Strategy analysis of Whirlpool's Inventory Mgmt.

1. INVENTORY MANAGEMENT
STRATEGY ANALYSIS
INDUSTRY CATEGORY: ELECTRONICS GOODS
GROUP 3:
Gaurav Sharma
Suvadeep Ghosh
Shilpa Mittal
Nimisha Aggarwal
Asmita chakraborty
Siddhant kapur

2. CONCEPTS USED IN THE ANALYSIS
• order quantity that minimizes the total
inventory holding costs and ordering costs
Economic
Order
Quantity
• describe a level of extra stock that is
maintained to mitigate risk of stockouts
Safety
Stock
• measure of the number of times inventory
is sold or used in a time period
• equals the Cost of goods sold divided by
the average inventory
Inventory
Turnover
Ratio-
CLASS A:
consisting of
items with larger
investment
CLASS B :
medium annual
dollar volume
CLASS C :
relatively small
investments but
fairly large
number of items
ABC ANALYSIS

3. EOQ and Safety Stock
• The EOQ and the no. of orders per year are calculated
and compared and it is found out that there is a
variation. Thus we can infer that the company is not
following EOQ while purchasing the materials and
hence the inventory planning was not satisfactory.
• The demand for each component and the lead time
was calculated for each item. Then by calculating the
safety stock we can be able to determine that how
much the company will be able to hold the inventory in
reserve stock per annum.

4. ABC Analysis
INVENTORYCATEGORIZATION
A :
unit value more than 100 and
constituting 45% of the total
components.
B :
Unit value 25-100 and constituting 35%
of the total components.
C :
Unit value less than 25 constituting 20%
of the total components.

5. Inventory Turn-over Ratio
Years Net Sales (Rs.) Avg. Inventory (Rs.)
Inventory Turn-over
Ratio
2003 12,30,05,134 8,42,09,371 1.46:1
2004 16,06,43,669 8,92,28,407 1.80:1
2005 11,73,30,581 14,52,26,925 0.80:1
2006 55,53,74,571 18,98,23,381 2.92:1
2007 79,11,78,220 17,40,71,613 4.5:1

6. Analysis and Interpretation
The above table shows inventory turnover ratio for the years
2003-2007 , depicting an increasing trend from 1.46 to 4.5,
except in the year 2005 which shows only 0.80 times.
During 2003-2004,the inventory turnover ratio was 1.46
times which in reached to 1.80 in 2004-05. The inventory
turnover ratio decreased to 0.80 in 2005-06 but increased to
2.92 times in 2006-07 and again it increases to 4.5 in 2007-
08. The average of the inventory turnover ratio was 2.296
which cannot be said satisfactory.

7. Comparison with Peers
Company
Name
Year Sales Inventories
Inventory
Turnover
Average
Whirlpool
2005 1173.3 1452.2 0.8
2.742006 5553.7 1898.2 2.92
2007 7911.7 1740.7 4.5
Godrej
2005 2292.5 555.1 4.13
3.982006 6745.3 1594.6 4.23
2007 8848.2 2464.7 3.59
Videocon
2005 1905.8 493.7 3.86
3.802006 5923.6 1596.7 3.71
2007 8212.6 2144.3 3.83
Toshiba
2005 3156.5 824.2 3.83
4.412006 6598.6 1386.3 4.76
2007 9562.3 2065.3 4.63

8. Analysis
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
Whirlpool Godrej Videocon Toshiba
2005
2006
2007
From the comparison we can see that the inventory turnover ratio is the least
for Whirlpool and most for Toshiba.
Thus we can infer that Whirlpool do not have a satisfactory inventory planning
technique in comparison to its peers and thus needs to improve.
INVENTORYTURNOVERRATIO

9. REFERENCES
• www.google.com
• Annual Reports of whirlpool
• CMIE prowess

10. THANK YOU