John Deere SCRLC Member Spotlight Elizabeth Carroll Bob Smola Austin, TX 18 May 2010 Agenda – John Deere Corporate – Supply Management – John Deere Supply Network (JDSN) – Current Supply Chain Risk Process – Future Supply Chain Risk Process – Questions 2 John Deere Spotlight – SCRLC 18 May 2010 It all started in a blacksmith shop… Integrity – Quality – Commitment – Innovation John Deere Today – Founded in 1837 – Over 100 Locations – In 28 Countries – Over 56,000 Employees 4 John Deere Spotlight – SCRLC 18 May 2010 Our mission is to distinctively serve those linked to the land Vastly Global: Customers and operations around the world Intensely Innovative: Advanced robotics, navigation technologies and autonomous vehicles Vigilant Stewards: Dedicated to our values, legacy, environment and safety of employees 5 John Deere Spotlight – SCRLC 18 May 2010 The John Deere Strategy Exceptional operating performance Disciplined SVA growth (Shareholder Value Added) Aligned high-performance teamwork 6 John Deere Spotlight – SCRLC 18 May 2010 2009 Net Sales and Revenues: $23.11 Billion Agriculture and Turf 78.4% Construction & Forestry 11.4% Credit 8.4% Other 1.8% 7 John Deere Spotlight – SCRLC 18 May 2010 John Deere Manufacturing Locations 8 John Deere Spotlight – SCRLC 18 May 2010 Parts and Logistics John Deere replacement parts in transit to dealers Interim Tier 4/Stage III B engines – A simple solution – A fuel efficient solution – A field proven solution – An integrated vehicle solution – A fully supported solution 10 John Deere Spotlight – SCRLC 18 May 2010 Agricultural Equipment World’s premier farm equipment manufacturer 11 John Deere Spotlight – SCRLC 18 May 2010 Agriculture and Turf Percentage of population engaged in agriculture Former Soviet Union 6.8% Western Europe 1.7% U.S. 0.9% China 38.5% India 25.4% Brazil 6.4% Argentina 3.7% (Based on data from Food & Agricultural Organization of the United Nations) 12 John Deere Spotlight – SCRLC 18 May 2010 Agricultural Equipment Emphasis on new products and emerging markets • Brazil • Russia • India • China 13 John Deere Spotlight – SCRLC 18 May 2010 Construction & Forestry Equipment $2.6 billion in sales in 2009 14 John Deere Spotlight – SCRLC 18 May 2010 Forestry Equipment World’s premier producer of timber-harvesting equipment What lies ahead for Construction & Forestry? $17 billion European Union $17 billion U.S. & Canada $6 billion Russia $14 billion China $2.5 billion Brazil $2.5 billion India $87 billion global market for the equipment we build 16 John Deere Spotlight – SCRLC 18 May 2010 Turf Equipment Total solution provider offering products and services for: • Property owners • Professional landscape contractors • Golf course superintendents 17 John Deere Spotlight – SCRLC 18 May 2010 Financial Services FarmPlan™ in United States Agline™ in Canada 18 John Deere Spotlight – SCRLC 18 May 2010 John Deere Water Technologies Exciting growth 19 John Deere Spotlight – SCRLC 18 May 2010 John Deere Recognition 2009 – Ranked 14th globally and 8th in North America on Fortune Magazine’s 2009 list of Global Top Companies for Leaders 2009 – Ranked among the 50 most admired companies in the world in a survey published by Fortune magazine 2009 – Chosen again by Ethisphere Institute for its third annual list of the World’s Most Ethical Companies 2009 – Recognized as a top employer by readers of Minority Engineer and The Black Collegian magazines 2009 – Ranked second in list of “Top 50 Employers” by readers of CAREERS & the disABLED magazine 2009 – Recognized as a 2009 Best Diversity Company by Diversity/ Careers in Engineering & Information Technology magazine 2008 – Chairman and CEO Robert Lane is included on Barron’s list of “The World’s Best CEOs” 2008 – Ranked 4th – CRO magazine’s “100 Best Corporate Citizens” list 20 John Deere Spotlight – SCRLC 18 May 2010 Value Chain Supplier Warehouse / Packaging Facility Deere Factory / PDC Warehouse / Depots Dealer / Customer Retail Store Countries We Buy From: 67 Units Supplied: 