Supply Chain Management And Logistics Management For John Deere Company

Background and Introduction Company

Back in 1837 Blacksmith John Deere made an innovative step to develop the farming industry by the use of a self-digging steel plow. This plow invention helped the farmer and completed work efficiently. Therefore, by the use of this innovative product, the work output had increased and labour efforts decreased. Approximately over 180 years ago John Deere started to produce more products with the use of emerging technology and data insight. The company now offers a widerange of solutions for encouraging the modern farming concept in the market (Zhivitskaya and Safronava, 2015).

John Deere works with the motto of commitment and the company is committed to offering the services to the people who are connected with the land. The company offers distinct products and services with distinguished value. To achieve the success, the company promotes the relationship building with their suppliers and provide services which cannot be pursued by the other competitors available in the market (Fugate et al., 2010). The supply chain management plays a significant role in providing innovative services to the customers. John Deere always tries to give finest solutions and values equipment support to complete the needs of the customers. Deere & Company is a renowned company for the supply of machinery that is used in the agriculture and diesel engines. In the year 2014, John Deere listed itself as the 80^th company in the fortune 500 ranking by the Americans and 307^th rank as the Fortune Global(Lynn and Fish, 2011).

Supply chain management and logistics management both play vital role in the growth of the organization. In respective to supply chain management if any variance is found in the inventory, it can only be dealing with the effective logistics of the company.  Logistics management is the large process of maintaining raw material to the final stage of the products packaging and distribution (Omar et al., 2012).

To influence prospect in developing markets John Deere focuses on uniting and supporting supply chain management substructure, procedure, and processes to decrease the costs and improve the efficiency of the processes. Every product category of the company has its own supply chain process. Supply chain processes have several steps in the making of the product from the initial stage to the final stage. These processes are separately known as the supply chains. Supply chains of the products can be complex and complicated(Peppard and Ward, 2016). 

To understand the supply chain structure of the John Deere, first it is better to understand the use of each supply chain (Joel et al., 2014). The company supports the four supply chain management structure:

• The first chain is known as the indirect material chain which includes services like building construction and capital required by the company. As the availability of these services is high in the market so they involve less risk as compared with the other chains of the supply management.
• The second chain is known as the external chain which includes third-party services provide like logistics service providers (Attaran, 2012). It also includes the suppliers of the parts those supplies are used in the operation of the John Deere factory.
• The third supply chain is the inter-factory chain. As John Deere has multiple production factories to transport the product from one factory location to another, it is done through this supply chain. These supply chains usually bear heavy volume of the material and products(Omar et al., 2012).
• Lastly, this fourth supply chain is the John Deere electronic solutions. The company’s electronic solution wing wasformed in the year of 1987. The supply chain produces the electronic components for the use of the John Deere production unit (Peppard and Ward, 2016). Most of the components provided by this unit are totally different from the rest of the components used by the company. John Deere Electronic Solutions is also the primary supplier for the inter supply chain. In order to get the product like control modules and electronic circuits inter supply chain need to connect the JDES.

Supply chain cost reduction challenges: The major challenge in the supply chain management faced by the John Deere is the cost of the supply chains. As the company offers numerous product range which is based on the consumer market and industry equipment too.Retail activity of the products is behaving as per the season. The majority of sales are achieved in the month of March and July. So with the huge product sales, supply chain also gets affected (Lynn and Fish, 2011). To handle the bulk product traffic John Deere needs a valid supply chain process.

Logistics Management and Supply Chain Management

To achieve this, the company contacted their nearest warehouses regularly and tried to complete the sales by getting the services from the nearby stores of manufacturing units. This process was slow and time-consuming, so the company looked for the best idea for cost reduction of the supply chain by at least 10 %(Lynn and Fish, 2011).

The path to cost reduction: To promote the reduction of supply chain costs, John Deere redesigned the whole process of the supply chain management. The company has optimized all the terminal locations to design the best plan for the supply of the products (KueiHuang, 2010). John Deere also increased the use of third-party logistics to attain the desired supply chain cost reduction. The company mainly focuses on two types of service provider:

• Ocean Transportation: Ocean transportation is the way to carry the goods and by the use of ships.  Ocean transportation is the part of the business unit from the last 50 years. As per the current data, Wallenius Wilhelmsen Logistics is recognized as the best service provider inthe John Deere company by the John Deere excellence program(Lynn and Fish, 2011).
• Freight Forwarders: Freight forwarders are especially known for the shipping and storage of the product. With the shipping and storage, they also provide another service like tracing transportation, export document, and cargo insurance(Gill et al., 2010).

Other service providers are ground transportation and small packages.

Supply chain cost management: By incorporating the third party logistics suppliers, John Deere managed to reduce the supply chain cost including inventory cost by $ 1 billion and also annual transportation cost was also decreased by 5 percent (Gill et al., 2010).

