The company was into manufacturing, distribution, financing and servicing of agricultural combines, tractors, construction forestry log skidders and forklifts, and commercial and consumer lawn equipments

Deere & company had pioneered the Skid-Steer machine, a 1000-3000 pound capacity versatile construction site machine, more than 25 years ago, but has been outsourcing product design and manufacturing to another company, New Holland for a while

The skid-steere machine is supposed to sell more than 60,000 units amounting to $1.2 billion by 2000-2001

Deere & Company enjoyed a market share of 1-3%, and plans to triple its market share

Deere wants to take back design and manufacturing from New Holland, as Deere had a rift with New Holland and now wants to improve its design and manufacturing

Order winning criteria like improved product features, product range, delivery and price are areas of focus for the new design

Deere & Company decides to invest $35 million for building a new design, manufacturing and marketing facility at Knoxville, TN

The target is to produce an improved skid steere loader that is 20% lower in prce than the best competition by August 1998

Case problem 1

Criteria for Selecting Suppliers for integration into the manufacturing and design

Scott Nolan, as the new Supply management manager is required to produce a proposal that outlines how Deere is going to manage the early supplier integration into the design and manufacturing of the new Deere Skid-steere loader. Suppliers will have to be integrated based upon strict selection guidelines that will prove to be critical in improving the new Deere skid-steere loader. The following criterion will be the basis of selecting suppliers.

All the present suppliers at new Holland will be informed of Deers’s decision to design and manufacture on its own, and they will be invited to get listed. The suppliers could make sure that they will be informed of any decision by Deere to purchase. All of the listed companies wil get a request to quote pr participate at the right. Their track record with new Holland and other competitors in skid- steer segment will be considered to see how well they perform with respect to delivery, service, price etc.

Suppliers with long experience with the skid steere machine parts will be considered. Suppliers that will be invited to partnership will be those that seem advantageous to Deere. Maybe it is their experience of the product and their strong market position with supplying skid steere and other machinery parts. A company with a diverse range of manufacturing capability could well behave as an associate partner in production or delivery.

The advantage of sourcing worldwide will be considered as this will enable Deere skid-steere loader to supplied at various location with reduced supply chain overheads. Since Deere is a multinational company with market in more than 160 countries, it could take advantage of the local sourcing capabilities in those countries for some parts at the finishing stage. As when a few parts are advantageous to be sourced locally to reduce delivery time and to maintain a good price.

The suppliers will be evaluated based on their ISO and other industry certifications and quality. International standards have to be kept, as Deere is indeed an international company and wants to compete with a product that has more features, better quality, lower price and fantastic delivery and service. The supplier’s way of doing business will matter in this situation.

The capacity of the suppliers to supply enough as and when required by Deere will be examined and compared. The production capacity of the supplier and their capital security is important. The supplier will have to engage with deere long term with various payment terms and the willingness and capacity of the company in this respect has to be evaluated.

The interest of these companies to participate in a design and manufacturing partnership would be considered for assessing their R&D capability. The supplier has to be evaluated based on the level of association they are interested in having. Deere expects more than just supplying the parts. Deere expects technical service and support, warranties and to benefit from the research background of the supplier to improve the product quality.

The cost involved in dealing with various suppliers for required parts and services will be gauged and compared. Of course the payment amount and terms will be compared and the supplier with the best offer will be selected. But this will not be the sole criteria, eventhough Deere wants a low cost and high quality product

Suppliers who participate in similar programs with the competition will also be considered for experience and ease of association. Deere could take advantage of the supplier integration models of the competition and get feedback to improve its own supplier management strategy.

Case problem 2

Guidelines for effective integration of those suppliers that are selected

Suppliers who are selected for early stage integration in to the Deere skid project will have to be effectively utilized for achieving a superior supply management strategy. This will be directly responsible for the improved design and manufacturing that Deere wants to achieve. Deere is mainly concerned with how these suppliers will help it meet improved product feature, product range, deliver and price objectives. So it is apparent that effective utilization of the companies that are selected for partnership is important. This has to be achieved with certain techniques or guidelines that the supply management team will implement.

The first step will be to get the suppliers’ pricing. As with any other sourcing objective, pricing is very important as Deere wants a product that is 20% cheaper than the competition. Pricing from various suppliers will ensure Deere has accurate calculations on the costing and can employ company resources on areas more important. Suppliers will be given a chance to competitively participate.

Supplier’s capability will be evaluated by visiting their facility and trying to assess the supplier’s advantage in comparison others. A face to face meeting will reveal a lot about whether a relation with that company would benefit Deere & company.

The customers served by the supplier will be inquired to study the performance of the supplier. How well the customers were served by the supplier and their track record is a good way of getting to know your supplier.

The certifications and other quality standards will be directly confirmed by team from the Deere company. All claimed standards will have to be directly evaluated first hand and confirmed.

Prototype testing for quality will be performed from the most prospective suppliers. As such an R&D association will require the supplier to support the company in more technical level.

The benefits of association with a supplier will be discussed at length in the company and a general consent will be had inside Deere before confirming the final integration steps.