Whirlpool Case: Evaluation

1. Forecasts W/O the ERP system 2000 2001 2002 2003 2004 2005
Units (in thousands) 2,271 2,271 2,271 2,271 2,271 2,271
Revenue (in thousands) 477,784 477,784 477,785 477,785 477,785 477,785
COGS (In thousands) 418,925 418,925 418,925 418,925 418,925 418,925
Margin (in thousands) 58,859 58,859 58,860 58,860 58,860 58,860
Price per unit 210.38 210.38 210.39 210.39 210.39 210.39
COGS per unit 184.47 184.47 184.47 184.47 184.47 184.47
Margins per unit 25.92 25.92 25.92 25.92 25.92 25.92
Percentage margin 12.32% 12.32% 12.32% 12.32% 12.32% 12.32%
Days Sales' inventories 45 45 45 45 45 45 8.11 times per year
Inventory ($ 51,648) ($ 51,648) ($ 51,648) ($ 51,648) ($ 51,648) ($ 51,648)
DSI = (Inventory/COGS)/365 18851625 18851625 18851625 18851625 18851625 18851625
Inventory Dollar Amt ($ 51,648) ($ 51,648) ($ 51,648) ($ 51,648) ($ 51,648) ($ 51,648)
Impact of ERP System 2000 2001 2002 2003 2004 2005
Additional units (Cumulative) 36 93 143 143 143 143
assuming COGS
stays same for
each prodcut
Chng in margins (b/c more expensive) 0.06% 0.25% 0.25% 0.25% 0.25% 0.25%
DSI Reduction (Cumulative) 3 8 12 12 12 12 days saved
Calculation for additional units 2000 2001 2002 2003 2004 2005
Pre-ERP Units 2,271 2,271 2,271 2,271 2,271 2,271
Pre-ERP Availability 73.5% 73.5% 73.5% 73.5% 73.5% 73.5%
Target Availability (Post ERP) 92% 92% 92% 92% 92% 92%
Improvement in Availability 25.2% 25.2% 25.2% 25.2% 25.2% 25.2%
Sales Increase (Improvement) 25% 25% 25% 25% 25% 25%
% Improvement in DSI in a year 25% 40% 35% - - -
Additional Units in a year 36 57 50
Additional Units (Cumulative) 36 93 143 143 143 143
Calculation for DSI Reduction 2000 2001 2002 2003 2004 2005
Target DSI Reduction 12 12 12 12 12 12
Percentage Improvement 25% 40% 35% - - -
DSI Reduction 3 4.8 4.2
DSI Reduction (Cumulative) 3 7.8 12.0 12.0 12.0 12.0
Forecast W/ ERP System 2000 2001 2002 2003 2004 2005
Units (in thousands) ( 2,307) ( 2,364) ( 2,414) ( 2,414) ( 2,414) ( 2,414)
Revenue (in thousands) ( 485,632) ( 498,748) ( 509,302) ( 509,322) ( 509,322) ( 509,322)
COGS (In thousands) ( 425,515) ( 436,060) ( 445,286) ( 445,304) ( 445,304) ( 445,304)

2. Margin (in thousands) ( 60,117.25) ( 62,688.47) ( 64,015.93) ( 64,018.50) ( 64,018.50) ( 64,018.50)
Price per unit 210.53 210.99 210.99 210.99 210.99 210.99
didn't change COGS per unit 184.47 184.47 184.47 184.47 184.47 184.47
Margins per unit 26.06 26.52 26.52 26.52 26.52 26.52
Percentage margin 12.38% 12.57% 12.57% 12.57% 12.57% 12.57%
Days Sales' inventories 42 37 33 33 33 33
Inventory ( 48,963) ( 44,442) ( 40,259) ( 40,260) ( 40,260) ( 40,260)
DSI = (Inventory/COGS)/365
Price per unit = COGS per unit / (1 - % margin)

