Managing Financial Principles And Techniques Management Essay
Deere’s & company is one of the top agriculture equipment manufacturers of the world. Deere does business in almost 160 countries. There are 40,000 people working for them world wide approximately. The main headquarters of Deere & company are located in Georgia, United states of America. It is one of the oldest company of united state. This company is guided today, as it has been since its beginning, by John Deere’s original values of quality, innovation, integrity and commitment. One of the main efforts is to create shareholder value through the chase of continuous improvement and profitable growth.
Deere & company has a vast variety of products including which are Agricultural Equipment ,Construction Equipment, commercial equipments for grounds care , and Forestry Equipment to help improve the forest, and finally, Deere Power System.
In addition, the worldwide net income was $13,947 millions in 2002. This corporation has sites in all the continents, its worldwide locations include North America, South America, the Caribbean, Europe, Africa, Near and Middle East, and Australia. Deere’s major competitors are Caterpillar, CNH Global, and Mitsubishi.
Also, Deere and Company employs some regulations such as the ISO 9000 standards. Finally, some of the supply sources of this organization are experience, industry, sales representatives, and customer. Deere & Company has the strategy of using single sourcing and multiple sourcing for purchasing a specific component. Most of them are multiple sourcing, although the goal is try to reduce the number of suppliers. . Most of Deere’s suppliers are from the United States. Deere buys raw material directly from manufacturers not from distributors. Deere is committed to the concept of maintaining its supply chain by actively partnering with its suppliers.
Deere is working very closely with its suppliers. They are providing them designing and re designing manufacturing facilities and operations. Deere is giving training to supplier’s personnel. Providing and facilitating the use of Software packages. Providing on site personnel for specific projects. Reduce suppliers manufacturing cycle. Lower manufacturing cost. Improve deliveries of finish goods.
For this purpose they made a SDG (supplier development group).
SDG is consisted mostly of process engineers. Process Engineers who help the suppliers to improve their operations .Each Deere division had SDGs.and in each SDGs has100 individuals assigned. Excelsior is one of the main suppliers for Deere. Excelsior Company is located in Cedar Rapids, Iowa. Excelsior manufactures tractor attachment products.Excelsior is a vertically integrated company with very little flexibility. By the time progressed and Deere purchased more from Excelsior and Excelsior became more and more dependent on Deere as a customer. In 2000 almost 95 percent of Excelsior’s revenue came from Deere’s purchases. Deere also founded itself growing dependent on excelsior. The reason is that there are very few companies which produce tractor attachments. Excelsior also owned the design of those attachments which they make. The business relationship is very important for both parties. Excelsior also relied on Deere for most of its sales. Deere also wants to keep Excelsior as a supplier because it will be very cost prohibitive for Deere to produce these tractor attachments in house.
Q :1 Is Deere’s tactic an appropriate?
From Deere’s point of view yes its an appropriate. Problem is that the manufacturing cycle time for excelsior’s antiquated process was 250 days. This is creating alot of problems for Deere and it customers. The delivery period is very long and the prices are high. The supplier development group created a tem to work on this project. The project is to reduce the cycle time and also minimize the costs at least 10 percent,
The Excelsior equipment project team was assembled in march 1999. This team is consisted of four members. The team’s task was to work with Excelsior to redesign its manufacturing process to meet the cycle time and cut cost.
The team worked for 23 months and made a report .the report showed that the cycle time and cost reduction goals can be achieved. The tactic to achieve these targets is to redesign the manufacturing process and improve their accounting system .Deere will use 5 million $ for this purpose. And Excelsior will give a 5% reduction in price or at least half of the projected savings if not implemented.
And on the other hand for excelsior this is not an appropriate tactic. Excelsior didn’t want to change their manufacturing process. This was the biggest obstacle which Deere faced. Excelsior did not want to invest in the equipment and facilities recommended by Deere. According to Excelsior’s assessments the maximum amount of saving that could be realized by redesigning manufacturing process would make at most less than 1 percent Difference. And Excelsior believed that its quality is better than IBM’s and it had also world class level of work in process. Excelsior was hesitant to invest 5 million $ to implement the changes recommended by the SDGs. They believe that manufacturing process at Excelsior was about as efficient as it could be.
Q:2 what are the implications of this tactic and the possible consequences, positive or negative?
Impact of these tactics
Integrated Supplier relationship
By applying this tactic supplier relationship will be integrated.
Meet customer demand
By implementing this tactic they can easily fulfill the demands od customers.
This will also result in reducing the cost for example if they make more units this will decrease per unit cost. Then definitely they will earn more money.
Reduce cycle time
It will also decrease the time period
It will also increase the profit margin of the company.
Enhanced manufacturing process
They are going to invest 5million $ to to increase the efficiency of the manufacturing process.
Satisfy their customers
If they will provide a good product less expensive and in less delivery time this will automatically satisfy their customers.
