Deere to slash its number of steel suppliers from forty-six
By Staff -- Purchasing, 5/4/2000 6:00:00 AM
Deere & Co., a maker of agricultural and construction equipment, is in process of consolidating its purchasing worldwide and reducing its number of suppliers.
The Moline, Ill., firm has 14,000 suppliers worldwide, and sources more than $7 billion worth of products and services annually. In remarks delivered at the recent annual meeting of the Association of Steel Distributors, R. David Nelson, VP/worldwide supply management for Deere notes that, "In steel, we do business with 23 mills, 18 service centers, and five processors. I can tell you this will change. We are rationalizing our supply base like everybody else." He doesn't say, however, what the new numbers will be. "We will have fewer suppliers, but enough to take care of our diverse global needs."
Last year, Deere bought $125 million worth of steel directly in the U.S. and Canada, "but that was unusually low because of reduced manufacturing schedules in the agricultural equipment division," Nelson says. Under direction from Deere's steel buying team, the company's key parts suppliers source another $300-$400 million worth of steel products. Deere's imminent consolidation will cover all of the steel grades and sizes that it buys, Nelson adds.
Today, Deere's steel buy breaks out as follows: 81% flat products, 11% tubing, 6% hot-rolled bar and about 2% cold-drawn bar. The company expects to decide, in the next 12 months, whether or not it will adopt a steel resale program, whereby it would actually purchase steel for its parts suppliers.
Nelson outlines for distributors the criteria that Deere is using to eliminate cost and waste from the supply chain. First, service centers must have or be exploring international operations in areas where Deere has factories. They must also have significant processing capabilities for both first and second stage operations. And, Deere puts high priority on selecting suppliers with superior computer systems that can collect and analyze management information, he says. The service centers also must have "an Internet presence today and use or intend to use Internet technology to streamline their own procurement processes," Nelson says. In addition, the company has identified small disadvantaged or woman-owned suppliers for greater roles in the company's supply base.
Nelson says Deere has created teams that are studying the company's needs and suppliers. Deere has 80 full-time supplier development engineers who work with suppliers to help them eliminate waste. Deere's commodity procurement teams will name suppliers to the company's shortened list based on criteria weighted 65% toward service and 35% on price. He says Deere's position on Internet purchases of steel is under study.
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