John Deere & Company manufactures and distributes agriculture equipment as well as a broad range of construction and forestry equipment. The company is partnered with FedEx in order to maintain the logistics flow involved with the company’s transactions. FedEx is responsible for providing outsourced transportation services to 11 Deere facilities across the US and Canada. The 11 Deere facilities have different service agreements with FedEx in terms of cost and service depending on the type of business unit.
With different prices and services across the facilities, management is trying to identify opportunities to standardize costs and services across the business units. The goal of this case study is to update Deere and Company’s logistics by recommending solutions to cut logistics cost by 69 million over 3 years
Analysis and Recommendations
At the moment, all 11 Deere & Company facilities operate under a different level of on-site transportation service. The onsite transportation services and associated costs shown in Exhibit 2 (OSTMS, OSRF) vary for each facility indicating lack standardization. Inflated costs may arise from local managers having individual operating principles that are not reflecting the best interests of the corporation as a whole. Confusion among employees may result because similar objectives are being dealt with differently at each business unit. Time and money is lost, as workers will need time to organize and communicate information from facility to facility. Unproductive costs are incurring which need to be resolved though consolidation of on-site transportation service.
On-site transportation service is currently favorable with managers at Deere’s plants and could be improved by standardizing the ...
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...to deal with inbound and outbound logistics, one that is made up mostly of the personnel from outbound logistics. These professionals deal with the second core competency of Deere, logistics, separate from the manufacturing of tractors and lawnmowers. The creation of this team helps eliminate the risk Fedex’s poor performance (managers were not pleased with Fedex’s centralized transportation management service) and need to measure performance of a 3rd part continuously. As a result, performance is self-managed. We expect as the IT system is used to optimize and plan transportation routes amongst inbound and outbound trucks, cost savings will increase more rapidly. We believe internal continuous improvement, leaner logistics operations and synergies amongst all logistics activities will lead to the $69 million goal being met by the third year after implementation.
However, whereas Caterpillar and John Deere manufacture machinery that are substitutes for each other, the success of complementary products are also crucial. Whereas Caterpillar is a company that is based on construction equipment, John Deere is first and foremost an agricultural company. More specifically, a corn-driven company. This is never more evident than when looking at 2015. The 16% drop in stock price in 2015 coincided with a very poor corn harvest, but things are looking up. The USDA recently forecasted a record-high in corn-production, along with soybean production. Corn production is expected to increase by 11% in 2016 compared to 2015, which will greatly help with John Deere equipment sales. In addition, corn prices are finally expected to begin to recover in the next three years (Clark, 2015), which provides yet another positive factor for the growth in sales of John
John Deere Component Works (JDCW), subdivision of John Deere and Co. was in charged specifically of the manufacturing of tractor component parts. The demand for JDCW’s products had problems due to the collapse of farmland value and commodity prices. Numerous and constant failures in JDCW’s competition for bids, alerted top management to start questioning their current costing methods. As an outcome, the analysis has to be guided to research on the current costing methods with the intention of establishing legitimacy and to help the company in adopting a more appropriate costing system.
Ryder Systems, Inc., a leader in transportation, logistics, and supply chain solutions, is a Fortune 500 company based in Miami, FL. Since its founding 80 years ago, Ryder has continued to expand its presence throughout the world. Ryder now operates in North America, Europe and Asia. Today, Ryder’s main offerings include Fleet Management Solutions (FMS) and Supply Chain Solutions (SCS). Fleet Management Solutions provides customers with Full Service Lease, Managed Maintenance, Commercial Rentals and Used Vehicle Sales. Their Supply Chain Solutions business segment offers solutions by industry and by capability. Specialized industry offerings are designed for retail, consumer packaged goods, high-tech and electronics, and the automotive, industrial and aerospace industries. The SCS segment also offers customers integrated logistics, and warehousing, distribution, and transportation solutions. Specialized solutions for the oil and gas industry have been available from Ryder since 2013. Both the FMS and SCS segments offer customers a low cost alternative for their transportation and supply chain needs allowing the customer to focus on production.
