WHIRLPOOL EUROPE

Harvard Business School Case N9-202-017

Case Software 2-202-711 (3rd edition; Revised 5/20/02)
Copyright 2001 by the President and Fellows of Harvard College

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.

Exhibit 1Whirpool Europe's Manufacturing Sites

Location
Amiens France
Norrkoping Sweden
Poprad Slovakia
Neunkirchen Germany
Schorndorf Germany
Cassinetta Italy
Naples Italy
Siena Italy
Trento Italy
Isithebe South Africa
Source: Company documents.

Products
Washers and Dryers
Microwave Ovens
Washers
Dishwashers
Washers
Refrigerators and Cooking Appliances
Washers
Chest Freezers
Refrigerators and Freezers
Refrigerators and Freezers

Exhibit 2A Project Atlantic Implementation Groupingsa

Wave West
Belgium
France
Netherlands
Plus: Warehouse
Mgt and Physical Dist.

Wave South
Italy
Portugal
Spain

Wave Central
Czech Republic
Hungary
Poland
Slovakia

Source: Company documents.

a

Austria, Germany, and Switzerland were not part of Project Atlantic.

Wave North
Denmark
Finland
Ireland
Norway
Sweden
United Kingdom

Exhibit 2B Wave Implementation Schedule

Start Date:
End Date:

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

Source: Company documents.

Exhibit 3

Wave
West
South
Central
North
Source:

1997 Data for Whirlpool Europe

DSI
45
51
67
55

Product
Availability
73.5%
83.1%
76.8%
83.2%

Company documents.

Units Sold
2,271,139
1,415,949
977,665
1,443,156

Revenue
Margin
(000s US$) (000s US$)
477,784
58,859
283,549
46,241
185,625
43,678
280,901
29,818

Exhibit 4

Wave
West
South
Central
North
Source:

Improvements in DSI and Availability by Year and Wave

2000
25%

Improvements by Year by Wave

2001
2002
2003
40%
35%
35%
40%
25%
40%
40%
40%

Company documents.

2004

20%
40%

2005

20%

Exhibit 5

Margin Improvements by Year by Wave

Margin Improvements by Year by Wave

West
South
Central
North

2000
0.06%
0.00%
0.00%
0.00%

Source:

Company Documents
2000

West
South
Central
North

0.06
0.00
0.00
0.00

2001
0.25%
0.10%
0.00%
0.00%

2001
0.25
0.10
0.00
0.00

2002
0.25%
0.25%
0.13%
0.00%

2003
0.25%
0.25%
0.25%
0.13%

2004
0.25%
0.25%
0.25%
0.25%

2005
0.25%
0.25%
0.25%
0.25%

2002
0.25
0.25
0.13
0.00

2003
0.25
0.25
0.25
0.13

2004
0.25
0.25
0.25
0.25

2005
0.25
0.25
0.25
0.25

Exhibit 6

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

2000

2001

2002

2003

2004

2005

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

Order Desk Headcount

Source:

Company Documents.

2006

2007

537

569

405

405

288

288

1,024

1,024

1,280

1,280

3,534

3,566

One measure of evaluating investment in project Atlantic is by calculating NPV. If the NPV of Investment in project Atlantic is > 0 th
For calculating NPV of the project we need to find the expected CF from the project.
Expected CF from the project can be found by taking the difference of expected CF without the project and expected CF with the p
Forecasted Income Statement for West Wave
Assuming Exhibit 3 is valid for 2000 and subsequent years
2000
# of Units sold
2271139
revenue/sales
477784000
margin/profit
58859000
cogs
418925000
cogs/unit
184.4559052
price/unit
210.3719764
margin/unit
25.91607119
margin % of revenue 12.31916515
DSI
45
Inventory in $
51648287.67

2001
2271139
477784000
58859000
418925000
184.4559052
210.3719764
25.91607119
12.31916515
45
51648287.67

2002
2271139
477784000
58859000
418925000
184.4559052
210.3719764
25.91607119
12.31916515
45
51648287.67

2003
2271139
477784000
58859000
418925000
184.4559052
210.3719764
25.91607119
12.31916515
45
51648287.67

Year
2004
2271139
477784000
58859000
418925000
184.4559052
210.3719764
25.91607119
12.31916515
45
51648287.67

2002
1415949
283549000
46241000
237308000
167.5964318
200.2536815
32.65724966
16.30793972
51
33158104.11