3. South Forecasts W/O the ERP system 2000 2001 2002 2003 2004 2005
Units (in thousands) 1,416 1,416 1,416 1,416
Revenue (in thousands) 283,549 283,549 283,549 283,549 283,549 283,549
COGS (In thousands) 237,308 237,308 237,308 237,308 237,308 237,308
Margin (in thousands) 46,241 46,241 46,241 46,241
Price per unit 200.25 200.25 200.25 200.25
COGS per unit 167.59 167.59 167.59 167.59
Margins per unit 32.66 32.66 32.66 32.66
Percentage margin 16.31% 16.31% 16.31% 16.31%
Days Sales' inventories 51 51 51 51 7.16
Inventory ($ 33,158) ($ 33,158) ($ 33,158) ($ 33,158)
DSI = (Inventory/COGS)/365 12102708 12102708 12102708 12102708
Inventory Dollar Amt ($ 33,158) ($ 33,158) ($ 33,158) ($ 33,158)
Impact of ERP System 2000 2001 2002 2003 2004 2005
Additional units (Cumulative) 13 28 38 38 38
Chng in margins (b/c more expensive) 0.10% 0.25% 0.25%
DSI Reduction (Cumulative) 4 9 12 days saved
Calculation for additional units 2000 2001 2002 2003 2004 2005
Pre-ERP Units 1,416 1,416 1,416 1,416
Pre-ERP Availability 83.1% 83.1% 83.1% 83.1%
Target Availability (Post ERP) 92% 92% 92% 92%
Improvement in Availability 10.7% 10.7% 10.7% 10.7%
Sales Increase (Improvement) 25% 25% 25% 25%
% Improvement in DSI in a year 35% 40% 25%
Additional Units in a year 13 15 9
Additional Units (Cumulative) 13 28 38
Calculation for DSI Reduction 2000 2001 2002 2003 2004 2005
Target DSI Reduction 12 12 12
Percentage Improvement 35% 40% 25%

4. DSI Reduction 4.2 4.8 3.0
DSI Reduction (Cumulative) 4.2 9.0 12.0
Forecast W/ ERP System 2000 2001 2002 2003 2004 2005
Units (in thousands) ( 1,416) ( 1,429) ( 1,444) ( 1,454)
Revenue (in thousands) ( 283,752) ( 286,549) ( 290,110) ( 292,013) ( 292,013) ( 292,013)
COGS (In thousands) ( 237,308) ( 239,532) ( 242,073) ( 243,662) ( 243,662) ( 243,662)
Margin (in thousands) ( 46,444.43) ( 47,016.72) ( 48,036.17) ( 48,351.39)
Price per unit 200.39 200.49 200.85 200.85
COGS per unit 167.59 167.59 167.59 167.59
Margins per unit 32.80 32.90 33.26 33.26
Percentage margin 16.37% 16.41% 16.56% 16.56%
Days Sales' inventories 51 47 42 39
Inventory ( 33,158) ( 30,713) ( 27,855) ( 26,035)
DSI = (Inventory/COGS)/365
Price per unit = COGS per unit / (1 - % margin)

5. Central Forecasts W/O the ERP system 2000 2001 2002 2003 2004 2005
Units (in thousands) 978 978 978 978 978 978
Revenue (in thousands) 185,625 185,625 185,625 185,625 185,625 185,625
COGS (In thousands) 141,947 141,947 141,947 141,947 141,947 141,947
Margin (in thousands) 43,678 43,678 43,678 43,678 43,678 43,678
Price per unit 189.80 189.80 189.80 189.80 189.80 189.80
COGS per unit 145.14 145.14 145.14 145.14 145.14 145.14
Margins per unit 44.66 44.66 44.66 44.66 44.66 44.66
Percentage margin 23.53% 23.53% 23.53% 23.53% 23.53% 23.53%
Days Sales' inventories 67 67 67 67 67 67 5.45
Inventory ($ 26,056) ($ 26,056) ($ 26,056) ($ 26,056) ($ 26,056) ($ 26,056)
DSI = (Inventory/COGS)/365 9510449 9510449 9510449 9510449 9510449 9510449
Inventory Dollar Amt ($ 26,056) ($ 26,056) ($ 26,056) ($ 26,056) ($ 26,056) ($ 26,056)
Impact of ERP System 2000 2001 2002 2003 2004 2005
Additional units (Cumulative) 0 0 19 39 48 48
Chng in margins (b/c more expensive) 0.13% 0.25% 0.25% 0.25%
DSI Reduction (Cumulative) 4.8 9.6 12.0 12 days saved
Calculation for additional units 2000 2001 2002 2003 2004 2005
Pre-ERP Units 978 978 978 978 978 978
Pre-ERP Availability 76.8% 76.8% 76.8% 76.8% 76.8% 76.8%
Target Availability (Post ERP) 92% 92% 92% 92% 92% 92%
Improvement in Availability 19.8% 19.8% 19.8% 19.8% 19.8% 19.8%
Sales Increase (Improvement) 25% 25% 25% 25% 25% 25%
% Improvement in DSI in a year 40% 40% 20%
Additional Units in a year 0 0 19 19 10 0
Additional Units (Cumulative) 0 0 19 39 48 48
Calculation for DSI Reduction 2000 2001 2002 2003 2004 2005
Target DSI Reduction 12 12 12 12 12 12
Percentage Improvement 40% 40% 20%