56 Part Numbers Purchased: 21 John Deere Spotlight – SCRLC 18 May 2010 657,000 Value Chain Supplier Warehouse / Packaging Facility Deere Factory / PDC Warehouse / Depots # of Suppliers Direct Indirect Logistics Total 22 John Deere Spotlight – SCRLC 18 May 2010 9,000 29,000 1,000 39,000 Dealer / Customer Retail Store Worldwide Supply Management & Logistics • Decentralized until 2000 • Divisional Directors • Global Strategic Sourcing – Enterprise commodities – Divisional commodities – Co-located globally – Many processes, tools, and legacy systems across the Enterprise 23 John Deere Spotlight – SCRLC 18 May 2010 2010 Strategic Plan Worldwide Supply Management & Logistics Strategic Global Sourcing 2010 We develop and implement sourcing strategies to achieve the lowest total cost solutions. — Execute the indirect materials and services strategy — Execute the global logistics segmentation strategy — Execute highly aligned enterprise strategies leveraging our total spend — Mitigate supply chain risk 24 John Deere Spotlight – SCRLC 18 May 2010 John Deere Supply Network - JDSN • Align suppliers to Deere business needs — Achieving Excellence — Deere Business Processes • Provide reliable, accurate, and timely data — Firm and Forecasted orders — EDI • Provide tools to enable supplier success — Capacity planning — Part drawings 25 John Deere Spotlight – SCRLC 18 May 2010 John Deere Supply Network - JDSN 26 John Deere Spotlight – SCRLC 18 May 2010 Achieving Excellence 27 John Deere Spotlight – SCRLC 18 May 2010 Order Fulfillment Readiness Assessment 28 John Deere Spotlight – SCRLC 18 May 2010 The Story Web Class Supplier Awareness Mike Brown, John Deere Supply Management Professional describes the Order Fulfillment Readiness Assessment Connie, calls John Deere Supply Management Mike and Connie discuss the Assessment for potential suppliers Maria explains to Connie how the Order Fulfillment Readiness Assessment works Mike shows Connie the Order Fulfillment Readiness scoring criteria Mike and Connie discuss next steps 29 Order Fulfillment Readiness Assessment Daily Security Briefings - continued on next slide 30 John Deere Spotlight – SCRLC 18 May 2010 Daily Security Briefings 31 John Deere Spotlight – SCRLC 18 May 2010 Daily Event Communications 32 John Deere Spotlight – SCRLC 18 May 2010 33 John Deere Spotlight – SCRLC 18 May 2010 JDSN MAP 34 John Deere Spotlight – SCRLC 18 May 2010 JDSN MAP 35 John Deere Spotlight – SCRLC 18 May 2010 JDSN MAP 36 John Deere Spotlight – SCRLC 18 May 2010 Event with/without Warning Process 37 John Deere Spotlight – SCRLC 18 May 2010 Eyjafjallajokul 38 John Deere Spotlight – SCRLC 18 May 2010 Event Team Mobilization: • Global team members assigned on a full-time basis — Factory, Logistics, Supply Management, Freight forwarders — Supply Management Director acted as team lead • Collaboration teleconferences scheduled three times per day • Communication plan to ensure “One Version of the Truth” — Separate plans for Deere and non-Deere stakeholders • Leveraged existing Supply Risk Share Point Site on JDSN — Read/write access granted to 35 stakeholders 39 John Deere Spotlight – SCRLC 18 May 2010 Daily GLOBAL Communication Plan: • 6:00 AM: Stakeholder conference call to confirm status • 7:00 AM: Logistics/SM meeting to set ongoing priorities • 1:00 PM: Logistics/SM meeting to update daily status • 2:00 PM: SM Director update issued to Deere Leadership • Communication plan enabled: — Live conversation with units (minimal messages) — Timely production planning 40 John Deere Spotlight – SCRLC 18 May 2010 41 John Deere Spotlight – SCRLC 18 May 2010 Share Point Communication Template: 42 John Deere Spotlight – SCRLC 18 May 2010 Team Actions: • Rerouted material to open airports • Leveraged 3PL relationships to reserve space on existing flights • Established charter flights • Identified alternate methods to acquire material — Pull parts from Spare Part Depots — Use alternate suppliers to manufacture parts — Product Engineering deviations to use