2003
1415949
283549000
46241000
237308000
167.5964318
200.2536815
32.65724966
16.30793972
51
33158104.11

Year
2004
1415949
283549000
46241000
237308000
167.5964318
200.2536815
32.65724966
16.30793972
51
33158104.11

2002
977665
185625000
43678000
141947000
145.1898145
189.8656493
44.67583477
23.53023569
67
26056024.66

2003
977665
185625000
43678000
141947000
145.1898145
189.8656493
44.67583477
23.53023569
67
26056024.66

Year
2004
977665
185625000
43678000
141947000
145.1898145
189.8656493
44.67583477
23.53023569
67
26056024.66

2002
1443156

2003
1443156

Year
2004
1443156

Forecasted Income Statement for South Wave

2000
# of Units sold
1415949
revenue/sales
283549000
margin/profit
46241000
cogs
237308000
cogs/unit
167.5964318
price/unit
200.2536815
margin/unit
32.65724966
margin % of revenue 16.30793972
DSI
51
Inventory in $
33158104.11

2001
1415949
283549000
46241000
237308000
167.5964318
200.2536815
32.65724966
16.30793972
51
33158104.11

Forecasted Income Statement for central Wave

2000
# of Units sold
977665
revenue/sales
185625000
margin/profit
43678000
cogs
141947000
cogs/unit
145.1898145
price/unit
189.8656493
margin/unit
44.67583477
margin % of revenue 23.53023569
DSI
67
Inventory in $
26056024.66

2001
977665
185625000
43678000
141947000
145.1898145
189.8656493
44.67583477
23.53023569
67
26056024.66

Forecasted Income Statement for North Wave

# of Units sold

2000
1443156

2001
1443156

revenue/sales
margin/profit
cogs
cogs/unit
price/unit
margin/unit
margin % of revenue
DSI
Inventory in $

280901000
29818000
251083000
173.9818841
194.6435451
20.66166097
10.61512775
55
37834424.66

280901000
29818000
251083000
173.9818841
194.6435451
20.66166097
10.61512775
55
37834424.66

280901000
29818000
251083000
173.9818841
194.6435451
20.66166097
10.61512775
55
37834424.66

280901000
29818000
251083000
173.9818841
194.6435451
20.66166097
10.61512775
55
37834424.66

280901000
29818000
251083000
173.9818841
194.6435451
20.66166097
10.61512775
55
37834424.66

Forecast With ERP

West Wave
2000
# of Units sold
2306866.95
revenue/sales
485632478.2
margin/profit
60117246.48
cogs
425515231.7
cogs/unit
184.4559052
price/unit
210.5160325
margin/unit
26.06012732
margin % of revenue
12.38
cogs % of revenue
87.62
DSI
42.00
Inventory in $
48963396.53

2001
2364031.68
498748071.2
62688468.73
436059602.5
184.4559052
210.9735146
26.51760947
12.57
87.43
37.20
44442238.94

2002
2414050.81
509300783.4
64014856.56
445285926.9
184.4559052
210.9735146
26.51760947
12.57
87.43
33.00
40258727.63

Year
2003
2414050.81
509300783.4
64014856.56
445285926.9
184.4559052
210.9735146
26.51760947
12.57
87.43
33.00
40258727.63

2004
2414050.81
509300783.4
64014856.56
445285926.9
184.4559052
210.9735146
26.51760947
12.57
87.43
33.00
40258727.63

2001
1429218.20
286548590
47016719.92
239531870.1
167.5964318
200.4932421
32.89681031
16.41
83.59
46.80
30712579.51

2002
1444382.99
290109610.3
48036174.4
242073435.9
167.5964318
200.8536597
33.2572279
16.56
83.44
42.00
27855025.5

Year
2003
1453860.99
292013300.9
48351386.34
243661914.6
167.5964318
200.8536597
33.2572279
16.56
83.44
39.00
26035108.68

2004
1453860.99
292013300.9
48351386.34
243661914.6
167.5964318
200.8536597
33.2572279
16.56
83.44
39.00
26035108.68

2001
977665.00
185625000
43678000
141947000
145.1898145
189.8656493
44.67583477
23.53
76.47
67.00
26056024.66

2002
997014.62
189621187.6
44864819.91
144756367.7
145.1898145
190.188974
44.99915951
23.66
76.34
62.20
24668071.43

Year
2003
1016364.24
193605604.5
46039869.05
147565735.4
145.1898145
190.4884065
45.29859204
23.78
76.22
57.40
23206227.98

