Update on Excellence
Deere and Danfoss: Effective Supplier
Development Approach Builds
Flexibility to Meet Customer Needs
Developing trusty (and trusting) extended enterprise relationships.
Lea A.P. Tonkin
Just how far (how close, actually) do you take
supplier development? The growing importance
of “speed-to-market” drives increasingly closer
OEM customer-supplier coordination these days.
Reflecting this trend, folks at John Deere Horicon Works and Danfoss Fluid Power continue to
explore innovative collaboration practices supporting closely-linked production and overall
order fulfillment. Make no mistake here. Companionship is fine. But Deere and Danfoss have
marketplace leadership in mind as they develop
their extended enterprise relationship. Joint
challenges range from seasonal demand
swings to sales spikes when mass marketers up
their orders with minimal notice, the need for
faster response to product design changes, and
blips from special orders in global markets.
Adopting a Time-Based Supply
Management Strategy for Mutual Gain
and Competitive Advantage
In this fast-paced environment, maintaining market leadership means continually
increasing responsiveness to changing market
demands. Responding to this need, under the
…maintaining market leadership
means continually increasing
responsiveness to changing
market demands.
leadership of then-Manager of Strategic Supply
Management Paul Ericksen, John Deere Horicon Works in Horicon, WI (see the box below)
began to experiment with an innovative new
a p p roach to supply management in 1995.
Ericksen’s goal: Find a more efficient method
of working with suppliers than the traditional,
combative, win-lose negotiations or the practice of imposing increasing numbers of burdensome supplier performance metrics with
the hope that suppliers would find their way
t o w a rd effectively eliminating perf o rm a n c e
gaps. Ericksen designed a time-based supply
management strategy to yield improved financial results and greater marketplace agility for
Deere as well as its suppliers.
Under time-based supply management, a
s u p p l i e r’s order fulfillment eff e c t i v e n e s s
becomes their primary supply management
metric. Using this paradigm, supplier manu-
About John Deere Horicon Works and Danfoss
Deere and Company, established in 1837, is the world’s leading producer of agricultural equipment and one of the leaders in
construction and forestry equipment, diesel engines, and other powertrain components for the off-highway industry. In 1963,
Deere began production of ride on lawnmowers at its Horicon, WI facility. The John Deere Worldwide Commercial and Consumer
Equipment Division is the largest producer of premium mowing equipment in the world. More than 3.5 million ride-on lawnmowers
have been manufactured at John Deere’s Horicon factory. Horicon employs 1500 salaried and production workers.
Danfoss is a $2.2 billion company headquartered in Denmark. The company has manufacturing facilities on four continents and
approximately 17,000 employees worldwide. Danfoss Fluid Power in Racine, WI is a Division of Danfoss, Inc., also of Racine.
Danfoss-Racine has over 200 production employees and is the headquarters of Danfoss’s North American Marketing and
Engineering groups.
Product-focused plant teams at the Danfoss-Racine facility made significant reductions in manufacturing cycle times since January
1998, according to John Davis, D Series motor engineer who served as one of the workshop tour guides. For example, the D Series
Motor Team moved machines, trimmed setup times, cut lot sizes, reduced bill of material complexity, developed a multi-person cell
training matrix, and posted performance metrics. Next on their agenda: addressing external leadtimes, shifting to a Kanban system,
and other steps. The D Series Motor Team was also part of an initiative that broke a large stockroom into smaller, product-focused
areas — speeding parts to work areas.
40
Update on Excellence
facturing cycle time is both a “snapshot” indicator of potential for sustainable cost reduction and future viability. Guiding principles
Horicon’s approach to supplier development as
well as results from a supplier development
case study were reviewed during the re c e n t
Wauwatosa, WI workshop, “Supplier Development Partnerships That Work.” The session
included plant tours at Deere’s primary and
assembly operations in Horicon, WI and the
Danfoss hydraulic pump and motor plant in
Racine, WI. Participants also heard overviews
of two associated University of Wi s c o n s i n Madison research studies.
The Shift to an Extended Enterprise
Building long-term mutual competitive
advantage into supplier partnerships takes
commitment, hard work, and patience. Trust is
fundamental, too. Barriers resulting fro m
years of arm ’s length supply management
practices must be addressed and overc o m e
before true partnerships can develop. Horicon
and its strategic supplier partners such as Danfoss find that, to operate as an effective extended enterprise, they must share details about
process and cost that might previously have
been considered confidential. There is a natural reluctance by many suppliers to start in
this sharing. A related extended enterprise
paradigm shift — difficult for many OEMs to
accept — is that they must share responsibility for the manufacturing efficiency and financial well-being of their strategic suppliers.
