john deere case presn

SUPPLIER DEVELOPMENTPresented by,

Arun Avinash Lakshmi Saranyan Vimala

Nothing runs like a Deere

About the Company

• Founded in 1837 by John Deere• World’s major manufacturer of Agricultural

and Construction equipments• In 2008, it was listed as 102nd in the Fortune

500 ranking• Offices, Manufacturing facilities, Suppliers

located in 160 countries

Partnering Activities

• Working closely with suppliers• Designing or Redesigning manufacturing facilities and

operations• Providing and facilitating the use of Software packages• Training supplier personnel• Providing on-site personnel for specific projects

Reduce Suppliers’ Manufacturing cycle

time

Lower Manufacturing Cost

Improve deliveries of

finished products

Supplier Development Groups

• Process Engineers who help the suppliers improve their operations

• Each Deere division had SDGs• 100 individuals assigned to SDGs

Excelsior Equipment

• 150 employee company located in Cedar Rapids

• Supplied a major Tractor Attachment to Deere• Vertically integrated Company• Deere purchases accounted for over 95% of

Excelsior’s revenue• Deere growing dependent on Excelsior

The Problem

• Deere not able to meet the Demand• Excelsior’s cycle time was about 250 days• High Cost for Deere• Disagreement between Deere SDG’s

recommendations and Excelsior on changes in the manufacturing process

• SDG’s recommendations reduces cycle time to 20-40 days and cost by 10%

Charter between Deere and Excelsior

• Capital expenses will be withheld against the cost reduction benefit

• 50% of the savings will be passed on to Deere• Current pricing is the basis• No price reductions are necessary until savings

are confirmed• Raw material cost savings will be passed to

Deere.

Deere’s Current Tactic

• Provide a 5% reduction in price or at least half of the projected savings if not implemented

• This will cause a strain in supplier relationship• Deere has a high bargaining power• It must be implemented to meet demand of

Deere• Ethically it is wrong to force the supplier

Implications

John Deere

• Integrated Supplier relationship

• Aggressive push through strategy

• Meet customer demand

• Reduce costs

Excelsior

• Reduce lead time• Improve profitability• Enhanced processes• Vertical integration

Alternative strategy

• Strategic alliances• Deere & co acquiring Excelsior • Deere & co investing $5 million in Excelsior• Sharing the Investment of $5 million• Deere & co providing a Long term credit to

Excelsior

Thank You