The trucking industry over the years have changed the type of services and the quality that it has provides to its customers. In today’s industry the focus is on efficiency with the overall beneficiary being the American consumer. Majority of today’s freight is being transported by truck during sometime in the distribution chain. Some of factors the trucking industry is facing today include hours and earnings and safety issues.
Understanding the changes in the market and the growth of e-commerce prompted the organization to invest heavily in its supply chain management forecasting and management system. The development of a network of distribution centers and Direct Fulfillment Centers to position the company to capitalize on the growing e-commerce market indicate a strong understanding of the need to adapt to changing market forces. The company spent over $300 million on new distribution center facilities in 2014 alone, and continues to expand to maintain efficiency in product movement (Cassidy,
The parcel service industry is made up of four main competitors. These competitors are UPS, FedEx, Airborne Express, and the U.S. Postal Service. Since 2000, American consumers have spent more than $50 billion to ship parcels, packages, and overnight letters. New parcel distribution patterns developed due to the way U.S. manufacturing companies are operating. The Internet has expanded the reach of direct marketing, particularly with retail transactions requiring home delivery. Globalization has also created the need for parcel carriers to expand worldwide.
Zanjirani F., Rezapour, S. & Kardar, L. (2011) Logistics operations and management concepts and models, 1st ed. London ; Elsevier.
Trucking is a $700 billion industry that touches every corner of the economy. Trucks haul natural resources from mines and forests. They transport industrial building blocks from manufacturers and deliver goods to stores and homes. Virtually every physical product from food to paper towels and furniture has touched a truck several times by the time it gets to a consumer’s
Federal Express, which is commonly known as FedEx, is regarded as America’s largest provider for overnight mail delivery. The company has a huge workforce of nearly 300,000 purple-blooded employees. In addition to having over 600 aircraft, FedEx has complicated models of Boeing and Airbus that transport over 3 million packages on a daily basis. The firm achieves its deliveries through the unique hub and spoke system, which are mainly used to transport packages that are flown from different destinations to its headquarters in Memphis. The transportation and delivery of these packages is characterized with a huge team of employees sorting incoming packages every night through the assistance of an advanced conveyer belt. As a result, this huge team of workers helps to ensure that mail is sorted by destination during a four-hour period, which is usually the duration before the planes leave again. However, the company’s operations in the past few years have been marred with numerous complaints about poor and delivery service, which has tarnished a good customer service reputation that it had for years.
Coyle, J., Langley, C., Gibson, B., Novack, R. and Bardi, E. (2008).Supply Chain Management: A Logistics Perspective. 8th ed. Cengage Learning, p.366.
From the manufacturers’ warehouse to the shelves, the business must orchestrate a symphony of the right products to the right places at the right times. Walmart serves customers and members more than 200 million times per week in retail outlets, online and on mobile devices. The company is able to offer a vast range of products at the lowest costs in the shortest possible time (Chandran, 2001). The main reason for this incredible growth of Walmart is because its distribution centers are highly automated.
Hum,Sin Hoon (2000), “A Hayes-Wheelwright framework approach for strategic management of thrid party logistics services”,Integrated Manufacturing Systems,Vol .11/2,pp 132-137
This sector or reverse logistics has proven to be quite difficult for companies to adapt to. Although it is the most obvious way to go green, it can be challenging for certain companies. This can be due to forecasting field failures, and certain companies’ ongoing need for certain parts. Some companies hand...
John Deere has invented some amazing technology in the past couple years. Technology that can change the agriculture life forever. I have noticed in the past couple years of living on the farm that it is on of the hardest jobs on the bodies of human beings. Farmers in the past could only make working in the fields around 40 years then they were done. Usually their backs go out or develop some type of cancer from being in the fields all day everyday. What happens in the field stays in the field, except cancer that shit stays with you.