John Deere Case Study Solution

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Introduction In the late 1990’s, recognizing that 70 percent of their manufactured products cost was occurring externally, John Deere decided to take some major steps in order to provide more value to their shareholders. At the center of this new strategy was a revamped logistics strategy that incorporated reduced transportation costs, and company wide standardized processes. However, in a volatile market such as the agricultural industry, where farmers depend not only on a stable economy but good weather and plentiful returns, it is important for John Deere to be able to react quickly to changing demands. As John Deere looked to reduce the costs of their global supply chains, it was important that they rebuilt that structure in a robust…show more content…
They hired a vendor of supply chain software to optimize their inventory, forecasting, capacity planning and optimization and replenishment planning. The contractor planned out the seasonal sales cycle and found that the peak season was between March and July. (Nelson 2002) John Deere can forecast out their demand needs for 18 to 24 months. They share this demand forecast with their suppliers to help their suppliers plan their production schedules. (NIST 2015) This follows the approaches suggested by Lee of planning and forecasting to reduce variability, and integrating suppliers more closely with business planning and forecasting. Variability is often seen as a threat to operations management and can lead to bullwhip effects from manufacturer compensation to unseen demand. (Lee 2004) By offering its schedules to suppliers, John Deere can expect a more stable supply of its needed…show more content…
Instead of separating product families by manufacturing facilities, each facility can produce multiple product families. This along with an optimized distribution network with short distances between distribution centers, allows John Deere to get its products quickly from the plant to the customer. (Nelson 2002) John Deere added an additional layer to its distribution network called temporary merge centers. These distribution centers hold on to about five days of inventory before they merge shipments from different factories, to be shipped to dealers. This inventory allows John Deere to react quickly to customer needs and provides some extra leeway in case deliveries from factories are delayed. It would take just 3 or 4 days to restock these merge centers from the factories (Cooke 2007) This ‘center of gravity’ approach as laid out by Lee allows the company to be more structurally flexible to customer needs (Lee 2004, Christopher & Holweg 2011) A further step as laid out by Lee is to use dual sourcing of raw materials as a key to the center of gravity approach, in order to avoid supply shortages, should one supplier fail to deliver, or an unavoidable event occurs. (Lee 2004) John Deere often sources its products from several suppliers, while keeping the controlling
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