Global Sourcing II (Case Study - John Deere) PDF

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Global Sourcing Procurement Assignment Establishing E-Business Standards at Deere and Company

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Executive Summary

Deere & Company is a 163-year-old company that works in the areas of Equipment Operations, Support Operations and Financial Services. A company has been suffering for the last couple of years from a lack of a centralized supplier system that has led to many difficulties resulting in a huge inefficiency. Paul Morrisey, a purchasing and e-business manager has been working with Deere for over 20 years. At the beginning of April 2000, Morrisey had been assigned to help a company’s $7 billion supply chain shift to e-business by establishing an effective common technology standard. This paper is covering main elements (such as background, justification, and consequences) of our group’s proposal for Morrisey's further actions in evaluation and implementation of ERP system for Deere & Company. We believe that ERP system will be able to greatly increase the effectiveness of Deere’s business structure by the consolidation of all 14 divisions supply chain management bases into one fully integrated centralized data system.

Introduction and Background:

Deere & Company is an American Corporation based in Moline, Illinois since 1837. They conduct business in three main areas: Equipment Operations (that consists of agricultural, construction and forestry, and commercial and consumer lawn care), Support Operations (engines and transmissions) and Financial Services (credit, financing and leasing agreements for 1,400 companies). The agriculture market is so competitive, companies like Kubota, Caterpillar, AGCO and Volvo construction are their competitor in the market. Due to economic conditions in the industry the competitive environment within each segment brings both opportunities and challenges to Deere & Company, the company is decentralized, they have 60 business units, and

so far they have sold their product in 160 countries around the world. Over the past 167 years, the company made an effort to increase its global manufacturing capacity to play the big card in the industry. They have 14 divisions in the world, but the problem was each of their divisions had to purchase their supplies individually, and that was a result of not having common, corporate supplier database or any other integrated system that all the supplier and divisions and customers could have access to that. They have an Electronic Data Interchange since early 90’s with 2000 Deere’s supplier that represent only 90% of their domestic orders. Thus, they don’t have any development system for their international operator in a globe. Paul Morrisey is the manager of E-business and supply chain management, and his task is to help grow common technology standards for entire Deere’s supply chain of $7 billion. Since the company's revenue dropped to $239 million in 1999, Morrisey put all his effort to establish an e-business integration system. He had meetings with major suppliers and understood that most of them are not satisfied with the coordination that existed in the supply chain in Deere, “It’s like there are 14 different companies all operating under the Deere name. If you want us to help you, help yourselves first” one of the suppliers said. Paul believes that their system should be able to respond to their customer faster and collect their information for future reference, so they can beat their competitor and categorize supplier. They should change company strategy and the supply chain to more centralization, so Deere can bring down the cost and increase their revenue.

Identification of Key Issues & Description of Plan:

Currently, in the case, John Deere consists of 14 divisions who purchased products independently. Although there is a corporate coordinator of purchasing, the coordinator acted

only as an advisory capacity. An EDI has already been in place to check in with Deere’s domestic orders but the key issue here is that Deere lacks a global commonality in systems. Each operating unit developed their own method of using technology with suppliers causing complaints about the coordination problems in supply that existed within Deere. As Deere has no common, corporate supplier database, different divisions purchase the same products from the same supplier at different prices which suppliers exploit. In order to solve this Paul Morrisey has been working on a way to shift operations to e-business. This provided Deere with a secondary key issue. As each division is currently purchasing independently a shift to a more global standard brings less freedom and more regulations for purchasing. Each division may not be able to see the usefulness the shift will bring instead they would want to return to the method they are used to or make Maverick purchases. The best way to deal with divisions that may seem uncooperative is to educate each division that not only is this a change in the purchase process, this is a cultural change that ultimately benefits Deere as a whole and allows the efficiency of purchasing to increase. As there are more and more repeated purchases and confusion Deere is sorely in need of a standardization for both domestic and global suppliers. After asserting the importance of the move towards e-business Paul Morrisey may also collect more information in the needs for each division and suppliers and continuously work on the e-business platform that would be able to standardize the purchasing process while keeping in mind the need of each of the 14 divisions and their suppliers.