2004
1026039.05
195448543.6
46478124.32
148970419.3
145.1898145
190.4884065
45.29859204
23.78
76.22
55.00
22447597.42

south wave
2000
# of Units sold
1415949.00
revenue/sales
283549000
margin/profit
46241000
cogs
237308000
cogs/unit
167.5964318
price/unit
200.2536815
margin/unit
32.65724966
margin % of revenue
16.31
cogs % of revenue
83.69
DSI
51.00
Inventory in $
33158104.11
central wave
2000
# of Units sold
977665.00
revenue/sales
185625000
margin/profit
43678000
cogs
141947000
cogs/unit
145.1898145
price/unit
189.8656493
margin/unit
44.67583477
margin % of revenue
23.53
cogs % of revenue
76.47
DSI
67.00
Inventory in $
26056024.66
North Wave
Year

# of Units sold
revenue/sales
margin/profit
cogs
cogs/unit
price/unit
margin/unit
margin % of revenue
cogs % of revenue
DSI
Inventory in $

2000
1443156.00
280901000
29818000
251083000
173.9818841
194.6435451
20.66166097
10.62
89.38
55.00
37834424.66

2001
1443156.00
280901000
29818000
251083000
173.9818841
194.6435451
20.66166097
10.62
89.38
55.00
37834424.66

2002
1443156.00
280901000
29818000
251083000
173.9818841
194.6435451
20.66166097
10.62
89.38
55.00
37834424.66

2003
1458420.15
284285528.8
30546843.25
253738685.6
173.9818841
194.9270441
20.9451599
10.75
89.25
50.20
34897758.95

2004
1473684.30
287647656.5
31253285.35
256394371.2
173.9818841
195.1894693
21.2075852
10.87
89.13
45.40
31891245.07

minus W
minus C
FCF
Discoun
Discoun
PV of a

PV of fo

If the NPV of Investment in project Atlantic is > 0 then we can invest in it.

CF without the project and expected CF with the project

Calculation of additional units
Gross margin=sales-cogs
Year
2005
2271139
477784000
58859000
418925000
184.4559052
210.3719764
25.91607119
12.31916515
45
51648287.67

Addn units calculation

Pre-erp units
P-erp availability
target availabity
% I^ in availability
additional sales
% Improvement
add units in year
add cumulative units
Inventory savings
Reduction in DSI by ERP
% Improvement
Net DSI reduction
cmulative dsi
new DSI

Year
2005
1415949
283549000
46241000
237308000
167.5964318
200.2536815
32.65724966
16.30793972
51
33158104.11

Year
2005
977665
185625000
43678000
141947000
145.1898145
189.8656493
44.67583477
23.53023569
67
26056024.66

Year
2005
1443156

Addn units calculation

Pre-erp units
P-erp availability
target availabity
% I^ in availability
additional sales
% Improvement
add units in year
add cumulative units
Inventory savings
Reduction in DSI by ERP
% Improvement
Net DSI reduction
cumulative dsi
new DSI
Addn units calculation
Pre-erp units
P-erp availability
target availabity
% I^ in availability
additional sales
% Improvement
add units in year
add cumulative units
Inventory savings
Reduction in DSI by ERP
% Improvement
Net DSI reduction
Cumulative DSI
new DSI

2000
2271139
0.735
0.920
0.252
0.250
0.250
35727.95
35727.95

In case it is given that erp increases gross m

The gross margins can increase by either increasing sales o
.As cogs is direct attributable cost so it cannot be decreased
Therefore the increase in margin is due to additional units p
firm would not want to increase price due to competetion etc
2001
2002
2271139
2271139
0.735
0.735
0.920
0.920
0.252
0.252
0.250
0.250
0.400
0.350
57164.72
50019.13
92892.68
142911.81

12.00
0.25
3.00
3.00
42.00

12.00
0.40
4.80
7.80
37.20

12.00
0.35
4.20
12.00
33.00

2000
1415949
0.831
0.920
0.107
0.250
0.000
0.00
0.00

2001
1415949
0.831
0.920
0.107
0.250
0.350
13269.20
13269.20

2002
1415949
0.831
0.920
0.107
0.250
0.400
15164.80
28433.99

12.00
0.00
0.00
0.00
51.00

12.00
0.35
4.20
4.20
46.80

12.00
0.40
4.80
9.00
42.00

2000
977665
0.768
0.920
0.198
0.250
0.000
0.00
0.00

2001
977665
0.768
0.920
0.198
0.250
0.000
0.00
0.00

2002
977665
0.768
0.920
0.198
0.250
0.400
19349.62
19349.62

12.00
0.00
0.00
0.00
67.00

12.00
0.00
0.00
0.00
67.00

12.00
0.40
4.80
4.80
62.20

280901000
29818000
251083000
173.9818841
194.6435451
20.66166097
10.61512775
55
37834424.66