With the bulk supply of the product, the next challenge that came across the John Deere production house is the order processing systems. Previously the company supported the traditional system for the order processing which consists manual entry of the data. However, they realized that manual intervention may decrease the efficiency and only increase the inaccuracy (Axsäter, 2015). With the same thought, they modify the order processing manual system in the automated order processing system.

• Customer Order: This is the stage where the customer can book an order for the new product and service. This also provides the processed order information as well as placing order information to the customer(Peppard and Ward, 2016).
• Data processing: Data processing can be considered as the important stage of the order management cycle. As this is the stage where all the data were combined together to check the status of the product or service books by the customers (Rushton et al., 2014). By using the cloud-based network John Deere cuts down the in-between data processing the doubled the speed of the process.
• Billing: Billing units of the company are fully based on the E-bill/ E-invoice format. They support both indirect and direct methods for the processing of the bill. By just sending the copy of the bill through an email company can process the order, as the company believes in the fast services that can be achieved by cutting the payment cycle time from the process(Omar et al., 2012).    
• Delivery: After completion of all the process customers can receive their product through the party logistics service providers. 

Improvement: Order processing system can impact the logistics function in two ways. If the order processing system is implemented in the best way they can improve the quality of information management system of the company. Another influence is the customers’ order messages set the logistics function motion. Accurate ordering system can lead to timely delivery of the product and other series (Schaltegger and Wagner, 2017).

John Deere updated the company’s traditional ordering system with the cloud-based automated system. The automated system resulted as the better way out with additional benefits like efficiently and accurately. John Deere supports the cloud-based automated system that can be accessed from anywhere and anytime. This system promotes customers to process the order request and check the order status with less overhead. The system also controls the order cycle automatically(Peppard and Ward, 2016).

Approximately two years back, some companies promoted the efficient customer response methods to examine the supply chain process instead of controlling the logistics cost. In recent times customer service became the center of attraction for all manufacturing industries. John Deere is also focusing on the value-based services for the customers. In this type of environment, the company decided to hold the inventory and focused onto improvisation of the customer service (Pettit et al., 2010). With this organization also faced the problem of too less inventory and too much inventory.

Commonly, organizations have the perception that cuts the cost of supply chain management better to cut the cost of inventory. In recent times the company followed the same by reducing the inventory by 60%, therefore, transportation cost also decreased by 20%. These methods promoted the inventory reduction strategies in supply chain management(Pettit et al., 2010).

Structure of Supply Chain Management

To understand the logistical strategy John Deere focused on the inventory cost, supply chain capabilities, and product market demand (Mikell, 2016). There is so many organization available in the marketplace, those use the different method to manage inventory like most of the companies use the inventory control method, some manufacture focuses on the inventory management approach and other never actively manage the inventory of the product. Some popular methods for the inventory control are ReOrder Cycle, ReOrder Point (ROP) models, and Economic Order Quantity (EOQ) model. However, these methods come with the limited accessibility of the inventory functions. John Deer approached fuzzy reasoning method to control the inventory and logistics management(Pettit et al., 2010). 

The influence of many outer causes on the procurement logistics system sometimes creates a situation for which right decision, making it depend upon some methods and tools that can specify the properties of the event through numerous parameters like information inaccuracy and changing parameters (Zhivitskaya, 2015). So the theory of fuzzy logic is the best tool to manage the inventory and control in the field of logistics (Lau, 2016). Fuzzy logic is the set of rules which can thoroughly model the human knowledge of the specific application.This model is based on the fuzzy theories, fuzzy reasoning and fuzzy rules. The typical structure of the fuzzy reasoning consists three sets:

• Fuzzification: This set defines the member function for the defined input parameters and calculates the degree of the parameters passed.
• Output: after getting the membership degree output calculates the member function of the output parameter of the model. This part consists rules, member function, output mechanism and output parameter.
• Defuzzification: Defuzzification calculates the precise value for the output parameter on the basis of the resulted member function. This result the numerical value for the X.  

Conclusion

John Deere is the organization with the multiple products and services. To achieve more growth in the field of manufacturing it is important to modify the system structure of the organization. In order to achieve the same John Deere can use the approach of modification to rectify their supply chain management, order process management, and inventory control management. Third-party logistics and the cloud-based system can help in the timely and effective process of the products ordered by the customers. For inventory control main step is to get the description of the company from outside and inside.

Using the knowledge decision system can be developed. This fuzzy set valid for the handling of inventory management system under uncertainty. By implementing these method companies can achieve greater heights. Once John Deere will start the process the company can also start to recognize the paybacks- an organization that is more adaptable, flexible and fully able to answer the business impulsiveness.  

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