John Deere Component Works
Harvard Business School
9-187-107
Rev. November 4, 1998
John Deere Component Works (A)
The phone rang in the office of Keith Williams, manager of Cost
Accounting Services for Deere & Company. On the line was Bill Maxwell, accounting supervisor for the Gear and Special Products Division in
Waterloo, Iowa. The division had recently bid to fabricate component parts for another Deere division. Maxwell summarized the situation:
They’re about to award the contracts, and almost all of the work is going to outside suppliers. We’re only getting a handful of the parts we quoted, and most of it is low-volume stuff we really don’t want. We think we should get some of the business on parts where our direct costs are lower than the outside bid, even if our full costs are not.
Williams asked, “How did your bids stack up against the competition?”
Maxwell replied:
Not too well. We’re way high on lots of parts. Our machinists and our equipment are as efficient as any in the business, yet our costs on standard, highvolume products appear to be the highest in the industry. Not only are we not competitive with outside suppliers, but our prices are also higher than two other
Deere divisions that quoted on the business.
Deere & Company
The company was founded in 1837 by John Deere, a blacksmith who developed the first commercially successful steel plow. One hundred years later, Deere & Company was one of seven full-line farm equipment manufacturers in the world and, in 1963, had displaced International
Harvester as the number one producer. During the 1970s, Deere spent over $1 billion on plant modernization, expansion, and tooling (see Exhibit 1).
Note: John Deere logo used by permission.
Research Associate Artemis March prepared this case under the supervision of Professor Robert S. Kaplan as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.
Copyright © 1987 by the
9-187-107
Rev. November 4, 1998
John Deere Component Works (A)
The phone rang in the office of Keith Williams, manager of Cost
Accounting Services for Deere & Company. On the line was Bill Maxwell, accounting supervisor for the Gear and Special Products Division in
Waterloo, Iowa. The division had recently bid to fabricate component parts for another Deere division. Maxwell summarized the situation:
They’re about to award the contracts, and almost all of the work is going to outside suppliers. We’re only getting a handful of the parts we quoted, and most of it is low-volume stuff we really don’t want. We think we should get some of the business on parts where our direct costs are lower than the outside bid, even if our full costs are not.
Williams asked, “How did your bids stack up against the competition?”
Maxwell replied:
Not too well. We’re way high on lots of parts. Our machinists and our equipment are as efficient as any in the business, yet our costs on standard, highvolume products appear to be the highest in the industry. Not only are we not competitive with outside suppliers, but our prices are also higher than two other
Deere divisions that quoted on the business.
Deere & Company
The company was founded in 1837 by John Deere, a blacksmith who developed the first commercially successful steel plow. One hundred years later, Deere & Company was one of seven full-line farm equipment manufacturers in the world and, in 1963, had displaced International
Harvester as the number one producer. During the 1970s, Deere spent over $1 billion on plant modernization, expansion, and tooling (see Exhibit 1).
Note: John Deere logo used by permission.
Research Associate Artemis March prepared this case under the supervision of Professor Robert S. Kaplan as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.
Copyright © 1987 by the