Explain the global challenges in Supply Chain Management and relate with the facts given in the case study.
Deere & Company (brand name John Deere) is famed for the manufacture and supply of machinery
used in agriculture, construction, and forestry, as well as diesel engines and lawn care equipment. In
2014, Deere & Company was listed 80th in the Fortune 500 America’s ranking and was 307th in the
2013 Fortune Global 500 ranking.
Supply Chain Cost Reduction Challenges: Deere and Company has a diverse product range, which
includes a mix of heavy machinery for the consumer market, and industrial equipment, which is made to
order. Retail activity is extremely seasonal, with the majority of sales occurring between March and July.
The company was replenishing dealers’ inventory weekly, using direct shipment and cross-docking
operations from source warehouses located near Deere & Company’s manufacturing facilities. This operation was proving too costly and too slow, so the company launched an initiative to achieve a 10%
supply chain cost reduction within four years.
The Path to Cost Reduction
The company undertook a supply chain network-redesign program, resulting in the commissioning of
intermediate “merge centers” and optimization of cross-dock terminal locations.
Deere & Company also began consolidating shipments and using break-bulk terminals during the
seasonal peak. The company also increased its use of third-party logistics providers and effectively
created a network that could be optimized tactically at any given point in time.
Supply Chain Cost Management Results: Deere & Company’s supply chain cost-management
achievements included an inventory decrease of $1 billion, a significant reduction in customer delivery
lead times (from ten days to five or less) and annual transportation cost savings of around 5%
1. Explain the global challenges in
study.
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