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As managers at Whirlpool discovered, best-of-breed may be the best approach.
Esther Shein, CFO.com | US
November 20, 2001
Executives at Whirlpool Corp. know a thing or two about spin cycles. After all, the company has been selling washing machines, along with a whole host of home appliances, for decades.
So when it came time for the white-goods specialist to start conducting E-commerce in an enterprise resource planning (ERP) environment, Whirlpool management wasn't necessarily buying into vendor hype coming from ERP makers. The fact is, when the Internet frenzy hit in late 1999 and early 2000, many ERP vendors, including heavyweights SAP, PeopleSoft, and Oracle, began repositioning some of their ERP products as E-commerce products. But in reality, a number of the E-commerce applications being touted by ERP makers were merely Web-enabled versions of the vendors' back-office applications — hardly true E-commerce platforms.
Whirlpool rolled out its ERP system — SAP's popular R/3 platform — back in 1996 and 1997. But in recent years, the Benton Harbor, Michigan-based manufacture has moved a fair amount of its business — both with customers and partners — onto the Internet. With this increasing reliance on virtual commerce, Whirlpool IT executives are now eager to boost the E-commerce capabilities of the company's existing ERP system. And they're looking beyond SAP to get it.
"When we went in 1996 and 1997, ERP was basically the answer to everything, from finance to logistics to manufacturing," explains Dave Cosgrove, director of E-business at Whirlpool. "Now there are strengths in those systems — and areas where they don't have strengths."
Whirlpool, which has manufacturing operations in 13 countries, has implemented its SAP platform globally. Cosgrove says the ERP rollout has solved the big problem of having duplicate back-office systems running at different locations. But he says management believes peripheral systems are needed to augment R/3, particularly in the area of customer relationship management (CRM). "One of the big things we've learned," says Cosgrove, "is that an ERP system in and of itself doesn't deliver everything you need to run a company that has multitiered distribution and deals with consumers."
One from Column A
Generally speaking, the leading ERP vendors have chosen to respond to the rising tide of E-commerce by expanding "significantly beyond their ERP roots," notes Dave Boulanger, research director in the enterprise management strategies group at AMR Research. Entering uncharted waters presents challenges, he says.
"SAP has gone from being the major player in one arena, ERP, to areas that are relatively new to them and where they have significant competition," says Boulanger. "As they broaden their suite, they have to have multiple balls up in the air in multiple arenas, and when they're juggling six or seven competitors, you can't use the strategy of 'build internally.' You need partners."
You also need to make it easy on existing customers. Toward that, Boulanger says ERP vendors "need to provide an ERP backbone to customers and make the integration easy, so companies can plug in best-of-breed solutions."
That's exactly the route Whirlpool is taking. Cosgrove says company management has selected I2 Technology's software suite to help with demand planning, forecasting, and manufacturing. Whirlpool executives are also considering deploying CRM software from Siebel Systems to help improve interaction with customers and to schedule technicians for service calls. Whirlpool, which reported revenues of $10.3 billion last year, is already using human-resources software from PeopleSoft rather than SAP's HR module.
This is not to say Whirlpool is abandoning R/3. Far from it. Cosgrove says the company plans to continue using the SAP product for its core strengths: data and transaction processing. "We're making sure whatever we lay on top of SAP … all of our transactional information and customer product information will all get back into SAP." Whirlpool runs R/3 on a combination of Unix-based IBM and Oracle servers.
SAP also remains the back-end data repository for the company's collaborative-commerce systems. For example, Whirlpool operates a browser-based order management system called Whirlpool Web World. That setup enables trade partners like Sears and Best Buy to order appliances online and print out product literature. Retail trade partners can also go onto the portal to inquire about an order and check delivery status and inventory.
Whirlpool workers also use the portal to get information about their 401(k) plans and buy appliances under an employee purchase program. "Basically they can do all employee HR-related functions there," says Cosgrove.
Employees in Whirlpool's procurement department can also communicate virtually with suppliers and parts manufacturers when ordering supplies. Cosgrove says the company's suppliers publish their catalogs on Web World. In addition, Whirlpool posts requests for quotes and requests for proposals on the portal. "All of this information is captured in SAP," Cosgrove note. "We were one of first to test SAP's B2B software in late 1998 and early 1999, and that's what running behind the portal."
AMR's Boulanger believes SAP management has finally come around to the notion that its ERP software might serve as a platform for best-of-breed E-commerce applications. The vendor's MarketSet software, which allows for collaborative supply-chain capabilities and business process analytics, functions as the integration layer between SAP programs and third-party applications. MarketSet will allow any best-of-breed application — or enterprise application — to more seamlessly tie into the integration layer and then into SAP, says Boulanger.
From a user perspective, the arrangement should make it easier to implement future versions of SAP's traditional ERP software. "Relatively speaking, users have lot more options when they upgrade," notes Boulanger. "They can plan their IT investment without fear of missing the E-commerce wave."
The most recent SAP upgrade at Whirlpool occurred last summer. But Cosgrove says that release was "really a mechanical upgrade and didn't really achieve added functionality." Observers say R/3 version 4.6 has greater Internet functionality, and Cosgrove acknowledges that Whirlpool will eventually upgrade to that version of R/3. But for the moment, he says the company has few problems rolling out E-commerce applications as needed. "Now that we don't have 11 order processing systems and so forth, we can [concentrate on implementing] best-of-breed software," he says. "That will help us accelerate what we want to do."