Recommendations

The Deere Company had a few issues with their company that was causing problems and

needed to be fixed. The first issue Deere had was lack of a global commonality in systems that were causing coordination problems in supply. That was causing suppliers to take advantage of them because of their inability to coordinate purchase quantities. My recommendation to Deere company would be to change operations to e-business, that includes sharing information across the internet. Also, Deere company can install an ERP system like sap software that will store information for the company for all departments and workers to know what's going on in the company and know where to find information if they need it. That will help with knowing what's in stock, what has been ordered that's where every department can use one technology instead of everyone having their own. This will help with the issue of the different departments purchasing the same products from the same supplier different times and whenever. At least getting one system will help keep order. Installing a new software will be a lot of work for Paul because he will have to educate the leadership of the company, bring together business processes and technology systems into synch and accomplishing a cultural change that will cause Deere to operate in new ways. Paul thinks it would be a lot of work but it is the best recommendation for the company to be more organized and in order with information shared amongst every department so time and money wouldn't be wasted. Even though it is a cultural change but it ultimately benefits Deere as a whole and allows the efficiency of purchasing to increase.

Conclusion:

Deere & Company has been successful in equipment operations, support operations, and financial services since 1837 as a decentralized company. Though Deere has been able to remain one of the top competitors, they have also had some issues along the way, one being a lack of

global commonality in systems. This led to Paul Morrisey coming to the realization that there is now a need to shift more towards e-business, and they would also need to standardize the purchasing process. The best way to resolve this issue would be by installing an ERP system that way all the information is stored in one area without confusing the different sections of Deere & Company. Deere has been able to remain one of the top companies because they have always had excellent individual parts that work well alone. This allowed them to make a profit while at the same time giving excellent customer service.

General Assignment Questions

1) If you were in the position of Paul Morrissey, what recommendations would you make to your boss in two weeks and why?

Currently, John Deere consists of 14 divisions that are decentralized where each division purchases its own supply and have created their own e-business modules. It is important to have a consolidation of all the current divisions e-business modules in order to create awareness for both the suppliers and John Deere. As John Deere has a future plan of incorporating more global sourcing it is the most strategic action to have a common standard of technology within the company. The ERP must be able to communicate and be compatible with each division and the top tier of suppliers. It must also be very flexible like the SAP system as John Deere is preparing to enter a global supply chain management. From this information, I believe Paul Morrisey should recommend a supplier selection and development integration while choosing suppliers from the first and second tier of suppliers and work with them in order to incorporate a consolidated supply chain management.

2) What does Deere’s current organizational structure & supply chain look like? Is it correct? What opportunities does Deere’s size and dominance provide? How can Deere’s supply management group use e-business to improve its competitive position?

Deere and company it's a decentralized company, sold their product in 160 countries with 60 business units and 14 divisions they operate three type of business: equipment operations,

support operation, financial operation. Each of Deere’s divisions purchase product independently and because they don't have common and corporate supplies database sometimes supplier could take advantage and sell product with different price to each division which could be a reason in decline of their revenue. But since early 90’s they have (EDI) between 2000 supplier that give them opportunities to represent 90% of the domestic order. Paul believes if they apply ebusiness integration they will respond to their customer needs quickly and having customer information could help them to anticipate their future needs so they can increase their efficiency in competition with others. By using this integrated system, they will be able to connect with their customer, supply chain and using industry information technology.

3) What specific challenges might Paul Morrisey face in establishing global standards for ebusiness transactions across his organization? Specifically, what problems and resistance can you expect from the business units? How would you suggest Paul Morrisey deal with these issues? Which functions are critical within a global E-Commerce implementation team? For example, would engineering not be considered a central function for Ecommerce? Why should it be?

People in his company used to be very autonomous. Creating a global standard, on the other hand, brings less freedom to them and more regulations. They may not see these as useful to themselves as they, in a way, see themselves as the entirety as the company in their little corner of the world. A way that Paul Morrisey could deal with a lot of these issues is to tell them that the parts of the companies that complain are not a different company. As a whole, the company is dying, and it would take either massive layoffs, or different command and control structures. As such the company is doing each worker and indeed business unit a favor by not

getting rid of the unit and laying off the employees. Functions that are critical within a global Ecommerce implementation force are not necessarily the most important things to the company. But that is to be expected as the implementation team is more concerned with procurement, then how each section might run individually. While engineering should definitely be a central function of this company, the specific implementation team would most likely not see it as in their area of expertise. This is because the team will be entirely focused on cutting costs to increase their bottom line, meaning shortening transportation lines, and fees, whilst maintaining the level of quality coming from engineering. 4) Can a large multinational organization implement a single instance global E-Commerce (or ERP) system without the aid of an outside consultant? Could they manage this process even after implementation? Is outsourcing the IS function completely (software as a service) a good option? Why/why not?

