Whirlpool-Europe

9-202-017REV:DECEMBER15,2003________________________________________________________________________________________________________________ResearchAssociateAldoM.Sesia,ProfessorSudhakarBalachandranofColumbiaUniversity,andProfessorRichardS.Rubackpreparedthiscase.HBScasesaredevelopedsolelyasthebasisforclassdiscussion.Casesarenotintendedtoserveasendorsements,sourcesofprimarydata,orillustrationsofeffectiveorineffectivemanagement.Copyright©2001PresidentandFellowsofHarvardCollege.Toordercopiesorrequestpermissiontoreproducematerials,call1-800-545-7685,writeHarvardBusinessSchoolPublishing,Boston,MA02163,orgoto—electronic,mechanical,photocopying,recording,orotherwise—withoutthepermissionofHarvardBusinessSchool.SUDHAKARBALACHANDRANRICHARDRUBACKWhirlpoolEuropeBythespringof1999,WhirlpoolCorporation(WHR:NYSE),theworldwideleaderinthehomeapplianceindustry,hadnearlytenyearsexperiencesellingtotheEuropeanmarketandhadgrownitsEuropeanmarketsharetoasizeable13%.WhirlpoolEurope’schieffinancialofficeranditsvicepresidentoflogisticswereevaluatinganinvestmentinanenterpriseresourceplanning(ERP)system.NamedProjectAtlantic,thesystemwouldre-organizetheinformationflowinallofWhirlpoolEurope.Ifsuccessful,theprojectwouldimproveoperatingeffectivenessandefficiencyinWhirlpool’ssalesandmarketing,operationsandlogistics,andfinanceareas.Thecostoftheproject,however,wouldbesubstantial,andwouldincludethedirectcostsofthesystemandthepersonnelthatwouldberequiredtocompletethecompleximplementation.Seniormanagementhadquantifiedthecostsandbenefits,andnowneededtoevaluatethem.CompanyBackgroundIn1989,WhirlpoolCorporationenteredtheEuropeanmarket,paying$470milliontopurchasea53%stakeintheappliancedivisionofDutch-basedPhilipsElectronics.ThecompaniesformedajointventurefirmnamedWhirlpoolInternationalBV(WIBV)andoneyearlater,launchedadual-brandingprogramwhichaddedtheWhirlpoolnametothePhilipsproductlines.InJuly1991,WhirlpoolpurchasedPhilips’47%stakefor$600milliontobecomethesoleownerofWIBV.Overtime,Whirlpooldevelopedthreepan-Europeanbrandstodifferentiateitsproductline:Whirlpool,Bauknecht,andIgnis.OtherregionalbrandslikeLaden,soldexclusivelyinFrance,werealsocreated.WhirlpoolEuropemanufacturedproductsbasedonsalesbudgetsorforecasts,andthenheldthemasfinishedgoodsinventory.Europeanmanufacturingoperated11plants,tenlocatedinEuropeandoneinAfrica.Eachplantproducedaspecificproductlineacrossallbrands.Exhibit1providesaplantlisting.Uniquecountryrequirements,suchaslanguage,productsattributepreferences,andelectricalspecificationsresultedinmultiplestock-keepingunits(SKUs)forthesamemodel.Intotal,WhirlpoolEuropemanufactured6,900SKUs.Ordersmovedfrommanufacturingtooneoftwocentraldistributioncentersandthenontooneof12regionaldistributioncentersbeforereachingthecustomer.202-017WhirlpoolEurope2IneachmajorEuropeanmarket,acountrysalesoffice—responsibleforsalesgenerationandforecasting,orderprocessingandfulfillment,billingandcashcollection—wastheprimaryinterfacewithcustomers.WhirlpoolEuropeoperatedmanystand-aloneinformationsystemsthatweredevelopedbyindividualplants,distributioncenters,orsalesofficesspecificallytomeettheirownbusinessrequirements.Informationcouldnotbeeasilysharedacrossfunctionsororganizations,andwasofteninconsistentandirreconcilable.Thesalesorganization,forexample,hadtoaccessasmanyas13independentinventorysystemstoviewinventoryacrossthesupplychain.Thereweretwotypesofcustomers:consumerswhopurchasedstand-aloneappliancesfortheirhomesandcontractorswhopurchasedbuilt-inappliancesfornewhomeconstructionorkitchenremodeling.Successintheconsumermarketdependedonproductquality,price,andavailability.WhirlpoolEuropeestimatedthatitsdistributioncentershadtheproductthatmatchedthecustomer’sdemand79%ofthetime.Iftheproductwasunavailable,thecustomerhadtoeitherwaitorswitchtoanotherproduct.Often,thelackofimmediateavailabilityresultedinlostsales.KitchenremodelinginEuropegenerallyinvolvedtheinstallationofnewcabinetsalongwithbuilt-inappliances.Installationoftenoccurredonlyafewweeksafterthekitchenwasorderedbythehomeowner.Whirlpoolestimatedthatthissegmentofthemarketwouldgrowtoabout25%ofkitchenappliancesales.Tosupplythebuilt-inappliancestothismarket,Whirlpoolwouldhavetodeliveritsapplianceswithintendaysofbeingorderedbythecontractor.Underitscurrentinventoryandinformationsystems,Whirlpoolwasunabletoreliablysatisfythecontractors’requireddeliverytime.ProjectAtlanticDescriptionThegoalofProjectAtlanticwastodesignandimplementanenterpriseresourceplanning(ERP)systemthatwouldallowWhirlpoolEuropetobetterserveitsconsumermarketforstand-aloneappliancesandcontractmarketforbuilt-inappliancesand,atthesametime,reduceitsinventoryby12daysofsales.Thesecompetinggoalswouldbeaccomplishedthroughaninformationsystemthatwouldallowacountrysalesofficetoviewproductthroughoutthesupplychain,therebyincreasingtheefficiencyofthedistributionprocess.ProjectAtlanticwasexpectedtoprovidesomeintegrationwithsuppli