Horicon supplier development engineers also
spend a high percentage of their time at supplier sites. This intensive collaboration often
collides with traditional practices. Before suppliers open themselves up to and invite in
Deere’s supplier development resources, they
need: 1) to become knowledgeable and comfortable about the process to be applied and 2)
assurance that information provided as part of
the effort won’t be used against them in regressive supply management practices.
Why pursue new supply management
strategies? OEMs such as Deere are no longer
v e rtically integrated to the extent that they
once were and for that reason have less direct
control over primary product cost. Purchased
parts play an increasingly important role in
OEM profitability.
“Over 80 percent of Horicon’s cost of
goods sold is now accounted for in purchased
parts,” said Paul Ericksen, now manager of
supplier development for John Deere’s Worldwide Commercial & Consumer Equipment
Division. “There is a critical need for a more
e fficient way in working with suppliers to
develop, produce, and procure purchased parts
for OEM end-use products. It is a fact of life
that although OEMs no longer own many of
the assets needed for production of parts used
in their product, they still want to maintain a
certain level of influence over those assets. The
question naturally comes up, then, do traditional supply management practices lend
themselves to this sort of OEM customer-supplier collaboration, or is a new paradigm in
supply management needed? It is my firm
belief that time-based supply management is
the needed new approach.”
Ericksen emphasized that responsibility
for shared success demands more of all partners — not just suppliers. “We need to ask
ourselves, ‘Do our suppliers really feel like they
a re part of our organization, receiving the
same support, consideration, and rewards as
departments located within our factory walls?
Ericksen emphasized that
responsibility for shared success
demands more of all partner
— not just suppliers.
Are the supply management strategies we currently employ going to attract suppliers
t o w a rds becoming an extended part of our
enterprise?’” Over the last generation, a select
group of companies have experienced dramatic increases in profitability as management
invited workers to become more empowered
and productive, and then rewarded them for
their gains, he added. This change in management-labor relations has been difficult to
accomplish but found to be financially worth
the eff o rt when successfully implemented.
E r i c k s e n ’s theory is that a similar shift in
OEM-supplier relations, where suppliers are
treated as an extension of an OEM’s enterprise,
will result in similar, sustainable financial
gains.
At the same time, Deere expects suppliers
to step sprightly as they collectively create new
ways to meet changing customer demands.
“Horicon used to give suppliers three months’
of firm order commitment, thinking this
would help them run their factories more efficiently,” Ericksen said. “In researching this as
part of a 1995 order fulfillment reengineering
study, we found that this lengthy commitment
was actually counterproductive, dis-incenting
suppliers to move away from inefficient manufacturing practices such as scheduling per
economic order quantities (EOQ) and operating through functional departments. Because
lengthy firm orders are artificial, not paralleling our actual market re q u i rements, we’ve
now reduced order commitments to two weeks.
Under an extended enterprise re l a t i o n s h i p ,
h o w e v e r, John Deere acknowledges that it
shares in responsibility with strategic suppliers
to assist them, where needed, in the implementation of the quick response manufacturing practices necessary for them to support
reduced leadtimes.”
A Paradigm Shift
“ Time-based supply management
requires a paradigm shift which few companies (OEMs and suppliers) have attempted,
much less successfully executed,” Ericksen
said, adding, “Those that can make this
change will see a tremendously positive impact
to their bottom line over the long run. To
make this shift, OEMs must begin to view suppliers as long-term assets — just as they have
come to view their production workers.”
John Deere Horicon Works Supplier Development Definition
A process utilizing dedicated enterprise and supplier resources to identify and
resolve systemic supply chain performance gaps.
41
Update on Excellence
Ericksen offered several questions which
mirror the management-production worker/
OEM-supplier relationship parallel:
• Are suppliers (employees) hired to do more
than just supply parts (turn a wrench)?
• Are suppliers (employees) rewarded for their
increased contributions (productivity)?
• Are suppliers (employees) consulted when
OEMs set future direction?
