Harvard Business School Case Study 9-202-017
The introduction of an Enterprise Resource System (ERP)
ANSWER TO QUESTION 1:
The Enterprise Resource Planning System is a cross-functional information system that represents an important development for Whirlpool and an important area of activity for the information management function. Instead of focusing on the information processing requirements of business functions, ERP software focuses on supporting the business processes involved in the operations of a business. The introduction of enterprise-wide computer networking makes it possible to control all major business processes within a single software design.
ERP systems are commonly composed of four major parts, covering accounting, manufacturing, sales and human resources. This forces organizations to operate along business processes.
Three activities that need to be carried out in order to try to match supply and demand, with which ERP system helps:
1. Forecast demand
2. Plan the level of capacity that the operation is likely to need to meet the forecast demand, both in the long and the short term. 3. Control the use of that capacity. This involves the allocation of people, equipment and other resources to the various work tasks to ensure the smooth running of the operation in the short term.
There is a number of benefits that Whirlpool foreseen to gain, from the introduction of an ERP system, in various tangible and intangible areas. Observable tangible benefits come from lowering costs for data communication and telecommunication. In addition, there are intangible benefits associated with improved flow of information throughout the organization. However, increased user satisfaction and response times compensate the system complexity and potential data inconsistencies.
Being an integrated solution, ERP, grants benefits from increased efficiency, and improved quality, productivity and profitability. ERP software penetrates functional departments and can be extended along the supply chain to suppliers and customers.
The ERP system, being an industrial software, helps a business manage the important functions of its business, including product planning, parts purchasing, maintaining inventories, interacting with suppliers, providing customer service and tracking order. Hence, a smoother and more transparent flow of all of these activities will mainly enhance monitoring of the supply chain.
The following table reflects a smooth presentation of Whirlpool’s foreseen benefits:
|Benefits |Description of expectations upon implementation of the ERP system | |Working Capital Reduction |Make its supply chain more transparent and efficient. | | |As a result, eliminate 8 days sales of inventory (DSI) of allocated and reserved unites, 9 days of transit and 3 obsolete.| | |Reduce 12 days of inventory in each wave. | |Revenue and Gross Margin |Increase product availability by: | |Increase |making the supply chain more visible and | | |integrating sales forecasting and inventory management. | | |Enable the company to realize an increase in unit sales equal to 25% of the improvement in product availability. | | |The incremental sales would contribute to increasing the profitability of Whirlpool Europe....