SCM: The Profession at John Deere

1
SCM The Profession at John Deere

• Art Rowe

2
Introductory Remarks

• Deere Company is a 167-year old company
• 2003 Sales were U.S. 15.5 Billion
• 2003 purchases exceeded 7.5 Billion
• Purchases average 70 of the Cost of Sales
• Worldwide employment - 43,000

• Supply Management employment
• 1250 worldwide
• historically decentralized
• a divisional/enterprise leadership model emerging

3
John Deere Today
Valley City, ND
Minneapolis, MN
Edmonton, Alberta
Fargo, ND
Zweibruecken, Germany
Woodstock, Ontario
Penticton, British Columbia
Joensuu, Finland
Bruchsal, Germany
Welland, Ontario
Langley, British Columbia
Poznan, Poland
Enschede, Netherlands
Klemme, IA
Rock Valley, IA
Horst, Netherlands
Waterloo, IA
Des Moines, IA
Gummersbach, Germany
Dubuque, IA
Stadtlohn, Germany
Horicon, WI
Ottumwa, IA
Davenport, IA
Mannheim, Germany
Springfield, MO
Moline, IL
Jiamusi, China
East Moline, IL
Coffeyville, KS
Greeneville, TN
Kernersville, NC
Tianjin, China
Piqua,OH
Fuquay-Varina, NC
Augusta, GA
Torreon, Mexico
Monterrey, Mexico
Pune, India
Thibodaux, LA
Saltillo, Mexico
Madrid, Spain
Santiago, Chile
Richards Bay, South Africa
Saran, France
Catalao, Brazil
Nigel, South Africa
Arc-les-Gray, France
Santo Angelo, Brazil
Horizontina, Brazil
Tokoroa, New Zealand
Rosario, Argentina

4
Supply Management Challenges

• We purchase 70 of the typical Deere products
  cost
  
• We manage a comparable proportion of the supply
  chains assets.
  
• In a highly capitalized, low-volume business, the
  chain must design right the first time.
  

5
Supply Management Challenges, continued

• We have to make better use of assets
• Accelerate inventory movement in the chain.
  Suppliers may determine Deere requirements.
  
• Place assets at the place in the SC with the
  lowest total cost
  

6
Why has SCM only recently emerged as a
profession?

• Less vertical integration/increasing
  sophistication of products and components
  
• Increased importance of suppliers (cost impact,
  strategic importance)
  
• Academic and commercial reluctance to changeCLM
  is becoming Council of Supply Chain Management
  Professionals

7
Deere Co. Enterprise-wide Purchases FY03
7.5 Billion
Highly Engineered Products 46
The Traditional Focus
Commodities/ Near Commodities 30
Indirect Material Services 24
8
Supply Managementthe past

• We at Deere knew what we needed.
• We designed components and these had a
  factory/regional focus.
  
• We shared information reluctantly.
• We were the customer.

9
Supply Management today at Deere

• Suppliers are increasingly part of the team.
• Commodity strategies drive sourcing decisions.
• SRM is fundamental.
• Supplier involvement begins long before new
  product design initiated

10
Supply Management the future at Deere

• Value chain, not commodity, will be focus of
  strategies
  
• Blurring of individual company vs. the SC
  enterprise
  
• Increased global vision

11
Fundamental Beliefs
Staying Competitive in the 21st century will
depend upon our ability to

• Leverage the expertise and capabilities of our
  supply base into John Deeres products
  
• Accept the fact that new ideas and leading edge
  technologies will often come from outside
  
• Form true strategic alliances with selected
  suppliers
  
• Adhere to guiding business principles

12
Supply Management at Deere

• Product Delivery Process (PDP)
• Strategic Sourcing
• Order Fulfillment Process (OFP)
• Logistics
• Supplier Cost Management
• Supplier Communication

13
Product Delivery Process

• Vision
• Suppliers as appropriate integrated into all
  aspects phases
  
• Tools systems in place to enable efficient
  supply chain integration
  
• Process consistently followed across enterprise
• Aligned with other processes strategies
• Cost targets/cost models used effectively
• Use of standard/preferred components
• Projects meet all program goals

14
Opportunities to influence product cost at John
Deere
Influence
Cost
15
World-class Value Management
concentrates on designing costs out
14 12 10 8 6 4 2 0 -2 -4 -6 -8
-10
-12 -14 -16 -18 -20
Good performance focused on price management
Toyota/ Honda
16
TDP / PDP Integration
17
Logistics

• A functional track in
• Supply Management
• and a core competency

18
The Logistics Challenge

• To deliver raw material from thousands of
  suppliers located around the world daily to 100
  units in 15 Countries.
  
• To deliver finished goods from manufacturing
  units to thousands of dealers and customers
  located in 160 countries.
  
• To deliver service parts to dealers and
  customers worldwide to Deeres exacting standards.

19
Deere Company Worldwide Manufacturing Operatio
ns
Waterloo, Iowa (5) agricultural tractors en
gines and other major components product en
gineering
foundry
Valley City, North Dakota air seeders
Dubuque, Iowa construction equipment and eng
ines
Fargo, North Dakota (2) large intermediate rect
angular balers flail shredders, snowblowers, ro
w-crop cultivators, orchard shredders, electron
ics
Minneapolis, Minnesota hydraulic cylinders
Horicon, Wisconsin lawn and grounds care
Des Moines, Iowa cotton harvesting tillage,
planting, and
spraying equipment
Davenport, Iowa construction and forestry eq
uipment