What’s needed to build and differentiate
supplier support is a time-based supply management strategy that encourages impro v ement of supplier technology (knowledge,
equipment, and process efficiency) and an attitude reflecting increased supplier appreciation
of its OEM customer, according to the Deere
executive. Ericksen believes that Horicon’s
focus on supplier manufacturing cycle time
reduction is “supply management of the
future.” A manufacturing cycle time metric is
essential to effective supplier management, as
opposed to traditional purchasing metrics such
as on-time delivery which tend to reflect how
effectively supplier performance will allow the
OEM customer’s factory to operate, he said.
( D e e re ’s definition for manufacturing cycle
time is the typical amount of calendar time
from when a manufacturing order is created
through the critical path until the first, single
piece of that order is shipped to the customer.).
For added detail about how John Deere Horicon’s supplier development process works, see
the section, “From Supplier Gaps to Shared
Success.”
Long-Term Potential for Topnotch
Performance, Capacity Flexibility
OEMs learning to manage suppliers
using new performance yardsticks is also part
of the picture. “Inefficient, low-quality suppliers often achieve high perf o rmance ratings
from OEM customers under traditional supplier performance metrics,” according to Jeffrey
Oelke, a Deere Horicon senior supplier development engineer. “Low-price suppliers may
not be low-cost producers! Instead of relying
on secondary OEM supplier metrics such as
‘percent on-time delivery’ and ‘as-delivered
quality’ — which reveal little or nothing
42
about a supplier’s operational effectiveness —
focusing on manufacturing cycle time gives
supply management professionals a metric
that can be used to evaluate and manage supplier operations.
“Manufacturing cycle time is a single,
unobtrusive, easily-derived indicator of supplier order fulfillment effectiveness,” Oelke said.
“It’s easy to understand and non-threatening
to suppliers.” He added that knowledge of supplier manufacturing cycle times allows Deere
to prioritize and tailor supplier cost reduction
expectations rather than manage thro u g h
broad-brush mandates. It spotlights suppliers
likely to offer sustainable, topnotch perf o rmance and helps Horicon target suppliers
which could benefit from supplier development
assistance, he added.
hampered project progress, however. The old
system of EOQs, MRP-based product routings
through a functionally-organized factory, and
associated capital investment justifications no
longer applied. Manufacturing cycle time
moved up as the primary project metric. Process mapping, part flow modeling using MPX
(a product of Network Dynamics, Inc.,
Burlington, MA), as well as employee training
in quick response manufacturing and worldclass manufacturing practices contributed to
manufacturing cycle time improvements.
The project focused on the Danfoss
motor used on John Deere seeders. Related
manufacturing cycle time at Danfoss decreased
from 42 to 18 days, a 57 percent improvement.
In turn, a six percent cost reduction led to a
five percent price reduction to John Deere.
“No Turning Back”
From “Spaghetti-Like” Process to
Product-Focused Teams
Despite the prospect of “no cost”resource
support and fair sharing of savings from John
D e e re Horicon’s paradigm-shifting supplier
development tack, “taking the plunge” was not
an easy decision, according to Preben H.
Petersen, president and CEO of Danfoss Fluid
…“taking the plunge” was
not an easy decision …
Power. Mindful of Deere’s significant annual
“buy” from his company (involving thre e
Danfoss plants and ten Deere buyer factories)
and a sobering 1997 third-party assessment of
his company’s manufacturing operations,
Peterson agreed to proceed with John Deere
H o r i c o n ’s “win-win” supplier development
assistance in January 1998.
“ We had significant institutional and
personal investment in existing manufacturing
strategies,” Petersen said. “Once the decision
to proceed was made, however, there could be
no turning back. After the first time John Deere
was given access to our factory, there could be
no ‘putting the genie back in the bottle.’” The
“up side” potential of establishing an extended
enterprise relationship with a major customer
made it worth the risk, he added.
Traditional product costing initially
Acknowledging a poor 40 percent ontime delivery record, Danfoss and Deere initiated their supplier development collaboration
on the Danfoss B Series gear motor (used as
the impeller on John Deere seeders). Danfoss
p roject team members scouted for ways to
i m p rove delivery perf o rmance and re d u c e
costs through manufacturing cycle time
reduction. They documented a “spaghettilike” product routing trail, said Peder Hansen,
project manager at Danfoss (an engineer with
an accounting background).
Working with Deere-Horicon’s Scott Dail,
a supplier development engineer, the B Series
Motor Team heavily invested in streamlining
efforts. Deere sank 31 man-days into the project while Danfoss contributed hundreds of
man-days supporting project activities such as
process mapping, project planning, and training (in setup reduction, total preventive maintenance, quick response manufacturing, and
the use of MPX).
