John Deere Inc: A Case Study of Initative, Growth and Pursuit of Excellence

Deere & Company has been in business for more than 100 years. It has a good and honorable reputation and operates on a global scale. Deere & Company is in the business of manufacturing, financing and servicing agricultural equipment. Among some of the equipment they produce, includes construction and forestry equipment, commercial and consumer lawn care equipment and several other technological services and products. Deere & Company’s most competitive product is the Skid-Steer Loader, small, easy-manipulated land-moving equipment. Deere & Company intends to promote the mechanism above the competition.

One of Deere & Company main competitor was New Holland, a company which Deere & Company with which Deere & Company had taken a risk by outsourcing the Skid-Steer Loader. A positive change in the market became a huge hindrance to becoming more competitive in the market place. The average market share for Deere & company, varied between 1 to 39%. It is forecasted to grow at 15%-20% per year.

Business Structure

Deere & Company was a centralized organization. Scott Nolan, the organizations supply chain manager, had been recently hired to move the organization forward. He was to reports directly to his immediate boss and plant manager. The organization’s employees around 38,000 employees worldwide

Key Issue/Problems

The most staggering problem of Deere & Company was there lack of control over the product design and features of its Skid-Steer Loader. With production of the product in the hands of a third party and potential competitor, it would be difficulty for Deere & Company to make a significant impact on the market. Besides, New Holland, the third party which contracted the engineering and manufacturing of the Skid-Steer Loader, rejected their request for greater production capacity over the product.

The restraints of having a third party in charge of manufacturing and producing the Skid-Steer Loader was very costly. This meant that Deere & Company wouldn’t have the ability to redesign features, ensure quality, guarantee availability, obtain competitive advantage or obtain greater market share.

The potential for gaining more market share for the Skid-Steer Loader was exceedingly great. The market was projected to grow 15-20 per year, with future projection of overall growth sales of 1.2 billion.

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Business Response

Understanding that the market was about to explode, Deere & Company had to discover a way to regain control over their unique mechanism. Deere & Company made a significant step toward gaining back control from New Holland getting approved for a capital investment of $35 million. The goal was to bring the design, manufacturing and marketing responsibilities into a planned facility located near Knoxville, TN.

Gaining control over the manufacturing, design and production of their Skid-Steer Loader would give Deere & Company of number of advantages, including product design improvement, price range, availability, feature uniqueness, ideas and creativity related to changing trends and adaptability to changes in the market. With this kind of power over their own creation, Deere & and Company could potentially drive their competitors into the ground.

Once Deere & Company regained production control of their Skid-Steer Loader product, they hired Scott Nolan, a new supply management manager for their new manufacturing facility. One of his manage assignments was to integrate or involve suppliers early in the manufacturing and production of the Skid-Steer Loader. Integrating suppliers into the production process had the potential to greatly improve the operation of the supply chain system.

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Integrating suppliers effectively into the supply chain system makes the difference between those organizations which excel in the market and those which fail. Integrating well skilled and informed suppliers into the supply chain system will greatly enhance the flow and effectiveness of entire supply chain system, benefiting the manufacturer, suppliers and customers.

Scott Nolan, the new supply chain manager for Deere & Company, had the task of selecting the most qualified suppliers to integrate into the early development of the new Deere Skid-Steer Loader. Experienced in the basic knowledge of including supplier’s product development and manufacturing choices, Scott wants to involve as many suppliers as possible. In order to choose most effective suppliers first and then train the other partners, Nolan Should consider unique criteria that world indicate valuable supply partners.(Industry Directions)

Consistent pattern of Zero Defects

Suppliers that have exhibited zero defects in their involvement in the supply chain system must be considered for early involvement in the supply chain system of Deere & Company. A good track record in pleasing customers by meeting demands.

Unique scheme for customer satisfaction

Suppliers who have set themselves apart from the competition will have a unique method of meeting customers demand. These are the supplier’s that customers can rely on for both accuracy in quantity and quality in product delivery.

