Strategic Changes of Whirlpool Corporation - Assignment Example

Question Whirlpool had operations in more than 170 countries and had a revenue flow that exceeded $13 billion dollars per annum. The world leader in home appliances business, this is a truly multinational company. During the 1990s the rise of the East Asian tigers had a string of home appliance businesses come from there. 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. 2. The continuous growth in the market was demanding innovations and new products every now and then to counter the innovative spirit of the other competing companies. 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. Question 2 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. 1. Model wise Production during the quarter 2. Inventory of raw material, intermediates and finished goods in the division 3. New Models launched during the quarter Production every quarter model wise would bring about a clear measurement of the production for that quarter which would result in the sales in a push type marketing environment that is practiced in Whirlpool. The models produced will hit the market and would eventually result in a sale for the company. However, in order to minimize the stock levels that the company maintains for the products, the production volume is decided by the marketing based on its marketing estimates. This figure would help the production department to internally monitor the production growth and thereby the growth of the company over a period of time, specifically with reference to the quarters. This would also help the management in arriving at the model wise sales in the company. This would provide the Return on Capital Invested. In addition to this, this will also be used by the management to calculate the customer preferences on the products and models made. Along with the data that is available in the marketing section on the competitor information, it is possible to arrive at the market share of the company as well. The raw material inventory and the work-in-progress material will decide on the amount of investment that has got locked up in the production process. This would also help the production to know the amount of investment that goes into the production systems. It is ideal to keep this to the minimum. This is achieved by effectively implementing the pull or the push of the Kanban systems for inventory control and monitoring. The inventory level could be brought down to the barest minimum if the ERP is fully implemented. This would save the amount of investment that goes into the inventory. This would also result in reducing the cost of production. Therefore, the stock / inventory details that is passed down as a Key Performance Measurement, is a very important measure to indicate the status of the company. Innovation of the company is reflected in the models launched in that quarter. The success of the models soon after would reflect the effectiveness of the models and the understanding that the researchers had on the requirements of their customers. The success of the models however will be known based on the orders that the marketing is able to pickup for the specific model soon after. Once a product is held successful, then the team could concentrate more on the product and streamline the production process to reach better heights in production by analyzing both the successes and the failures in the model or the models soon after the launch of the product. The management will be able to take the innovativeness from the information provided by the division. The acceptance of the model has to be subsequently lead to a better planning at both the materials and the marketing divisions to enable the success to continue further. Failures also is to be taken note of by these two divisions, to ensure that the material that reaches production meets up to the required status in case of the materials division and to give an appropriate feedback to the production to make sure that the product become better. These KPIs can be used further to improve the performance of the Production division. Internally, this will help the managers in the division and the staff there to improve upon their performance. KPIs will also help in understanding the status of the production systems and this will also help in augmenting the resources if required. This will also help in identifying the ones under control and those that are not under control. Typically, the KPIs will also help the rest of the divisions in the company to understand the performance of the production division and would enable them to have their own balanced score card for the purpose. Question 3 On implementation of the ERP software for the company, the company should be able to realize the following benefits in the production division. This would help the company in optimizing the performance in the division and to improve upon the results that exist in the company during a similar period. The following points make up the list of issues that would ideally met in order to make the ERP implementation in the company a success: 1. Inventory Control: The inventory control will be one of the major results expected out of the ERP software when it comes into being. The raw material prices have shot up and controlling their inventory in the company would drastically reduce the cost to the company for producing every unit. Similarly, the intermediates that are formed should also be reduced by suitably planning the production process. This will also help the company in realizing a better investment control, resulting in saving of monetary investments in the company. Both these would directly impact the inventory carrying cost of the company bringing about better performance and financial result of the company. 2. Online monitoring of the suppliers in the supply chain system would enable timely delivery of material. This will ensure that the production does not get stopped for want of material whether it is one of the raw materials or a reprocessed intermediate supplied by a vendor. Supply chain starts with the processing of the material requirement and raising an enquiry for the supply of materials which would eventually lead to order placement and material supply. The automation of supply chain would result in better inventory control and in reducing the lead time for any order that is being executed. This would also result in bringing about the complete life cycle of the product being brought under the control. 3. Online monitoring of the financial status of the suppliers needs to be monitored. Payments for their supplies need to be effected in time to ensure that there is no delay in the delivery of goods. The entire process of supply chain could be monitored by working on the supply chain. This is expected out of the ERP system. 4. The spare requirements of the marketing need to be fine tuned and integrated with the production systems. This would help in shipping the spares the moment a requirement arises at the distributor end. This would ensure that the material reaches the distributor in time and that the customer requirements are met whenever they arise. This would bring about a much higher satisfaction levels in the customer. Ideally this could be integrated with the distributors. Whenever there is fall in the stock level at the distributor end, then an order could be raised in the spares supply system which would eventually be executed by the company. Customer satisfaction would rise with the effective implementation of this system. 5. The production system should be fully integrated once the ERP goes on line. It is very essential that the marketing and the distribution departments know the production that is in progress and the extent to which the production could effect supplies. This would enable marketing and the distribution department to plan their dispatches. This would also enable the company to plan their advertisements and promotion campaigns depending on the stock in hand. Apart from this, just-in-time management can be more effective only if the entire process of production is fully controlled and monitored. Work in progress at all points of time will be known to the people in the department and the extent of goods locked up will also be known and the extent of goods at every stage in production should also be known. Effective bar coding or RFID tagging may also be done at the stores and at the production floor level. 6. The ERP should also help in reducing the time taken from design to production of a newly designed product. Project Atlantic is expected to deliver a number of facilities to the production department. All these facilities will add value to the production process and reduce the cost of production thereby saving valuable dollars for the company. The company therefore, can ensure that they remain competitive in the global market. Read More