Whirlpool Europe’s implementation of an enterprise resource planning (ERP) system is a positive business investment. One of the biggest challenges that Whirlpool Europe faces is a disconnect in the information systems. This disconnect has led to a decrease in product availability, loss in sales, and an unreasonably high inventory. A new system will allow Whirlpool Europe to improve operating effectiveness and efficiency. The cost of implementation of the ERP is quite substantial. However, the benefits do outweigh the costs when net present value is calculated and compared. Once the ERP system is implemented, sales offices will be able to view inventory across the entire supply chain to determine what…show more content… As a result of the ERP system, there will also be an increase in gross margin. An integrated information system will help evaluate product line profitability. This gross margin increase is forecasted to be .25%. This gross margin increase is determined by multiplying the forecasted % increase by the revenue in 1997. |Cumulative Calculation of additional profit due to ERP implementation(000's) | | | | | | | |2000 |2001 |2002 |2003 |2004 | |286.67 |1,764.68 |3,909.32 |6,641.89 |9,711.54 |
Once these three benefits are accounted for plus the savings related to a reduction in order desk and finance headcount, warehouse space, bad debt expense, and information systems, the total benefit is determined. From the total benefits Net Present Value can be calculated accounting for the 9% discount factor.
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