Deere & Company Case Study

Case 1 – Deere & Company

Case Summary

After years of offering a branded product manufactured by a competitor, Deere & Company has decided to take control of the design and manufacture it using a new factory designed to produce Skid Steer loaders. Scott Nolan, Deere’s new Supply Management Manager, is tasked with integrating suppliers into the product development process and must develop a proposal to deliver to management in one week. Scott immediately understands he must identify target suppliers to involve in development and identify the interactions with these suppliers.

Analysis & Recommendations

While Deere’s brand name represents significant potential in the market, the firm has been contracting engineering and manufacturing to New Holland, a direct competitor, for some years.  As Deere identified potential growth in the market for Skid Steers, the firm decided that a plant should be built and placed online to develop and manufacture the loaders internally. This choice mitigates some risks but presents some significant challenges and a tight time frame.

Scott must develop a strategy to address the need for qualified suppliers as soon as possible, and deliver his proposal to management for approval and ensure alignment with strategic objectives for the product.

Scott must first determine how he will screen suppliers to participate in the various stages of the product life cycle. He must determine which of the suppliers will be involved in the engineering of component parts of the Skid Steer, and also ensure they meet the standards required by Deere. To accomplish this, Scott should start by identifying suppliers with experience in delivering Skid Steer parts. A system to rate suppliers against baseline criteria should be developed before any supplier is selected. Evaluating suppliers with experience in Skid Steer component manufacturing represents a lower startup cost and lower risk the supplier will not meet quality standards or have the ability to meet demand. In addition, Scott should look at suppliers that currently provide manufactured parts to New Holland. Considering that what was good enough for Deere to put its name on to date, will likely be good enough going forward. In addition, supplying parts to both New Holland and Deere, may lead to a lower cost due to the additional competition. Scott must also consider the suppliers commitment to manufacture and deliver goods within compliance with international quality standards such ISO certification. By ensuring a quality management system is in place with a subcontracting firm, Scott will be able to negotiate lower rates for components manufactured in low-cost countries while maintaining quality standards. Lastly, suppliers should be evaluated on capacity (both engineering and manufacturing), scalability, and delivery history. There is often no better way to gauge a firm’s capacity than to look directly at what it has historically performed. By screening suppliers using the methods described, Scott will ensure that he has a list of qualified suppliers from which to begin negotiations for cost, and determine which suppliers have the potential to be involved at the various stages of the product’s life cycle.

When suppliers have been identified and selected, integration becomes a key concern for Scott. He must now employ some specific practices and principles to integrate the supplier into the design or manufacturing processes. To do this effectively, Scott should continue to evaluate the suppliers by coordinating site visits. Site visits can provide a look into the manufacturing processes employed by a firm and will help Scott determine alignment with Deere’s production processes. In addition, Scott will need to ensure that selected suppliers are in alignment with Deere’s Supply Management Strategy. It may also make sense for Scott to assign a Supplier Quality Manager to each of the suppliers. This can help to ensure compliance with the quality policy, ensure alignment, and also identify and mitigate risk of delays in engineering or manufacturing. Lastly, Scott may also want to consider the contract under which the supplier is providing goods or services to Deere. By including liquidated damages for components that do not meet quality standards, or are not on time, Deere releases some financial risk associated with delays in the assembly line caused by delays from suppliers.

Conclusion

Scott’s challenge to support Deere’s strategy to develop the new Skid Steer product, is one of Collaboration with suppliers. Considering that purchased materials will likely account for half of the cost of the goods sold, it makes sense that significant attention be paid to supplier relationships. While we can see from this case that Scott is in a position to support this, it isn’t likely that he can do it alone. The supplier will need to be integrated and treated like a partner in the process. According to Schroeder, “Studies have shown that overall performance improves through supplier collaboration from 10 to 20 percent in cost, time, quality, and product performance”. By first selecting suppliers capable of engagement in the development process, and fostering effective collaboration, Deere can increase the likelihood of positive outcomes for the new skid steer product.