2005
2414050.81
509300783.4
64014856.56
445285926.9
184.4559052
210.9735146
26.51760947
12.57
87.43
33.00
40258727.63

2005
1453860.99
292013300.9
48351386.34
243661914.6
167.5964318
200.8536597
33.2572279
16.56
83.44
39.00
26035108.68

2005
1026039.05
195448543.6
46478124.32
148970419.3
145.1898145
190.4884065
45.29859204
23.78
76.22
55.00
22447597.42

Addn units calculation

Pre-erp units
P-erp availability
target availabity
% I^ in availability
additional sales
% Improvement
add units in year
add cumulative units

2000
1443156
0.832
0.920
0.106
0.250
0.000
0.00
0.00

2001
1443156
0.832
0.920
0.106
0.250
0.000
0.00
0.00

2002
1443156
0.832
0.920
0.106
0.250
0.000
0.00
0.00

12.00
0.00
0.00
0.00
55.00

12.00
0.00
0.00
0.00
55.00

12.00
0.00
0.00
0.00
55.00

2000
2001
6107909.00 6107909.00
1227859000 1227859000
178596000
178596000
1049263000 1049263000
148696841.1 148696841.1

2002
6107909.00
1227859000
178596000
1049263000
148696841.1

2000
2001
6143636.95 6214070.87
1235707478 1251822661
179854246.5 183201188.7
1055853232 1068621473
146011950 139045267.8

2002
6298604.42
1269932581
186733850.9
1083198730
130616249.2

Inventory savings
Reduction in DSI by ERP
% Improvement
Net DSI reduction
cumulative dsi
new dsi

Sum of all waves without ERP

# of Units sold
revenue/sales
margin/profit
cogs
inventory

Sum of all waves with ERP

# of Units sold
revenue/sales
margin/profit
cogs
inventory

Incremental Cash flow from ERP

2000
2001
2002
# of Units sold
35727.95
106161.87
190695.42
revenue/sales
7848478.195 23963661.21 42073581.37
margin/profit
1258246.477 4605188.652 8137850.869
cogs
6590231.718 19358472.56
33935730.5
inventory
-2684891.145 -9651573.34 -18080591.87
working capital for inventory
-2684891.145 -6966682.19 -8429018.535
negative cash flow from inventory means that cash has gone out from business for inventory
also FCF= NI+NCC-WC+Int(1-t)+capex
so we need to find NCC,CAPEX

capex of equipment
capex of software license
total capex
depreciation+amortization

1999
4300000
600000.00
4900000

2000
8600000
300000.00
8900000
980000

capex and NCC

2001
6900000
6900000
980000

2005
1481316.38
289137357.2
31415143.23
257722213.9
173.9818841
195.1894693
21.2075852
10.87
89.13
43.00
30361795.07

1780000

Total Dep+Amortization

980000

2760000

Expenses
current employees
consultants
Task force
manage&maintenance
License maintenance
Total expenses
forecasted savings
operating expenses net

operating expenses
1999
2000
2250000
2250000
3511200.00 1663200.00
300000
600000
1200000
100000
6361200
5513200
621000
6361200
4892200

2001
2250000
1293600.00
600000
1800000
200000
6143600
1749000
4394600

Expenses
revenue
(cogs)
(Operating expenses)
(depreciation)
EBIT
taxes@40%
EBIAT
plus NCC
minus Working Capital inventry
minus Capex
FCF
Discount factor at 9%
Discounted cash flow
PV of all DCF

FCF and NPV

1999
2000
2001
0 7848478.195 23963661.21
0.00 6590231.72 19358472.56
6361200
4892200
4394600
0
980000
2760000
-6361200.00 -4613953.52
-2549411.35
-2544480 -1845581.41 -1019764.539
-3816720.00 -2768372.11
-1529646.81
0
980000
2760000
0 -2684891.14 -6966682.192
4900000
8900000
6900000
-8716720.00 -8003480.97
1297035.38
1
0.917
0.842
-8716720 -7339192.05 1092103.792
23877808.3

