E a r l y Su p p l i e r I n t e g r a t i o n i n t h e De s i g n o f t h e Skid-Steer Loader1
“Congratulations, Scott. You are the new supply management manager of our new Deere & Company Commercial Worksite Products manufacturing facility in Knoxville, Tennessee. As you know, we really need your help to make this new facility fully operational in 24 months. I am sure you realize that a critical responsibility of your new job is to integrate suppliers into the product development process for our own Deere manufactured skid-steer loader 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 on June 15, 1996.” As Scott hung up the telephone with James Field, plant manager and his immediate boss, he realized that this was not a simple request. In his proposal, he knew he would need to (a) identify and justify which suppliers to integrate in the product development phase, and (b) specify how to structure the interactions with these chosen suppliers. The recommendations in his proposal had to ensure that this new plant would be up and running smoothly by the target date in July 1998.
Deere & Company
Deere & Company, headquartered in Moline, Illinois, had more than 150 years of history, making it one of the world’s oldest business enterprises. A well-respected company, Deere & Company had a core business portfolio in 1996 comprised of the manufacturing, distributing, financing and servicing of agricultural equipment (e.g., combines and tractors), construction and forestry equipment (e.g., log skidders and forklifts), and commercial and consumer lawn care equipment (e.g., lawn and garden tractors and mowers), as well as other technological products and services. With more than 38,000 employees worldwide, Deere & Company conducted business in more than 160 countries.
The Skid-Steer Loader
The skid-steer loader, a small loader with a 1,000–3,000 pounds load capacity, was targeted for construction and ground care sites in need of light, versatile and easy handling land-moving equipment (see Figure 1). Deere & Company pioneered the skid-steer
1. Reprinted with permission from the publisher, the Institute for Supply ManagementTM “Early Supplier Involvement in the Design of the Skid-Steer Loader” by Manus Rungtusanathem, PhD and Fabrizio Salvador, PhD, Arizona State University, 2001 Case Writing Workshop. 19
Examples of Deere Skid-Steer Loaders
loader market more than 25 years ago but, subsequently, the company had contracted the engineering and manufacturing to New Holland, an independent contractor. Although New Holland produced its own line of skid-steer loaders that competed directly with the Deere brand, it agreed to sell its excess capacity to manufacture essentially the same product for Deere & Company, allowing aesthetic changes for brand differentiation only.
In 1995-1996, Deere’s average market share for the skid-steer loader varied between 1 to 3 percent. Market data indicated that this market niche was growing at a rate of 15-20 percent per year and was projected to reach overall sales of U.S. $1.2 billion or approximately 60,000 units by year 2000-2001. Given these numbers, corporate headquarters became increasingly interested in establishing the Deere skid-steer loader as one of the leading worldwide competitors in this market niche with a goal of more than tripling its market share. In order to reach such an aggressive goal, Deere realized its market penetration strategy needed to focus on fundamental order-winning criteria in such areas as: • 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 make the difference between the Deere...
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