John Deere Case Study

UNIVERSITY

SUPPLY CHAIN MANAGEMENT

Assignment One

Executive Summary

John Deere is an American based company out of Moline, Illinois currently trying to assess one of it's supplier company's performance. The company in question is Complex Parts Inc. who has been a supplier for Deere for the past ten years with annual sales to its Moline unit of approximately $3.5 million.

The issue in question comes after five members of an evaluation team discussed Complex Parts' performance over the past year. Although Complex Parts has been a long term supplier providing Deere with a key manufactured part requiring significant engineering and input testing, they have been noticed to have fallen behind with customer satisfaction.

Deere's AEP program has served as a grading base for the supplier and it seems they have fallen behind this past quarter. It is the team's intent to analyze the situation and to determine whether there is a need for a new supplier.

Despite Complex Parts' drop in its delivery rating this past quarter, it has also come to the attention of the evaluation group that the company is not fully responsible for the data. There seem to be issues with Deere's inability to return important phone calls from Complex Parts' customer service group. Upon further evaluation, Complex Parts needs some adjustments, however their recent downfalls do no merit their replacement.

Table of Contents

Issue Statement................................................................... 3

Analysis ...........................................................................5

Alternatives & Decision ........................................................ 6

Recommendation & Conclusion............................. ...................8

Issue Statement

Introduction

John Deere is an agricultural, construction, commercial and consumer equipment producing company. Founded in 1837 in Moline, Illinois, and now conducting business in over 160 countries with 43 000 employees worldwide, it reached net sales of over $11 billion in 2000.

Situation

For the past quarter Deere's long term partner and supplier of ten years, Complex Parts Inc. has not been achieving great results according to Deere's supplier evaluation team. This has become an issue and the team must now determine if there is a need to replace the supplier. Complex Parts has sold $3.5 million worth of product to Deere within the past year and is the preferred supplier since they are normally able to meet all of Deere's needs at one time and they take a proactive approach to its dealings with the company.

Based on Deere's Achieving Excellence Program (AEP) which is aimed at giving suppliers a competitive advantage to help them do their job as well as developing a long term relationship, Complex Parts was evaluated under five key areas. The AEP focuses on classifying suppliers based on their scoring on quality, delivery, cost management, wavelength and technical support. These areas are further divided and analyzed in closer detail by a corresponding evaluator. The program also aims to recognize supplier performance by rewarding those suppliers who earn the best scores in the supplier classification criteria. There are training benefits and a banquet awarded to the top supplier due to their outstanding work. Also, each supplier is given a performance report quarterly and performance cut-offs are revised annually.

Upon closer evaluation, Complex Parts scored 666 under the quality rating, which is well below the 1000 mark required; and the delivery rating had an even better score of 8 650 which was way below being under a minimum 30 000. Once the member in charge of the technical evaluation was consulted, it has been found that the delivery rating dropped to 155 000 for the quarter.

Hayley Marie, the manufacturing planner, is concerned that Deere has not been returning Complex Parts' customer service calls and in return Deere has had to expedite many deliveries which cost the company a lot of money and may be the reason for the dismal delivery rating.

Overall, there has been a continuous improvement from the company as a whole, yet each member of the evaluation team has a point in which Complex Parts could improve if they are to keep them as their main supplier. Due to the AEP currently in place, it is worth determining if one supplier is best at this time or if Deere is at a point where some change could be beneficial and perhaps strategic sourcing may be the answer.

Analysis

Quantitative

Complex Parts provides Deere with a special part, and has had great sales figures in the past. This company is looking forward to expanding its business with Deere, and must therefore improve the delivery rating to what it has previously been. The issue of not having Deere personnel return their phone calls is also quite pressing, as this is affecting their rating and in turn their business. Yet not being on time with price quotes is an issue they must also look to. Another issue is Complex Parts' products have not met their required cost targets; in turn they are reducing Deere profit. This problem also relates to their inability to suggest methods for cost reductions.

However, they have been developing their R&D department and because of it Deere has been able to take suggestions and make the necessary changes.

Qualitative

Upon review of this information, according to the evaluation team's members, Complex Parts has been doing a good job in following through with suggestions for quality improvement. They have also taken a proactive business approach and an active role in keeping up with specific changes made be Deere. Complex Parts has also been able to internalize quality plan elements and has had improved quality performance; this might be thanks to their recent ISO 9000 certification.

It seems as though Complex Parts is having