Early Supplier Integration in the Design of John Deere Skid-Steer Loader

Executive Summary

Early Supplier Integration in the Design of John Deere Skid-Steer Loader

Background information

Founded in 1837, headquartered in Moline, Illinois, Deere & Company is the world's leading manufacturer of agricultural and forestry equipment and also provides worldwide financial services. Deere & Co. has an industrial base in 11 countries, over 38,000 employees worldwide, product marketing more than 160 countries and regions.

Deere & Company had pioneered the skid-steer loader, a small loader with a 1,000-3,000 pounds load capacity, about 25 years ago. However, they outsourced design and product manufacturing to New Holland, an independent contractor for a long time, until 1996.

The company enjoyed a market share of 1%-3% during 1995-1996, and plans to triple its market share. The market data shows that, the niche market is growing at an annual rate of 15%-20%, and is expected to reach total sales of $1.2 billion or about 60,000 sets of equipment by 2000-2001.

Therefore, the company wants to take back design and manufacturing of skid-steer loader from New Holland and decides to invest $35 million for building a new design, manufacturing and marketing facility at Knoxville, TN.

Issue statement

Right now, the target is to produce an improved skid-steer loader that is 20% lower in price than the best competitors’ by August 1998, and meet all other identified order-winning standard, like product features, product range, delivery and price.

As the new supply management manager, Scott Nolan needs to make a proposal that outlines how to integrate suppliers into the product development process, the criteria for selecting early stage suppliers, guiding principles, practices, and techniques.

Recommendations

The purpose of implementing supplier integration in the design and fabricating processes for Deere skid-loader is to move towards a new business model to stay competitive in the increasing global competition.

Scott Nolan may establish the following four major standards for his supplier screening process as:

1. Strength of know-how that can be utilized through early supplier’s involvement. The supplier should have good experiences gained in fabricating similar products previously. It is desired for the selected suppliers to have strong design ability and know-how in following three aspects:

• Improve product Features. Because the skid-steer loader is a fixed investment asset, product features that improve ease of use (e.g., versatility of load placement), reduce operational costs (e.g., fuel-efficiency), and reduce maintenance requirements (e.g., self-lubricating parts) would