Deere & Company headquarter in Moline, Illinois was founded in 1837.In 2007, they conducted business in over 110 countries and employed approximately 47,000 people worldwide. Their employment rate grew to over 67,000 individuals as shown in the Statistics, 2014. They are the world’s leading manufacturer of farm and forestry equipments and also produce construction, commercial and consumer equipments. Other products and services produced by Deere included; equipment financing, power system, special technologies and healthcare. In 2006 members of John Deere’s supplier evaluation team were discussing issues on a long time supplier, Complex Parts, performance. Over the past year, their service had declined resulting in an unfavorable and less profitable relationship between John Deere and Complex Parts and the supplier evaluation team was tasked with providing a recommended course of action to their project manager.
Deere’s achieving excellence program (AEP), a supplier evaluation process that promotes communication, trust, cooperation, and continuous improvement, has served as a grading base for their suppliers. The AEP evaluates on a yearly bases, key parts on how a supplier is performing. It focuses on five key areas; quality, delivery, cost management, wavelength and technical support. The program classifies each supplier, from best to worst as either partner, key, approved or conditional. AEP effectively assesses the supplier’s commitment to its relationship with Deere in such areas as; enhancing communication, lowering cost and improving design. Complex Parts had been a supplier for John Deere for over ten years with annual sales to their Moline unit of approximately $ 3.5 million. Complex Parts’ responsibility was to manufacture a key part that required significant engineering input and testing and had remained John Deere’s only supplier of this part, even though two other suppliers can also supply it. Complex Parts was a supplier who was actively involved and interested in increasing their sales with John Deere.
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They have always taken proactive measures in their dealings with John Deere, by participating in cost reduction strategies and staying up with Deere’s design changes and most importantly giving in to Deere’s Product Quality Plan. However, their delivery rating was extremely high at 155,000 and their Quality rating was 666. This was as a result of their failure to implement the Product Quality Plan at their newly opened facility. Lastly, for as willing as they were about employing cost reduction strategies, they failed to do so over the past year, resulting in untimely deliveries and delays. For Complex Parts to go forward to the project manager there are four courses of actions to be presented to Complex Parts. 1) Contract a new external supplier and hope that the research and analysis conducted would benefit John Deere with a good rating, 2) Utilize Complex Parts in combination with a second supplier, either external or internal, 3) Utilize an internal supplier already on contract with John Deere, and 4) Continue to move forward with Complex Parts as their main supplier. Our team recommendation should be the fourth option, of keeping Complex Parts as a main supplier.
However identifying a path forward that is more engaged on John Deere’s part. Identifying a team or a direct contact of upper management that will be responsible at John Deere as a liaison between the two parties. Creating a dashboard interface, or a decision support system, that ranks each aspect of their relationship on a green, yellow, and red scale could also help them identify risks before they become realized and give monthly feedback to both companies on their overall health. Some short-term and long-term implications of the recommendations are; The decade long relationship between Complex Parts and John Deere is a good indicator of past performance. Because the AEP fails to solicit and incorporate supplier feedback to their analysis, it’s difficult to assess what could be the driver of the recent downturn in performance and deliveries. It could be an issue that is short term and due to rectify its self in the coming quarter.
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Choosing to keep Complex Parts on contract, as a supplier for John Deere will offset any of the initial costs associated with looking for external suppliers or contracting even those internally. Long-term relationships will have lows and highs and its ideal that John Deere rides this low out. Due to the lack of communication between both parties, keeping up with Deere’s required specification changes, but was very concerned with their frequent inability to return phone calls to Complex Parts’ customer service group. An increasing number of deliveries had to be expedited over the past year, costing Deere in the process it’s difficult to predict the results of keeping Complex Parts on contract. Had the two retained a healthy level of communication John Deere could be made aware of any recent issues that Complex Parts is experiencing and perhaps due to their vast experience offer solutions that would increase the turn around of the imposed decline.
There is a risk that communication alone will not prevent a future decrease in performance by Complex Parts and John Deere will ultimately lose additional profits. To both their benefit though, Complex Parts reputation and historical performance is a good indicator of future performance, instilling confidence for John Deere to press forward with their buyer and supplier relationship with Complex Part. Focus only on scoring a high rating on the AEP scale but not necessarily doing what is best for the supplier is not a good indicator for John Deere and Company.
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It is not only Complex Parts responsibility to make adjustments for John Deere. Deere and Company should also exploit what they could be doing to help the supplier. The AEP is an ideal way to analyze how a supplier is functioning but it would be beneficial to include an assessment of how or what Deere and Company could do to help suppliers, provide training to conditional suppliers in order for them to improve their process which will be beneficial to both Deere and this suppliers , and to avoid danger of losing business relationship for both parties.
References
Accounting Tools (2014) Accounting Tools. The Weighted Average Method. Retrieved on October 4, 2014 from: http://www.accountingtools.com/weighted-average-method The Statistics Portal (2014) Statistical. John Deere’s Workforce 2002-2013. Retrieved on October 4, 2014 from: http://www.statista.com/statistics/278010/john-deere-number-of-employees-since-2002/ Wisner, J. D., Tan, K., & Leong, G. K. (2012).
Principles of Supply Chain Management (3rd ed.).
Mason, OH: South-Western.