If a large multinational organization wanted to implement an ERP system, they would need the aid of an outside consultant. While there are many pros to implementing an ERP system, it can be difficult to use initially. The organization would need to be trained and have a good understanding of how to use the system properly, which will also prevent time consumption in the long run without a consultant. After implementation and proper training, the organization would eventually be able to manage this process. Completely outsourcing the software would be a good option initially because ERP is difficult to understand and would take time for the consultants to teach employees how to properly use the systems. By using professionals, this would give the organization complete confidence that the information is being inputted properly and will lead to fewer mistakes happening within the organization, which could end up being costly.

5) What options does Deere have for its standard? What criteria would you use to evaluate the different options (technologies/suppliers)? What criteria should be considered for (i) system selection, (ii) system implementation and (iii) system auditing?

Technology Evaluation: ● Cost/Efficiency Ratio; ● Ease of understanding for the employees; ● Effectiveness for Deere’s business model (includes tools that are needed and won’t be obsolete). Supplier Evaluation: ● Experience; ● References + References’ Reliability; ● Cost; ● Customer Support; ● Additional Features. (i) System Selection Criterias: company goals and strategy, functional software requirements, future scalability of a technology, budget, and resources. (ii) System Implementation Criterias: business processes and requirements’ focus, strong project management, upfront time management, employees’ training, understanding of why you’re implementing ERP. (iii) System Auditing Criterias: ensure that project decision making is effective, adequateness of performance and management of project activities, project governance, and risk management meet business requirements.

6) Do you think Deere should join a B2B exchange/E-market? What type/which one and why? (Refer to Simchi-Levi, p.290-4 on reserve) What partners (if any) would you suggest joining? What other aspects of a fully functional global E-Commerce system have arisen since the writing of this case and need inclusion?

Yes, I think joining a B2B exchange in open market will open many opportunities for Deere & Company. It will help to establish new trading partnerships, either within their supply chain or across supply chains which will provide greater transparency in the purchasing process since availability, prices and stock levels are all accessible in an open environment. As well Deere will be able to resolve some of the issues that they are having related to the different divisions purchasing the same products from the same supplier at different prices which suppliers exploit. E-marketplaces offer convenient ways to compare prices and products from a single source rather than spending time contacting each individual supplier trying to find out prices or buying products without comparing prices. The E-market updates information on price and availability securing the best deal for businesses. I would suggest the Deere company to get ERP systems such as SAP to store their information for the company that makes it easier for everyone and accessible.

7) What lessons could be learned from Deere’s implementation process that could be used for future change management initiatives? Develop an overall model to guide the successful implementation of strategic change at your organization.

Every company should be evaluating oneself through audit or a consulting company to

see the potential for growth. A business has to be constantly seeking a potential for growth through its’ SWOT analysis. Weaknesses of Deere’s decentralized structure were resolved by using a better system (EDI, and then ERP) that allows shifting the focus from divisions’ coordination to overall performance development. In order to do a successful implementation of strategic change in a company, the following has to be done: 1. Create urgency (identify potential threat/threats coming from the issue that has to be resolved) 2. Convince others (leadership is what people are looking for; work on teambuilding; prove that by resolving the issue the company will see a better future) 3. Create a vision (determine what is the goal you are heading towards to; what’s your strategy) 4. Develop a plan and support it on everyday basis (not simply make changes but constantly address improvements; recognize and reward people for making change happen; identify employees that are resistant to changes and go through their problem thoroughly; remove barriers as people or otherwise) 5. Build on the change (set new goals based on your new achievements; there is always an opportunity for growth - kaizen) 6. Make the changeset (the change has to become a new part of the company carrying further plans and values)

Works Cited

“John Deere.” John Deere CA, John Deere , 2007, www.deere.ca/en/connect-with-johndeere/visit-john-deere/world-headquarters. Accessed 20 November 2017....