6. DSI Reduction 0 0.0 4.8 4.8 2.4
DSI Reduction (Cumulative) 0 0.0 4.8 9.6 12.0 12
Forecast W/ ERP System 2000 2001 2002 2003 2004 2005
Units (in thousands) ( 978) ( 978) ( 997) ( 1,017) ( 1,026) ( 1,026)
Revenue (in thousands) ( 185,771) ( 185,625) ( 189,621) ( 193,606) ( 195,449) ( 195,449)
COGS (In thousands) ( 141,947) ( 141,947) ( 144,756) ( 147,566) ( 148,970) ( 148,970)
Margin (in thousands) ( 43,823.76) ( 43,678.00) ( 44,864.82) ( 46,039.87) ( 46,478.12) ( 46,478.12)
Price per unit 189.95 189.80 190.12 190.42 190.42 190.42
COGS per unit 145.14 145.14 145.14 145.14 145.14 145.14
Margins per unit 44.81 44.66 44.98 45.28 45.28 45.28
Percentage margin 23.59% 23.53% 23.66% 23.78% 23.78% 23.78%
Days Sales' inventories 67 67 62 57 55 55
Inventory ( 26,056) ( 26,056) ( 24,668) ( 23,206) ( 22,448) ( 22,448)
DSI = (Inventory/COGS)/365
Price per unit = COGS per unit / (1 - % margin)

7. North Forecasts W/O the ERP system 2000 2001 2002 2003 2004 2005
Units (in thousands) 1,443 1,443 1,443 1,443 1,443 1,443
Revenue (in thousands) 280,901 280,901 280,901 280,901 280,901 280,901
COGS (In thousands) 251,083 251,083 251,083 251,083 251,083 251,083
Margin (in thousands) 29,818 29,818 29,818 29,818 29,818 29,818
Price per unit 194.66 194.66 194.66 194.66 194.66 194.66
COGS per unit 174.00 174.00 174.00 174.00 174.00 174.00
Margins per unit 20.66 20.66 20.66 20.66 20.66 20.66
Percentage margin 10.62% 10.62% 10.62% 10.62% 10.62% 10.62%
Days Sales' inventories 55 55 55 55 55 55 6.64
Inventory ($ 37,834) ($ 37,834) ($ 37,834) ($ 37,834) ($ 37,834) ($ 37,834)
DSI = (Inventory/COGS)/365 13809565 13809565 13809565 13809565 13809565 13809565
Inventory Dollar Amt ($ 37,834) ($ 37,834) ($ 37,834) ($ 37,834) ($ 37,834) ($ 37,834)
Impact of ERP System 2000 2001 2002 2003 2004 2005
Additional units (Cumulative) 0 0 0 15 31 38
Chng in margins (b/c more expensive) 0.13% 0.25% 0.25%
DSI Reduction (Cumulative) 0 0 0 5 10 12 days saved
Calculation for additional units 2000 2001 2002 2003 2004 2005
Pre-ERP Units 1,443 1,443 1,443 1,443 1,443 1,443
Pre-ERP Availability 83.2% 83.2% 83.2% 83.2% 83.2% 83.2%
Target Availability (Post ERP) 92% 92% 92% 92% 92% 92%
Improvement in Availability 10.6% 10.6% 10.6% 10.6% 10.6% 10.6%
Sales Increase (Improvement) 25% 25% 25% 25% 25% 25%
% Improvement in DSI in a year 40% 40% 20%
Additional Units in a year 0 0 0 15 15 8
Additional Units (Cumulative) 0 0 0 15 31 38
Calculation for DSI Reduction 2000 2001 2002 2003 2004 2005
Target DSI Reduction 12 12 12 12 12 12
Percentage Improvement 40% 40% 20%
DSI Reduction 0 0.0 0.0 5 4.8 2.4
DSI Reduction (Cumulative) 0 0.0 0.0 5 9.6 12.0