Hansen, assigned as a dedicated project
manager, led weekly meetings of management
and production employees to track pro j e c t
progress and launch team activities. A weekly
employee newspaper documented these meetings. Dail assisted by introducing the team to
new quick response manufacturing concepts
Update on Excellence
and the tools needed to implement them. He
also pitched in by providing assistance in the
actual work.
Hansen said Danfoss management
involved union (UAW) representatives in every
aspect of the effort, earning their increased
understanding of the need for change and in
the process receiving a tremendous number of
good ideas for making the change happen.
The team took a group of Danfoss production employees to Deere’s Seeder plant in
Moline, IL to see how their motor was used on
D e e re ’s product and benchmark an alre a d y
“lean” manufacturing operation. Danfoss production people also heard straight from their
Deere production employee counterparts about
the shift they could expect in their jobs —
duties, responsibilities, and rewards — as they
moved to a time-based production strategy and
team-based compensation. Through the site
visit and training, they learned the basics of
organizing teams around products rather than
processes or machines. The visit also allowed
the B Series Motor Team to understand the
added accountability they were receiving for
tools and machinery, and for acquiring new
skills needed to shepherd product from raw
material to shipping.
D a n f o s s ’s internal cooperation netted
significant cost reduction significant benefits
as manufacturing cycle times decre a s e d .
According to Hansen, Danfoss is more self-sufficient as it extends its streamlined production
approach to other products. The other nonfinancial benefits achieved on B Series motors
a re also expected throughout the plant as
implementation progresses:
• Shortened response time to customer orders
• Development of product experts in all
functions
• Elimination of barriers to intern a l
communication
• Clear lines of responsibility and authority
• Improved priority setting
• Clear measures of effectiveness.
“ I t ’s not a rapid improvement, it’s a long
journey,” Hansen said of manufacturing cycle
time reduction. “However, it is the best
Culture Shifts at Danfoss
Coming From
Going To
One operator, one machine
Multiple-operator cells
Fill in jobs
Secondary cell tasks
No immediate action
Taking initiative
Work waiting in front of work centers
Line filled only according to agreed-on buffers
Traditional UAW environment
High degree of flexibility within a UAW
environment.
Figure 1.
John Deere Horicon Works SD Process
Initiate
Project
Confirm
the project
Project charter
Map and
Measure
Map and
analyze
Team
supplier
project
process
charter
Process
Development
Achieve
Results
Control
Create
solutions
Team
Recognition
➧ ➧ ➧ ➧➧ ➧
charter
from
SD
Define
process
Assess
customers
needs
Assess
the
business
environment
Identify the
metrics
Collect the
data
Analyze
the data
Process
baseline
root
causes
Select
solutions
Develop the
process
Create
project plan
Project
plan,
mgt.
buy-in
Implement
process
Standardize
process
New
process
Share
lessons
Establish Process learned
process controls and
controls
best
practices
Initiate
correcAcknow
tive
-ledge
action
team
routine
efforts
Document
baseline
Report
results to SD
and SPE
Share
lessons with
COE/PEC
Figure 2. The abbreviations are as follows: JD=John Deere, SD=Supplier Development, BPE=Business
Process Excellence, COE=Center of Excellence, and PEC=Process Excellence Champion.
a p p roach to gaining sustainable impro v ement.” He believes that cultural change, over
time, will help build momentum for further
p ro g ress, as employees gain experience in
implementing teams and time-based manufacturing. Figure 1 shows some of the company’s culture shifts in progress.
From Supplier Gaps to Shared Success
Such supplier progress flows from a supply management strategy evolution. Uneasy
with supplier performance gaps and its own
strategies for creating a more nimble supply
chain, Deere-Horicon identified limited supplier management resources and technical expertise as culprits. Acknowledging that resulting
Such supplier progress flows
from a supply management
strategy evolution.
supplier perf o rmance gaps resulted in part
from traditional OEM supplier cost management strategies, they also acknowledged a
43
Update on Excellence
responsibility to assist supplier eff o rts in
improving performance.
After researching strategies for ensuring
sustainable supply chain improvement, they
initiated a new supplier development process
designed to eliminate supplier perf o rm a n c e
gaps through manufacturing cycle time reduction and to generate the atmosphere necessary
for the creation of extended enterprise relationships, according to Scott Dail, a Horicon
supplier development engineer (see Figure 2).