similar products (bearings) 43 John Deere Spotlight – SCRLC 18 May 2010 Lessons Learned: • Appropriate team leadership/structure to drive performance — Prioritize decisions based on enterprise business needs — Access to appropriate enterprise/3PL leadership — Appropriate understanding of business processes & operations — Team approach supported by global Senior Leadership • Process gaps identified to ensure rapid deployment for future events • Expertise and simple tools drove business results — Cell phones, Share Point web site, email, time-zone calendars 44 John Deere Spotlight – SCRLC 18 May 2010 John Deere Online Publication: 45 John Deere Spotlight – SCRLC 18 May 2010 Supply Chain Risk Management Market Segment Financial Risk Country Risk Capacity Natural Disaster 46 John Deere Spotlight – SCRLC 18 May 2010 Risk Risk Management - Criticality Rating (Dimensions) Supply Base TOTAL Suppliers “nominated“ Suppliers identified “critical“ Suppliers with detected risk(s) BUSINESS WITH JD PARTS Criteria(s) : • Number of JD parts • Effort to Resource • Run without • Complexity / Flexibility Part portfolio related criticality Suppliers covered by Risk Mitigation Plan Criteria(s) : • SINGLE- or MULTIunit/divisional/regional • PDP Involvement • JD spend & proportion of supplier’s total business • Supplier’s dependency on market segments • Multiple-tier supplier • # of served platforms & indicator for high SVA product-line suppliers + Business related criticality Criteria(s) : • Tooling ownership • Redundant tooling • Tooling leadtime • Tooling cost + Tooling related criticality Total Supplier Criticality 47 John Deere Spotlight – SCRLC 18 May 2010 DISTANCE JD <-> SUPPLIER (Reaction time) TOOLING Criteria(s) : • Local (Truck) • Regional (Train, truck) • Global (Ship, aircraft) + Distance / Reaction time related criticality Risk Assessment Risk Management – Risk Assessment (Dimensions) Supply Base TOTAL Suppliers “nominated“ Suppliers identified “critical“ Suppliers with detected risk(s) MARKET SEGMENT FINANCIAL Criteria(s) : • Supplier’s dependency on market segments (focus: critical industries) Market related risk Suppliers covered by Risk Mitigation Plan Criteria(s) : • Rating results - public owned - private owned • Financial constraint indicators - Change in payment terms • Request for advances - Creditor/debtor to a bankrupt company - Plant restructuring - Ownership or management change + “Financial health” related risk + (SUPPLIER) COUNTRY RELATED RISK(S) SUPPLIER PERFORMANCE Criteria(s) : • Event driven risk(s) - Natural events - (Geo) poltical events - Pandemic - Transportation strikes - Terrorism/attacks, etc. • Rating results - Political & economic i.e. economic & financial prospects - “Business Climate” Criteria(s) : • Quality & delivery • Warranty claims • AE Rating • Downtimes (customer) • Audit compliances • Capacity • Supplier specific events • # of drop-in orders Event / Country related risk Total Supplier Risk 48 John Deere Spotlight – SCRLC 18 May 2010 + Performance related risk Risk Mitigation Supplier Risk Scorecard Supplier Name Company ABCDEF Supplier# 123456 Location - Country USA Location - City Austin Turnover (JD TOTAL FY 2008) 120,000,000 USD Relationship Owner(s) A.B. Smith C.D. Chen E. F. Kumar G. H. Gonzalez Add Info 1 Text Add Info 2 Text Financial Risk Market Segment 49 John Deere Spotlight – SCRLC 18 May 2010 Supplier Performance (A&T) (JDPS) (C&F) (Enterprise) Previous Current Risk Level Risk Level Event/Country Risk Public Financial Analysis Public Financial Analysis Privately Held Supplier Financial Analysis Enterprise Supplier Financial Risk Team Confidentiality – partial financials Increase in private supplier response – AE wavelength impact An Increasingly Global Process 53 Maximum Confidentiality Provided 54 High Financial Risk Supplier Enterprise Supplier Financial Risk Team Full financial review In-depth ratio analysis Meet with CFO & Upper Mgmt Monthly reviews Supplier visits Questions 56 | John Deere Spotlight – SCRLC May 2010