solution

Whirlpool Corporation–
Giving ERP a Spin1

Centralized PricingWhen Frigidaire Co. drops freezer prices, a flurry of faxes and FedExes fly from
Whirlpool Corp.’s offices in a fight to match those prices. But soon Whirlpool will be
able to match competitors’pricing with a few keystrokes, allowing the company to
react quickly to market changes or launch a special promotion for a single product.
Whirlpool is implementing a centralized pricing configuration system from Trilogy
Development Group, Inc. in Austin, Texas. The pricing software will allow Whirlpool
to cut by more than half the 110 days it now takes to reprice its entire product line of
more than 2,000 models each quarter.
Most important, the application will give Whirlpool a centralized pricing structure.
Previously, the company used separate pricing models and order entry systems for each
Whirlpool division, from small appliances to large goods to spare parts. “The big driver
for all of this is to make Whirlpool easier to do business with,”said Bill Hester, a senior
information systems project manager at Whirlpool.
Whirlpool’s technology overhaul, which also includes implementing SAP AG’s R/3
and a massive operational reorganization, is necessary to prime Whirlpool for the dish-
washer wars in years to come. The entire IT overhaul is estimated to cut U.S. $160 million
from Whirlpool’s operational budget over five years.
Hester said the company expects the new pricing system will pay for itself within a
few years. Historically, Whirlpool’s customer claims usually resulted from pricing discre-
pancies. “We would tell trading partners we were going to sell them something at ‘x’
price, but the system was charging them ‘y’,”said Kathleen Descamps, business project
manager for Whirlpool’s new pricing system. “So we would have to issue them a credit.
It creates dissatisfied customers. It’s much easier to say we are charging them ‘x’and that
is what is on the invoice.”
With one centralized pricing system, sales agents will be able to meet that goal. The
same information will be replicated in sales agents’laptops for quick reference when
making field calls to trading partners. “They will have the same sales history information
that is used to make [production] forecasts,”Descamps said, so they will have the same
information to help meet the forecasts. Whirlpool’s current pricing system is highly
dependent on spreadsheets, a laborious and time-consuming system.
Bill Hester, project manager at the appliance giant, said the quarterly job of revamp-
ing the pricing of every product takes 110 days and is prone to errors. Pricing has to be
entered for every product under eleven different brand names. “It took roughly 180,000
cells in the spreadsheet,”Hester said. “Since pricing is formula-driven, if someone
Case 16 Whirlpool Corporation–Giving ERP a Spin 109

changed a formula, you wouldn’t know the effects somewhere else in the spreadsheet.
It took a lot of work to get the pricing masters printed.”
If a marketing manager needs to change the price of dishwashers to match General
Electric’s pricing, that person can now enter the information, do a profitability analysis
on the change and then, if acceptable, enter the new price. “Then a message is automati-
cally sent to the pricing administrator, who sets up any rules for the pricing, and as soon
as they hit ‘enter,’if the pricing is effective today, the next person that places an order
gets that new price,”Hester said.
Vendor Interfaces
A warehouse automation system has propelled Whirlpool Corporation’s Parts
Distribution Center in LaPorte, Indiana, into a new era of customer satisfaction. The sys-
tem, comprised of an elaborate configuration of computers and automatic conveyors,
reduces the order-processing cycle time for customers around the world. “It helps us bet-
ter manage our inventories with the ultimate improvement being customer satisfaction,”
says Tom Harrow, customer service supervisor.
Whirlpool Corp. hopes a new e-commerce initiative, Easy EDI, will cut down supply
chain expenses and enhance efficiencies. Easy EDI’s goal is twofold: to eliminate the
paper process used by Whirlpool’s 300 smaller suppliers, and to save Whirlpool up to
U.S. $600,000 a year in operational costs for the electronic data interchange network
used by Whirlpool’s 300 largest suppliers, says David Tibbitts, manager of strategy and
planning in global procurement at Whirlpool.
Initially, Easy EDI will involve four small and midsize suppliers that rely on paper
transactions to conduct business with Whirlpool’s fourteen North American manufactur-
ing facilities. Four to six weeks later, the service will expand to about 30 suppliers; all
small and midsize suppliers should be online by year’s end. Whirlpool then expects to
gradually roll out Easy EDI to its largest suppliers, which use a public value-added net-
work (VAN) for EDI transactions. The company hopes to phase out VAN-based EDI,
Tibbitts says—along with the U.S. $40,000 to U.S. $50,000 a month it pays for the service.
Easy EDI is an example of how the consumer-goods manufacturing industry is mov-
ing in the same direction as the automotive industry, says Susan Cournoyer, an analyst
at Dataquest. “Agile, just-in-time manufacturing and its use of the Internet will cut costs
and improve communications and responsiveness to customers,”she says. Whirlpool is
working with integrator Litton Enterprise Solutions, a division of government contractor
Litton Industries, to develop Easy EDI

please answer the questions

1.How were the customers and vendors communicated with about the changed proce-
dures for interfacing in various transactions with Whirlpool?

2.How were IT employees prepared for interfacing with external consultants?