Overseen by Ericksen, this process (when consistently followed) drives consistent re s u l t s .
Dedicated supplier development resources (not
on loan from other job functions) — organized as “process owners” of elements critical to
the supplier development process — work
closely with project champions at strategic
suppliers such as Danfoss to trim manufacturing cycle time, and thus increase flexibility
and reduce waste. This focus yields substantial
benefits for both parties. “For instance, it is
amazing how much impact reducing manufacturing cycle time has on improving other
outcomes such as product quality,” Dail said.
Deere selects key candidates for what it
calls the “IMPACT” (Initiate projects, Map
and measure, Process development, Achieve
results, Control, Team recognition) supplier
development process. More than two dozen
six-month IMPACT projects have been completed so far. Supplier participants successfully
completing multiple IMPACT projects are
i n c reasingly re g a rded as part of Horicon’s
extended enterprise.
Initiating Projects: Start with a Charter
Deere learned the value of a clear mutual understanding about supplier development
projects early in the game. Each project starts
with joint development of a project charter. It
defines and documents the project mission,
vision, goal, and scope. The charter helps to
keep the project focused on its original objectives, according to Dail. “In our early projects,
when we hadn’t recognized the need for charters, we sometimes had problems keeping on
task,” he said.
Next, Map and Measure
Deere-Horicon and selected suppliers use
process mapping during the map and measure
phase (see the box, “Process Mapping Methodology”) to document bottlenecks and capacity
constraints in the manufacture of a product.
Identifying metrics, collecting process data,
and documenting the baseline are steps also
completed in this phase. Baseline metrics focus
on measurable process statistics. At project’s
end, changes in these statistics are used to
evaluate cost impact. “Projects tend to drag
out if they are not well-founded in the beginning and team members don’t have the necessary knowledge,” Dail said. “Training in topics
such as business financials, world-class manu-
facturing, and quick response manufacturing
are fundamental to ensuring supplier development success.”
D e e re ’s Ericksen facilitated supplier
access to training in Wisconsin by forming the
Wisconsin Manufacturing Extension Partnership (WMEP) Supplier Training Consortium. It
gained state subsidization for training consortium suppliers through the Wisconsin Department of Commerce. The program curriculum
is modeled after Deere’s Illinois and Iowa supplier training programs.1
Suppliers also bone up on process mapping and manufacturing cycle time reduction
tools. They learn to use MPX software to model
manufacturing flow and quantify manufacturing cycle time based on parameters such as
volume, capacity, labor and equipment availability, and operational routing data. Tagging
(Quick Response Manufacturing, p. 340 —
see footnote 1) is used to gather details for
confirming process mapping results. Evolver, a
spreadsheet analysis engine (Palisade Corporation) aids part family analysis and cell
scheduling; and cost analysis identifies
improvement opportunities.
Process Development
In the process development phase, the
implementation team members brainstorm
and benchmark (possibly developing more
detailed process maps based on tagging data).
Process Mapping Methodology
Process mapping’s value as a supplier development tool increased at John Deere Horicon, thanks to a new methodology adopted
during the winter of 1998-1999. The old method involved sending suppliers a process mapping guide and asking them to submit
process maps according to its format. Suppliers were asked to figure out the details of how to complete process maps — not the ideal
way to gather process information about manufacturing cycle time.
“In response, Deere-Horicon developed a quantitative, standardized, simpler approach,” explained Aaron Armstrong and K’uang Ku,
Horicon supplier development engineers. Working with suppliers to assess needs, explain the purpose of process mapping, and gather
necessary materials (part routing data and times) enhances acceptance and effective use of this tool, the engineers said. Through this
collaborative process suppliers learn how to flow chart a process including critical paths and sub-paths. They also sort out data
collection methodology and boundary issues. Subsequent quantitative data collection through the use of tagging confirms accuracy
and credibility. Tagging is the physical time-tracking of a part or job as it travels through an organization from start to finish, captured
in a spreadsheet.
Process steps are analyzed and categorized as value added, non-value-added (NVA) but necessary, or NVA and unnecessary. After all
steps are evaluated and total manufacturing cycle time is determined, Deere and the supplier identify potential problem areas. Offending
practices range from large lot sizes and excessive material handling to long queue or setup times. Process mapping results are a
primary motivator for suppliers in convincing them to pursue manufacturing cycle time reduction, according to Armstrong and Ku.