Ethically it is wrong to force the supplier
This will cause a strain in supplier relationship
Aggressive push through strategy
Q 3: If it is not an appropriate tactic, what are some other alternatives?
Supplier development is defined as any activity that a buyer undertakes to improve a supplier’s performance and capabilities to meet the buyer’s short and long term supply needs.
Supplier development requires financial and human resources investments by the both partners and includes a wide range of activities such as training of the supplier’s personnel, investing in suppliers operations , and ongoing performance assessment.
Supplier’s development decision
Supplier development should not apply to all suppliers
It does not make financial sense to develop suppliers of low-value- added, non-strategic commodities
Reasons for supplier development include:
Supplier provides an innovative product
Supplier provides an innovative process
Supplier provides an innovative technology
A long-term advantage exists to the buying firm
To maintain flexibility in meeting changing market demands
Seven step approach to supplier development
Identify critical product and services:
Asses the relative importance of the products and services from a strategic perspective. Product and services that are purchased in high volume, do not have good substitutes, or have limited source of supply are considered strategic supplies.
Identify critical suppliers:
Suppliers of strategic supplies who do not meet minimum performance in quality, on time delivery, cost, technology, or cycle time are targets for development.
Form a cross functional team:
The buyer must develop an internal cross functional team with a clear agreement for the development initiative.
Meet with top management supplier:
The buyer’s cross functional team meets with the supplier’s top management team to discuss details of strategic alignments, supplier’s performance measurement, improvement, and professionalism.
Identify key projects:
After the promising opportunities have been identified, they are evaluated in terms of feasibility, resource and time commitment, and expected return on investment. The most promising projects are selected.
Define details of agreement:
After agreement has been reached on the development projects, the partners must jointly decide on matrices to be monitored such as percent improvement in quality, delivery, and cycle time.
Monitor status and modify strategies:
To ensure continued success, management must actively monitor progress, promote exchange of information, and revise the strategy as business condition warrant.
Best Practices in Supplier Development
Provide training programs and training time to suppliers
Provide education programs offline that go beyond training
Provide improvement focused seminars for suppliers
Provide tooling and technical assistance to suppliers
Provide supplier support centers
Loan executives, such as process engineers and quality managers
Drive fear out that a supplier’s workforce may have towards supplier development programs
Set “stretch goals” to encourage radical change as well as continuous improvement.
Improve accounting systems to enable measurement of improvements
Share the savings from the development improvements
Encourage suppliers to contribute to improving processes at the buyer’s facilities
Provide a feedback loop for suppliers to help encourage supplier development efforts
Improve the supplier’s supply management system
Q 4: Is this an ethical approach?
No , In my point of view this is not an ethical approach. Excelsior did not want to implement those changes suggested by the supplier development group team. they were forced by the Deere & company to implement those changes to their manufacturing plant. Deere gave the indication that if Excelsior refused to implement changes to manufacturing process they would not remain viable supplier in long run. the main supplier development engineer and project manager also wondered whether this tactic would work or not. and whether it would be an effective way of getting excelsior to improve their manufacturing process.
Ethics is defined as the study and philosophy of human behaviour, with importance on the determination of right and wrong, that which is moral, the basic principles of right action, a work or theory on morals, and a standard of character set up by any race or nation. Ethical is defined as that which follows the right principles, as defined by a given system of ethics or professional conduct. Ethics in business continues to be important across all industries. The importance on ethics in
your environment is due to its relationship to general principles as well as its favourable impact worldwide on your ability to enhance your competitive opportunities, continuously improve your processes, ensure total quality throughout your businesses, and increase consistency in your operations.
Economic Success Linked to Ethical Behaviour.
To have an ethical policy in place is a basic
business requirement today. Having suppliers and employees display universal ethical behaviour in their day-to-day operations, however, is an asset. Ensuring a track record of outstanding ethical conduct is just as important as product and service quality, competitive prices, and efficient operations.
Upsides Downsides of Ethical Behaviour.
The upsides of ethical behaviour in a business environment are very positive. The downsides of not encouraging and adhering to business ethics policies include the risk of unethical business practices that affect your reputation in the market place, unethical behaviour of employees occurring, and/or the risk of legal prosecution.
A negative impact on the company’s image is difficult and boring to repair. Strengthen Quality and Integrity of Purchasing Activities.
Developing an ethical environment within your organization helps you facilitate issue resolution, prevent problems, and create a pleasant and enjoyable workplace. A plan of action for doing this might include:
1. Stressing the importance that all individuals need to consistently exhibit ethical behaviour
2. Educating everyone on your business practice standards
3. Raising ethical issues and concerns by providing a forum to do so
4. Developing a network of professionals who treat themselves, their co-workers, customers, and suppliers with integrity, honesty, openness, and fairness all of the time
5. Educating everyone on the risks involved in unethical behaviour.