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Value Added Services

Suppliers who give the customer a little extra for the service will stand out from the competitors. Such extras as discounts in delivery and return services will go a long way in positive influences the customers.

Vendor Controlled Inventory Contracts (VCI)

When customers and Suppliers can control their own inventory, the supply chain system can operate more efficiently. Customers are able to make known their inventory levels and operations to partners while suppliers are able to make schedules based on demand more accurately.

Reputation for the greatest performance in delivery

Suppliers who exceed the competition in delivery service will most likely gain the trust of customers and will add great value to the supply chain system. Supplier who make timely delivers and promise to some sort of reimbursement for failure will display an air of sincerity to the customer.

Choosing suppliers that fit the above criteria would give Scott Nolan a head start in integrated successful suppliers in the early stages of the manufacturing and development process of the along the supply chain system. However, Scott desired to include all suppliers in the production chain. There are several ways in which he could have approached this.

First Scott had to understand that in order to greatly enhance the supply chain system; suppliers must be in alignment with the expectations of the customers. This is the number one requirement for an out-of this-world supply chain.

Therefore, suppliers must be known how the product is made from start to completed product. Knowledge of how the product is made will give suppliers the expertise to explain any problem that the customer may have regarding the product upon its delivery. Suppliers should be trained how to demonstrate the product and explain the operation of all its features.

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Moreover, suppliers must be taught to reach for excellence in accuracy, responsiveness, timeliness, inventory reduction and a mindset for continuous growth. Suppliers who are skilled in these qualities will accelerate in customer satisfaction and delivery. In addition, the operation of the supply chain system becomes more efficient and less expensive.

Scott Nolan had to take in consideration all of these ideas and insights when selecting a team of suppliers to integrate in the early stages of the manufacturing and production of the Deere-skid-steer loader. Once the suppliers were fully involved, Deere & Company had a great opportunity to obtain a decent share of the market as well as the potential for overtaking the competition.

Results

After the suppliers were integrated into the early stages of the supply chain system, the company became extremely successful. It was known for its powerful technology, quality and enhanced cost reduction. Once the Skid-Steer Loader, along with other products, was introduced into the potentially lucrative market 1998, the company reached record net earnings of $1 billion for the first time. Deere & Company became one of the most advanced product and service organization committed to the satisfaction of the customers. In 2012, Deere & Company celebrated its 175 the anniversary. With a net sale of 36.2 billion and a net income of 3.1 billion the organization has created a new record of success. (John Deere)

Alternatives and Options

The organization could have continued to outsource the Skid-Steer Loader with New Holland but Deere & Company would have never experienced the success it now enjoys. It would have never had the opportunity to become a global company with locations in North America, Africa, Middle East, Asia, Australia/New Zealand and Central/South America. Because New Holland was unwilling to corporate with Deere & Company, the company would have always lagged behind the competition and would always be in danger of losing customers as well as significant market share.

Recommendations

To successfully hold strong in the market, Deere & Company must continue to adapt to changes in them market place. It needs to concentrate heavily on the green movement and seek sustainability by reducing carbon footprints. In addition it must continue strengthening qualities such as efficiency, communication, responsiveness and capacity to deliver in a timely manner.

The willingness to fulfill the needs of the customers more passionately than any of the competitors will help Deere & Company uphold its position in the market.

Conclusion

Deere & Company stands as a role model for product and service companies who desire to be successful by eliminating outsourcing or the third party. When organizations have control over manufacturing and producing their own products will have an opportunity to reach beyond the competition and win the hearts of customers everywhere.

By getting suppliers involve in the production process of a product, an organization gives them a sense of ownership. This state of mind creates excitement for the product or service which impacts the attitude of the customers. The investment is well worth it.

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1 comment

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no body 23 months ago from Rochester, New York

Very interesting look into the business mindset. The competitive moves and defensive outlook on a projected future is actually brilliant use of knowledge and understanding of the entire business structure movements. I am not a good chess player but this has the feeling like a giant game of chess with each placement critical to the outcome of the whole economy. Voted up. Bob.

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