44
Update on Excellence
Then they select a solution based on manufacturing cycle time reduction, develop the supporting manufacturing strategy (using MPX to
model it and confirm its viability), and get
rolling with plan design and implementation.
This plan details the project critical path, project activity, interdependencies, milestone dates
for deliverables, etc.
Supplier personnel also receive training
in setup reduction, Total Preventative Maintenance (TPM), cellular manufacturing, design
of experiments, kaizen (rapid continuous
improvement), project planning and management, basic quality tools, group problem solving, and other training necessary for project
implementation. This training assures supplier
self-sufficiency when Deere supplier development resources are not present.
Achieving Results
Moving along to the “achieve results”
phase, the project team implements the new
manufacturing strategy. Effective communication speeds progress as project milestones are
defined, hurdles are overcome, and the
revamped process is documented for consistency and clarity. If all goes well, the project team
Effective communication
speeds progress …
delivers a process plan diagraming the footprint of the affected process areas, contro l
points, material movement, and flow. They
track project progress, document quality systems, and evaluate the supplier’s pay system to
ensure that it dovetails with quick response
manufacturing principles. The team also verifies that expected results are being delivered by
the new manufacturing strategy.
Control
The control phase comes next. Project
personnel create quality, training, and preventive maintenance plans/programs and initiate
any needed closed loop corrective action routines. They develop operational method sheets
(OMS) — instruction sheets for each manufacturing work station, including critical qual-
JD Horicon Works Supplier Development Win/Win Savings Sharing Formula
• Supplier development support development services are provided at no cost
• If savings are realized, they go towards increasing supplier profit and reducing John
Deere’s prices. If no savings are realized, no price reduction is expected as part of the
project.
• If implementation of the supplier development proposal requires capital investment,
John Deere will defer their portion of the savings until that portion of the investment
used in the production of John Deere parts has been paid for.
Figure 3.
ity checks. Related training ranges from job
instruction workshops (on OMS development)
to process failure modes and effects analysis
(PFMEA) and product quality planning.
Recognition, a Jumping-Off Point, and
Win-Win Savings Sharing
D e e re and its suppliers share “lessons
learned” and best practices in the recognition
phase of a project. They publish related case
studies and note project results. Deere process
owners use their project experiences to refine
key processes such as charters, process mapping, training, etc.
“Project achievement is a jumping-off
point, critical to motivating others’ involvement in continuous improvement efforts,” Dail
said. “Participants identify the next barriers to
trimming manufacturing cycle time and complete cost/benefit analysis. Typical results from
completed projects include 90 percent reductions in manufacturing cycle time, 25 percent
gains in productivity (units/man hour), and
significantly higher quality, improved delivery
p e rf o rmance, inventory reduction, fre e d - u p
floor space, improved safety, and ROI.”
Deere Horicon Works shares any savings
from these projects with the supplier (see Figu re 3). Dail emphasized that Deere looks
toward sustainable, repeatable improvement,
not just quick hit, one-time savings.
Standard Accounting Practices Need
Review
Tracking and evaluating manufacturing
cycle time reduction-related activities tends to
rankle supplier accounting personnel. Abolishment of EOQs, for example, cuts against the
grain of established costing formulas. Suppliers must trust that their “leap of faith” in
implementing manufacturing cycle time
reduction initiatives will work, according to
Steve Addison and Christopher Schluter, supplier development engineers at John Deere
Horicon. Although accountants may recognize
that reducing manufacturing cycle times
reduces cost, the magnitude of the reductions
is often in dispute.
Addison and Schluter discussed a project
metrics template designed to document actual
costs and savings. Working with data provided
by Danfoss, they tracked cost reductions associated with manufacturing cycle time reduction
on Danfoss’s B series motors. This research was
conducted under the auspices of the University
of Wi s c o n s i n - M a d i s o n ’s Center for Quick
Response Manufacturing.
D a n f o s s ’s accounting system initially
calculated that the 57 percent reduction in
manufacturing cycle time trimmed costs six
percent. A later, in-depth, “non-traditional”
accounting research study revealed the cost
reduction was actually 13 percent, said Addison and Schluter. Danfoss accounting
acknowledged this level of impact.