Kernersville, North Carolina
hydraulic excavators
Redondo Beach, California satellite receivers
Raleigh, North Carolina
commercial and golf
and turf mowers
Ottumwa, Iowa hay and forage equipment
Moline, Illinois (2) planting equipment and
hydraulic cylinders
Coffeyville, Kansas power transmission equipmen
t
Birmingham, Alabama log loaders
East Moline, Illinois combine harvesters pla
nting and combine
product design
Augusta, Georgia 4000 Series Tractors 5000 S
eries Tractors
Greeneville, Tennessee Lawn Tractors, WB Mowers
Springfield, Missouri remanufacture engines
Thibodaux, Louisiana agricultural and forestry
equipment
20
Deere Company Worldwide Manufacturing Operatio
ns
CANADA
Langley, British Columbia forestry equipment
Welland, Ontario material handling equipment,
rotary cutters, utility vehicles
Edmonton, Alberta remanufactured hydraulic
pumps and cylinders
Woodstock, Ontario feller bunchers, skidder
s, forwarders
21
Deere Company Worldwide Manufacturing Operatio
ns
Aabybro, Denmark electronic control and inst
rumentation systems
Gummersbach, Germany walk-behind mowers
Joensuu, Finland forwarders
Enschede, Netherlands lawn and grounds care
equipment


Stadtlohn, Germany combine heads

Horst, Netherlands spraying equipment
Filipstad, Sweden forestry harvesters




Mannheim, Germany agricultural tractors




Zweibrücken, Germany combine and forage harvest
ers,
material handling equipment
Saran, France engines

Bruchsal, Germany tractors and combine cabs


Madrid, Spain components
Cerkezkoy, Turkey agricultural tractors
Arc-les-Gray, France balers, forage equipment
material handling equipment
22
Deere Company Worldwide Manufacturing Operatio
ns
AFRICA
Pune John Deere India office agricultur
al tractors
I N D I A


Jamshedpur Backhoes


Richards Bay, South Africa trucks
Nigel, South Africa seeding equipment tillag
e and planting equipment
23
Deere Company Worldwide Manufacturing Operatio
ns
Torreon engines, axles
Catalao, Brazil sugar cane harvesting equipm
ent

SOUTH AMERICA
Monterrey (2) agricultural implements cons
truction equipment
components, buckets

Horizontina, Brazil agricultural tractors,
combine harvesters,
planting equipment






MEXICO
Santiago, Chile remanufactured hydraulic pu
mps
and cylinders

Santo Angelo, Brazil castings
Saltillo agricultural tractors, backhoes,
excavators
Rosario, Argentina engines, components
24
Deere Company Worldwide Manufacturing Operatio
ns
Jiamusi Combine Harvesters

Tianjin Tractors
AUSTRALIA


Beijing Deere Company Corporate Office

C H I N A
Bundaberg agricultural and forestry equipmen
t
25
Deere Company European Suppliers
Sweden
Country of Suppliers Belgium 35
Bulgaria 1 Czech Republic 14
Denmark 14 Finland
8 France 520 Germany 1,751
Greece 1 Hungary
17 Italy 221 Netherlands 5
95 Norway 5 Poland
2 Spain 121 Sweden 4
2 Switzerland 24 Turkey
33 United Kingdom 238 Yugoslavia
1
42
Finland
8
Norway
5
United Kingdom
Denmark
14
Ireland
Netherlands
England
Belgium
238
Czech Republic
595
Poland
Germany
35
2
1,751
14
France
520
24
Austria
Hungary
17
Italy
221
1
Spain
Portugal
Yugoslavia
Bulgaria
Switzerland
121
1
Turkey
1
33
Greece
26
Worldwide Shipments
Deere ships products from 15 countries into
160 countries
27
U.S. Factory International Purchasing
DENMARK Electronic Control and Instrumentation S
ystems

CANADA Wheels Oil Grease Steel U-Joints Hyd
raulic Hose Shock Absorbers Powdered metal Plas
tics
Stampings Tines
UNITED KINGDOM Forgings Turbochargers Rasp bars

Cam followers
SWEDEN Forgings Machine tools Bearings Fastene
rs
FRANCE Tires Disc blades
GERMANY Power shafts Turbo chargers Hydraulic c
omp Transmissions/axles Fuel injection equip Pi
stons Undercarriage components Seats Forgings
Machine tools
JAPAN Fuel injection equip Forgings Bearings E
ngines Oil seals Chain saws Aluminum die castin
gs Hydraulic components Radios Clutches Valves
Chain Machine tools Transaxles Steel tubing
RUSSIA Bearings
AUSTRIA Knives Steel Sections
SWITZERLAND Machine tools
SINGAPORE Chain
SPAIN Dies Gearboxes Aluminum die castings Cas
tings
TAIWAN Chain Powdered metal Fasteners
TURKEY Rockshafts Hydraulics
SLOVENIA Starting Motors
CHINA Machined Castings Gearboxes Investment Ca
stings
Bearings Carburetors Mufflers
INDIA Castings Forgings Gears Hitch Component
s

ITALY Undercarriage components Gearboxes Powers
hafts Synchronizers Shock Absorbers Forgings C
lutches
Rocker Arm Assemblies
MEXICO Tires/Wheels Tractor frames Wiring harne
sses Fuel Injection nozzles Plow bundles share
s
Bucket weldments Rippers
SOUTH KOREA Radiators Forgings Castings Rubber

Plastics Gears Steel Bearings
HUNGARY Axles
BRAZIL Cylinder heads Camshaft castings Pistons
CZECH REPUBLIC Steel Fabrication Alternators Fu
el Injection Pumps
28
Future Sourcing

• Designs are increasingly appropriate to all
  geographic regions
  
• Why have regional supply bases for global designs?

29
Future Sourcing Implications

• Increased need for global competencies
  (languages, experiences)
  
• Increased importance of logistics