8. Forecast W/ ERP System 2000 2001 2002 2003 2004 2005
Units (in thousands) ( 1,443) ( 1,443) ( 1,443) ( 1,458) ( 1,474) ( 1,481)
Revenue (in thousands) ( 280,901) ( 280,901) ( 280,901) ( 284,286) ( 287,648) ( 289,137)
COGS (In thousands) ( 251,083) ( 251,083) ( 251,083) ( 253,739) ( 256,394) ( 257,722)
Margin (in thousands) ( 29,818.00) ( 29,818.00) ( 29,818.00) ( 30,546.84) ( 31,253.29) ( 31,415.14)
Price per unit 194.66 194.66 194.66 194.95 195.21 195.21
COGS per unit 174.00 174.00 174.00 174.00 174.00 174.00
Margins per unit 20.66 20.66 20.66 20.95 21.21 21.21
Percentage margin 10.62% 10.62% 10.62% 10.75% 10.87% 10.87%
Days Sales' inventories 55 55 55 50 45 43
Inventory ( 37,834) ( 37,834) ( 37,834) ( 34,898) ( 31,891) ( 30,362)
DSI = (Inventory/COGS)/365
Price per unit = COGS per unit / (1 - % margin)

9. Net Present Value of Cash Flows
Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 Discount Rate 9%
(+)Depreciation 980 2760 4140 4960 4960 3980 2200 820
(-) CAPX 4900 8900 6900 4100
(+/-) Working Capital ($ 2,685) ( 6,967) ( 8,429) ( 6,218) ( 3,765) ( 1,529)
Operational Cash Flow -3817 -2,768 -1,530 152 2,820 3,781 4,673 6,631 7,478
Total ($ (8,717) ($ (8,003) ( 1,297) ( 8,621) ( 13,998) ( 12,506) ( 10,183) 8,831 8,298
NPV $22,752.59 In Thousands
Sensitivity Analysis
Discount rate 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16%
NPV $31,514.02 $29,071.34 $26,806.32 $24,704.45 $22,752.59 $20,938.74 $19,252.00 $17,682.44 $16,220.98 $14,859.34 $13,589.95 $12,405.88
Capital Expenditure and Depreciation
Year 1999 2000 2001 2002 2003 2004 2005 2006 2007
Capital Equipment 4300 8600 6900 4100
Software Licence 600 300
Capital Expenditure Total 4900 8900 6900 4100
Depreciation
West 980 980 980 980 980
South 1780 1780 1780 1780 1780
Central 1380 1380 1380 1380 1380
North 820 820 820 820 820
Total Depreciation 980 2760 4140 4960 4960 3980 2200 820
Operating Expenses/Savings
Year 1999 2000 2001 2002 2003 2004 2005 2006 2007
Additonal Employees 2250 2250 2250 2250
Consultants 3511 1663 1294 739
Ongoing Operational 600 1200 1800 2400 3000 3000 3000 3000 3000
License Maintaince 100 200 300 400 400 400
Compliance Task force 300 600 600 600 300
Total Costs 6361 5513 6144 6289 4000 3700 3400 3000 3000-Cost savings from
Reduction in Employees,
Warehouse. Returns -621 -1749 -2544 -3300 -3457 -3503 -3534 -3566
Total Operating Expenses 6361 4892 4395 3745 700 243 -103 -534 -566
Revenues of Additional Units
Year 1999 2000 2001 2002 2003 2004 2005 2006 2007
Additonal Units 36 106 191 235 260 268 289 289
Additional Revenue ( 7,848) ( 23,964) ( 42,074) ( 51,367) ( 56,572) ( 58,061) 63,197 63,197
COGS ( 6,590) ( 19,358) ( 33,936) ( 41,007) ( 45,068) ( 46,395) 50,480 50,480

10. Margin ( 1,258) ( 4,605) ( 8,138) ( 10,360) ( 11,504) ( 11,666) 12,717 12,717
Reduction in Inventory- WC ($ 2,685) ( 6,967) ( 8,429) ( 6,218) ( 3,765) ( 1,529)
Cash Flow of ERP Project
Year 1999 2000 2001 2002 2003 2004 2005 2006 2007
Revenue 0 ( 7,848) ( 23,964) ( 42,074) ( 51,367) ( 56,572) ( 58,061) 63,197 63,197
COGS 0 ( 6,590) ( 19,358) ( 33,936) ( 41,007) ( 45,068) ( 46,395) 50,480 50,480
Gross Margin 0 1,258 4,605 8,138 10,360 11,504 11,666 12,717 12,717
Operating Expenses 6361 4892 4395 3745 700 243 -103 -534 -566
Depreciation 0 980 2760 4140 4960 4960 3980 2200 820
EBIT -6361 -4,614 -2,550 253 4,700 6,301 7,789 11,051 12,463
Tax @ 40% -2544.4 -1846 -1020 101 1880 2520 3116 4420 4985
Cash Flow -3817 -2,768 -1,530 152 2,820 3,781 4,673 6,631 7,478