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
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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
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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
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John Deere Spotlight – SCRLC 18 May 2010
The John Deere Strategy
Exceptional operating
performance
Disciplined SVA growth
(Shareholder Value Added)
Aligned high-performance
teamwork
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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%
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John Deere Spotlight – SCRLC 18 May 2010
John Deere Manufacturing Locations
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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
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Agricultural Equipment
World’s premier farm
equipment manufacturer
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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)
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Agricultural Equipment
Emphasis on new products
and emerging markets
• Brazil
• Russia
• India
• China
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Construction & Forestry Equipment
$2.6 billion in sales
in 2009
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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
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Turf Equipment
Total solution provider offering
products and services for:
• Property owners
• Professional landscape contractors
• Golf course superintendents
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Financial Services
FarmPlan™ in United States
Agline™ in Canada
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John Deere Water Technologies
Exciting growth
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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
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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:
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657,000
Value Chain
Supplier
Warehouse
/
Packaging
Facility
Deere
Factory /
PDC
Warehouse /
Depots
# of Suppliers
Direct
Indirect
Logistics
Total
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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
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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
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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
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John Deere Supply Network - JDSN
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Achieving Excellence
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Order Fulfillment Readiness Assessment
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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
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Order Fulfillment Readiness Assessment
Daily Security Briefings
- continued on next slide
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Daily Security Briefings
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Daily Event Communications
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JDSN MAP
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JDSN MAP
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JDSN MAP
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Event with/without Warning Process
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Eyjafjallajokul
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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
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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
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Share Point Communication Template:
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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)
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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
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John Deere Online Publication:
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Supply Chain Risk Management
Market Segment
Financial
Risk
Country Risk
Capacity
Natural
Disaster
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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
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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
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+
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