Horicon envisions creation of a manufacturing cycle time versus cost impact
database as data from completed projects is
compiled, enabling Deere to hone its (and its
suppliers’) effectiveness in slashing costs. The
University of Wisconsin-Madison Center for
Quick Response Manufacturing plans to continue to support work on this template through
additional studies, strengthening this framework for manufacturing cycle time reduction
45
Update on Excellence
savings accounting.
Trust Counts, Too
Cost-based price reductions from Deere’s
commitment to supplier development are critical. Yet they are not the sole measure of success. Supplier trust, commitment to the new
ways, and information sharing increased as
Deere ramped up its supplier communications,
sin Strategy (COWS). His study of Horicon’s
supplier development program showed that
this closer, more trusting collaboration made
possible improvements in productivity, delivery,
and quality that would otherwise not have
been achieved — confirming the impact of
extended enterprise relationships and timebased supply management through supplier
development as a means of establishing them.
What’s Next?
Supplier trust, commitment
to the new ways, and information
sharing increased …
consulting, and training, indicated a study by
Jeff Rickert, a research associate at the University of Wisconsin-Madison’s Center on Wiscon-
Partnering more effectively with suppliers in an extended enterprise relationship will
continue to better Deere’s flexibility and competitiveness, Ericksen believes. He’s eager to
rope even bigger mutually beneficial manufacturing cycle time reductions.
Ericksen already deployed his supplier
development engineers to home offices so they
John Deere has long recognized the value of developing associations with
organizations having similar goals. For instance, in 1989, the National Institute of
Standards and Technology (NIST) launched a network of Manufacturing Extension
Partnerships (MEPs) to support small- and medium-sized manufacturers through
technology transfer. Recognizing that many OEM suppliers are small- and mediumsized per the NIST definition, Deere-Horicon became involved in the Wisconsin MEP
(WMEP). The Wisconsin MEP organization has taken a national leadership role in
providing supplier development to OEMs. Horicon has also brought two University of
Wisconsin Research Centers into the supplier development mix. Deere-Horicon’s
supplier development methodology is based on the quick response manufacturing
principles championed by Professor Rajan Suri, director of the UW-Madison Center
for Quick Response Manufacturing (CQRM) and a university professor. Horicon is
active in recruiting supplier development personnel from Suri’s Manufacturing
Systems Engineering program. Horicon supplier development has also partnered with
the UW-Madison Center on Wisconsin Strategy (yes, the acronym is COWS!), a thinkdo tank nationally known for its research on management-labor strategies. COWS
recently expanded its research scope into OEM-supplier relationships and has studied
the impact of Horicon’s supplier development program on the WMEP supplier
training program in that regard.
By Paul Ericksen, C.P.M., manager of supplier development for John
Deere’s Worldwide Commercial & Consumer Equipment Division. He
is serving a second term a s presid ent of the Wisconsin
Manufacturing Extension Partnership and chairman of the board of
directors of the Wisconsin Center for Manufact uring and
Productivity. Ericksen is a member of the Industrial Advisory Board
for UW-Madison’s Center for Quick Response Manufacturing and on
the Wisconsin Small Business Development Council. He is also
chairman of the WMEP Supplier Training Consortium. Ericksen
received a B.S. degree in mechanical engineering from the University
of Iowa in 1977.
46
can more easily drop in on suppliers. “Why
have an office at a Deere location if you’re
generally out in the field?” he asked. “And
why stop there? If it gives Deere and its strategic suppliers an edge, Deere supplier development staffers may start to do more than just
visit at supplier sites; they may become periodic ‘residents’ at supplier facilities — whatever
it takes to keep the extended enterprise relationship alive.”
He believes that time-based supply management is effective extended enterprise supply
management, and that supplier development is
the most effective way to implement it. Ericksen also believes the day will come when supplier development comes to be universally
re g a rded as a primary supply management
strategy and not just one of several tools on the
tool belt of supply management professionals.
1. John Deere Horicon Works’ investment in supplier
development (p. 276) as well as other leadtime reduction efforts are described in the book, Quick Response
Manufacturing; A Companywide Approach to
Reducing Lead Times, by Rajan Suri, Productivity
Press, Portland, OR, 1998.
Lea A.P. Tonkin, Target editor, is a member of the
The hospitality and assistance of John Deere
and Danfoss employees in the development of
this article are appreciated. Additional
speakers during the workshop included Greg
Van Grinsven, Bash’Shar El-Jawhari, Bruce
Carver, David Christensen, and Robert Smola.
© 1999 AME®
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