991, and created many pan-European appliance brands. It operates 11 manufacturing plants and 12 distribution centers across Europe and Africa. The document then analyzes Whirlpool's delivery route and identifies that having many regional distribution centers leads to inefficiencies. It proposes a project called "Atlantic" to consolidate distribution to increase efficiency and enhance deliverability.
The document discusses Whirlpool's operations in Europe. It summarizes that Whirlpool formed a joint venture with Phillips in 1989, bought out Phillips' stake in 1991, and created many pan-European appliance brands. It operates 11 manufacturing plants and 12 distribution centers across Europe and Africa. The document then analyzes Whirlpool's delivery route and identifies that having many regional distribution centers leads to inefficiencies. It proposes a project called "Atlantic" to consolidate distribution to increase efficiency and enhance deliverability.
The document discusses Whirlpool's operations in Europe. It summarizes that Whirlpool formed a joint venture with Phillips in 1989, bought out Phillips' stake in 1991, and created many pan-European appliance brands. It operates 11 manufacturing plants and 12 distribution centers across Europe and Africa. The document then analyzes Whirlpool's delivery route and identifies that having many regional distribution centers leads to inefficiencies. It proposes a project called "Atlantic" to consolidate distribution to increase efficiency and enhance deliverability.
Whirlpool Corporation joined with Dutch-based Phillips Elect
ronics to form Whirlpool International BV in 1989($407 M, 53%)
WIBV bought out Phillips stake for full ownersship in 1991
($600 M, 47%)
Many pan Europen brands created: Whirlpool,Bauknecht, Ig
nis, Laden, etc.
11 Manufacturing Plants(10 Eu, 1 Africa) and 12 Distributio
n centers
6,900 SKUs +
Delivery Route
Central distrribution centers
12 regional Plants distribution Central distrribution centers centers
What is the main problem exi
st in the delivery route? What is the consquence to thi s problem? How could we solve this probl em? + Project Atlantic Increase the efficiency of the distribution process Goal Enhance spot goods' deliverability
is a business management software that a company can us
e to collect, store, manage and interpret data from many business activities
Better serve its consumer Allow a country sales offic
market for stand-alone appli e to view product throughout ances and contract market f the supply chain, and increa or built-in appliances and red se the efficiency of the distri uce its incentory by 12 days bution process. of sales. Procide some integration Allow Whirlpool to build pr with suppliers and to increas oducts to specific orders fro e inventory visibility across t m contractors. he supply chain. + Methodology Four-wave Analysis West Wave: Forecasts(Pre-ERP) 1999 2000 2001 2002 2003 2004 2005 2006 2007 Units (000s) 2,271.139 2,271.139 2,271.139 2,271.139 2,271.139 2,271.139 2,271.139 2,271.139 2,271.139 Revenue ($000s) 477,784 477,784 477,784 477,784 477,784 477,784 477,784 477,784 477,784 Margin ($000s) 58,859 58,859 58,859 58,859 58,859 58,859 58,859 58,859 58,859 COGS ($000s) 418,925 418,925 418,925 418,925 418,925 418,925 418,925 418,925 418,925 Price per unit 210.372 210.372 210.372 210.372 210.372 210.372 210.372 210.372 210.372 COGS per unit 184.456 184.456 184.456 184.456 184.456 184.456 184.456 184.456 184.456 Margin per unit 25.916 25.916 25.916 25.916 25.916 25.916 25.916 25.916 25.916 Percentage margin 12.32% 12.32% 12.32% 12.32% 12.32% 12.32% 12.32% 12.32% 12.32% DSI 45 45 45 45 45 45 45 45 45 Inventory 51,648.288 51,648.288 51,648.288 51,648.288 51,648.288 51,648.288 51,648.288 51,648.288 51,648.288
What is DSI ( Days Sales of Inventory)?
DSI=Ending Inventory /(COGS/Days in Period)
Ending Inventory =DSI *( COGS/ Days in Period)
Additional Units and DSI reduction: Improvements in DSI and availability by Year 2000 2001 2002 2003 2004 2005 West 25% 40% 35%
Change in NWC($000s) (2,684.89) (6,966.68) (8,429.02) (6,218.42) (3,765.14) (1,529.45) 0.00 0.00 Analysis Forecastthe simplified income statement without the ERP system, the incremental costs/benefits of the ERP system, and then a simplified income statement with the ERP system.
Get the firm’s simplified income statement without ERP
and with ERP, with which we can easily calculate the firm’s total revenue, cost and change in NWC.
Compute the NPV regarding the adoption of the ERP
Discounted Cash Flow(9%) -8,716.72 -7,342.64 1,091.69 6,656.69 9,915.54 8,126.96 6,070.81 4,353.58 3,726.71 - - Sum of Discounted Cash Flows -8,716.72 16,059.36 14,967.67 -8,310.98 1,604.56 9,731.52 15,802.33 20,155.90 23,882.62 + Recommendation : NPV Net Present Value is the difference between the present value of cash inflows and the present value of cash outflows. Used to analyze the profitability of a project We typically base our capital budgeting decision on the project’s NPV since it takes into consideration the Time Value of Money. It provides the most reliable profitability decision. + Recommendation: IRR
The Internal Rate of Return is the
discount rate that makes the NPV of a project equal to zero. We desire a higher IRR and at the least, it should be higher than the firm’s required rate of return. IRR always gives the same investment decision as the NPV. + Recommendation: Whirlpool Europe NPV = $23,882,000 IRR = 35% TheNPV is positive so we should accept the new Enterprise Resource Planning System in order to add wealth to the company. This goes along with the key goal of maximizing shareholder wealth. TheIRR is greater than the firm’s cost of capital of 9%. We should accept the project based on the IRR as well. + Recommendation: Conclusion
Overall, we recommend that the new ERP system be implemented. By utilizing the process in the case and following the wave schedule, we see a positive NPV, a high IRR and ultimately, wealth creation for Whirlpool Europe.
