Student Instruction Sheet Early Supplier Integration in theDesign of the Skid-Steer Loader (John Deere Case; page 448; 6thedition of Schroeder) Instructions to Students:
1. Read the case carefully, assimilating all facts and data.
2. Read the Problem Solving Rubric attached. This is how thequality of your case will be gauged.
3. Please write a report covering the following bullet points -while minding the attached rubric on problem solving. (Do not dothe Discussion Questions at the end of the case).
-Describe all of the problems faced by Scott Nolan and hiscompany in this case. Be sure to provide justification of why allof these problems are important. Make sure you understand all ofthe contextual data provided in the case, especially the financial,quality, product development, schedule, and related data.
-For each problem, propose solutions, giving a completerationale / justification. Be sure to use the data in the case andprovide financial and business analysis (qualitative andquantitative) where necessar.
-For each solution, evaluate its potential impact andfeasibility.
-You can organize your report so that you address problem,solutions and feasibility issues for each important problem – inseparate sections.
4. Your answers should be concise, concrete, action oriented,and well-supported. Please limit your narrative to five pages,single-spaced. You can add appendices, charts, graphs, and exhibitsas desired.
5. When you are finished, upload your file to the Dropbox namedJohn Deere Case.
“Congratulations, Scott. You are the new supply managementmanager of our new Deere & Com- pany Commercial WorksiteProducts manufacturing facility in Knoxville, TN. As you know, wereally need your help to make this new facility fully operationalin 24 months. I am sure you realize that a critical responsibilityof your new job is to integrate suppli- ers into the productdevelopment process for our own Deere manufactured skid-steerloader as quickly as needed. You will be reporting directly to me,and I need a proposal from you by the time we meet next week onJune 15, 1996.” As Scott hung up the telephone with James Field,plant manager and his immediate boss, he realized that this was nota simple request. In his proposal, he knew he would need to (a)identify and justify which suppliers to integrate in the productdevelopment phase and (b) specify how to structure the interactionswith these cho- sen suppliers. The recommendations in his proposalhad to ensure that this new plant would be up and run- ningsmoothly by the target date in July 1998. EXHIBIT 1 Example ofDeere Skid-Steer loader. DEERE & COMPANY New Holland producedits own line of skid-steer loaders that competed directly with theDeere brand, it agreed to sell its excess capacity to manufactureessentially the same product for Deere & Company, allowingaesthetic changes for brand differentiation only. Market In1995–1996, Deere’s average market share for the skid-steer loadervaried between 1 to 3 percent. Market data indicated that thismarket niche was growing at 15–20 percent per year and wasprojected to reach overall sales of $1.2 billion, or approximately60,000 units by year 2000–2001. Given these numbers, corpo- rateheadquarters became increasingly interested in establishing theDeere skid-steer loader as one of the leading worldwide competitorsin this market niche with a goal of more than tripling its marketshare. In order to reach such an aggressive goal, Deere realizedits market penetration strategy needed to focus on fundamentalorder-winning criteria in such areas as: Product Features: Becausethe skid-steer loader is a fixed-investment asset, product featuresthat improve ease of use (e.g., versatility of load place- ment),reduce operational costs (e.g., fuel-efficiency), and reducemaintenance requirements (e.g., self- lubricating parts) would makethe difference between the Deere brand and competing products.Product Range: To better serve the customers, Deere knew that itneeded to offer some product variety, as typically required forindustrial equipment, given dif- ferent usage requirements.Therefore, a range of Deere & Company, headquartered in Moline,IL, had more than 150 years of history, making it one of theworld’s oldest business enterprises. A well-respected company,Deere & Company had a core business port- folio in 1996comprised of the manufacturing, distribut- ing, financing, andservicing of agricultural equipment (e.g., combines and tractors),construction and forestry equipment (e.g., log skidders andforklifts), and commer- cial and consumer lawn care equipment(e.g., lawn and garden tractors and mowers), as well as othertechno- logical products and services. With more than 38,000employees worldwide, Deere & Company conducted business in morethan 160 countries. THE SKID-STEER LOADER The Product Theskid-steer loader, a small loader with a 1,000- to 3,000-pound-loadcapacity, was targeted for construc- tion and ground care sites inneed of light, versatile and easy-handling land-moving equipment.Deere & Company pioneered the skid-steer loader market morethan 25 years ago, but, subsequently, the company had contractedthe engineering and manufacturing to New Holland, an independentcontractor. Although 416 Part Seven Case Studies models, perhapsdifferentiated on load capacity and available options (e.g., handor foot controls) was needed. Product Delivery: Deere knew thatdemonstrating its skid-loader’s versatile functionality and beingable to demonstrate and deliver the product to the actual work sitewas an important sales incentive. Price: Last but not least, thedemand for skid-steer loaders was highly price sensitive. As aresult, minimiz- ing cost of goods sold without sacrificing timelydeliv- ery of a high-quality Deere skid-loader was imperative. Thesituation before 1996 was therefore pretty clear. As long asengineering and production of Deere brand skid-steer loaders werein the hands of a third party— one that, in fact, competed in thesame market niche— there would be little opportunity to gainsignificant benefits over competing products and product features.The same argument held for cost considerations, mak- ing betterdelivery and service the only competitive advantages. Furthermore,expecting market demand for skid-steers would increase, New Hollandhad refused to sell additional production capacity to Deere &Company. As a result, Deere & Company decided that it needed toregain direct control of the design and manufacturing of thispotential lucrative product. THE “GREENFIELD” KNOXVILLE DECISION InApril 1996, corporate headquarters approved a capi- tal investmentproject of $35 million dedicated to regaining control of the designand manufacturing of the steer-skid loader. This capital investmentdecision also approved the placement of the design, manufacturing,and marketing functions in a new facility to be built nearKnoxville, TN. The mandate was clear—engineer and manufacture ahigh-quality skid-steer loader that would be 20% lower in coststhan that of the best competitor’s by August 1998, consistent withother identified order- winning criteria. SCOTT NOLAN, CQE, PE, ANDNEW SUPPLY MANAGEMENT MANAGER?Nolan joined Deere & Company as amanufacturing engineer, after graduating from Iowa State Universitywith a mechanical engineering degree in 1979. Along the way, he hasreceived an MBA (in 1989) from the University of Iowa, as well asprofessional certification as a Certified Quality Engineer and as aProfessional Engineer. In 1989, Nolan began working in supply man-agement for the Horicon, WI, lawn and garden equip- mentmanufacturing facility. The opportunity to join a new Deeremanufacturing facility in the role of supply management manager wasa welcomed promotion and challenge. SUPPLIER INTEGRATION INSKID-STEER LOADER DESIGN?Having worked in supply management for theseven past years, Nolan was well aware of the general princi- pleof involving suppliers in product development and manufacturingdecisions and the frequently touted ben- efits of lower costsstructures, faster product develop- ment cycle and reducedoperational inefficiencies. He believed, however, that not allsuppliers needed to be or should be involved, especially in theearly stages of the new product development process. Furthermore,involv- ing suppliers should not be “lip-service”; the selectedsuppliers should be well integrated into the various productdevelopment activities. CONCLUSION Reflecting on this knowledge,Nolan realized that he must answer two important questions in hisproposal— these being: (a) How to choose the suppliers that shouldbe inte- grated early in developing the new Deere skid-steerloader? (b) And, equally important, what principles/practices/techniques should be adopted to structure the inter- actions duringthe early product development phase with these selected suppliersso that the full-scale production of skid-steer loader units wouldbegin by the target date in July 1998? With less than a week beforehis meeting with James Field, Nolan sat down in front of his homecomputer and began drafting the proposal.
