Why Deere wins the 2001 Medal of Excellence
By Douglas A Smock, Editor-in-Chief -- Purchasing, 9/6/2001 6:00:00 AM
Need to reinvigorate your purchasing department?
Take a look at Dave Nelson's techniques at Deere—this year's winner of PURCHASING Magazine's Medal of Professional Excellence. Recruited four years ago from Honda Mfg. of America (also a Medal winner), Nelson established best practices at Deere in supplier development, strategic sourcing, cost management, and employee recruitment and training.
It was a tough task—Deere is highly decentralized. Purchasers at separate plants and divisions had catapulted Deere's supply base through the roof in the 1980s, making buyers more tactical, driving up administrative costs, and pinching margins. In that time period some great things were happening as well (excellent training and supplier development programs at selected sites), but corporate purchasing functioned in a weak advisory capacity.
The best of Nelson's evangelical skills were required. Even getting Deere to rationalize a chaotic glove buy required a presentation to the Deere executive committee.
One of the most impressive best practices is a tier of programs to recruit and train purchasing and logistics talent. Last year, Deere had about 80 interns in the supply department and intends to expand that to 130. The program cost $1.25 million in 2000 and direct savings amounted to $15 million. Nelson also established an on-site MBA program at Deere in conjunction with Arizona State University. Another impressive best practice was an overhaul of logistics, moving it entirely within the supply department. Deere took control of truckloads using better planning with a software tool.
Nelson and his team have made progress, but still have a way to go. Deere is in the midst of an ambitious transition to build-to-order, a move that requires a nimble supply base and optimum process technology.
Deere this year guessed badly and built more tractors and other equipment than the economy could bear in an apparent attempt to increase market share. How that squares with a widely stated drive toward build-to-order is hard to figure. Deere's loss for the fourth quarter could hit $110 million, surprising analysts and supplier partners.
None of that, of course, takes away from the inspired effort to rebuild the supply department at Deere. Nelson's foundation is one that will serve the company well the next time demand falters for farm, construction and garden equipment.
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