PV of forecasted cash flows from ERP = 23.8 million

In case it is given that erp increases gross margin

margins can increase by either increasing sales or by reducing cogs
direct attributable cost so it cannot be decreased without decreasing the no of units produced
he increase in margin is due to additional units produced as the
not want to increase price due to competetion etc.
2003
2004
2005
2271139
2271139
2271139
0.735
0.735
0.735
0.920
0.920
0.920
0.252
0.252
0.252
0.250
0.250
0.250
0.000
0.000
0.000
0.00
0.00
0.00
142911.81
142911.81
142911.81

12.00
0.00
0.00
12.00
33.00

12.00
0.00
0.00
12.00
33.00

12.00
0.00
0.00
12.00
33.00

2003
1415949
0.831
0.920
0.107
0.250
0.250
9478.00
37911.99

2004
1415949
0.831
0.920
0.107
0.250
0.000
0.00
37911.99

2005
1415949
0.831
0.920
0.107
0.250
0.000
0.00
37911.99

12.00
0.25
3.00
12.00
39.00

12.00
0.00
0.00
12.00
39.00

12.00
0.00
0.00
12.00
39.00

2003
977665
0.768
0.920
0.198
0.250
0.400
19349.62
38699.24

2004
977665
0.768
0.920
0.198
0.250
0.200
9674.81
48374.05

2005
977665
0.768
0.920
0.198
0.250
0.000
0.00
48374.05

12.00
0.40
4.80
9.60
57.40

12.00
0.20
2.40
12.00
55.00

12.00
0.00
0.00
12.00
55.00

2003
1443156
0.832
0.920
0.106
0.250
0.400
15264.15
15264.15

2004
1443156
0.832
0.920
0.106
0.250
0.400
15264.15
30528.30

2005
1443156
0.832
0.920
0.106
0.250
0.200
7632.08
38160.38

12.00
0.40
4.80
4.80
50.20

12.00
0.40
4.80
9.60
45.40

12.00
0.20
2.40
12.00
43.00

Year
2003
2004
6107909.00
6107909.00
1227859000 1227859000
178596000
178596000
1049263000 1049263000
148696841.1 148696841.1

2005
6107909.00
1227859000
178596000
1049263000
148696841.1

Year
2003
2004
6342696.19
6367635.15
1279205218 1284410284
188952955.2 190097652.6
1090252262 1094312632
124397823.2 120632678.8

2005
6375267.22
1285899985
190259510.4
1095640475
119103228.8

Year
2003
2004
234787.19
259726.15
51346217.62 56551284.42
10356955.2 11501652.57
40989262.43 45049631.86
-24299017.9 -28064162.3
-6218425.98 -3765144.43
e out from business for inventory

2005
267358.22
58040985.09
11663510.45
46377474.64
-29593612.29
-1529450.002

capex and NCC

2002
4100000

2003

2004

2005

2006

2007

4100000
980000

0
980000

0
980000

1780000
1380000
4140000

1780000
1380000
820000
4960000

1780000
1380000
820000
4960000

1780000
1380000
820000
3980000

1380000
820000
2200000

820000
820000

2002
2250000
739200.00
600000
2400000
300000
6289200
2544000
3745200

2003

2004

2005

2006

2007

600000
3000000
400000
4000000
3300000
700000

300000
3000000
400000
3700000
3457000
243000

3000000
400000
3400000
3503000
-103000

3000000
400000
3400000
3534000
-134000

3000000
400000
3400000
3566000
-166000

2002
42073581.37
33935730.50
3745200
4140000
252650.87
101060.3477
151590.52
4140000
-8429018.54
4100000
8620609.06
0.772
6655110.192

2003
51346217.62
40989262.43
700000
4960000
4696955.20
1878782.079
2818173.12
4960000
-6218425.98
0
13996599.10
0.708
9909592.163

2004
2005
2006
56551284.42 58040985.09 58040985.09
45049631.86 46377474.64 46377474.64
243000
-103000
-134000
4960000
3980000
2200000
6298652.57
7786510.45 9597510.45
2519461.026 3114604.178 3839004.18
3779191.54
4671906.27 5758506.27
4960000
3980000
2200000
-3765144.435 -1529450.002
0
0
0
0
12504335.97 10181356.27 7958506.27
0.65
0.596
0.547
8127818.383 6068088.337 4353302.93

2007
58040985.09
46377474.64
-166000
820000
11009510.45
4403804.18
6605706.27
820000
0
0
7425706.27
0.502
3727704.548