Just-In-Time Practices in the Supply Chain of John Deere

John Deere is a global manufacturing company that deals with multiple facets of business. The company’s supply chain management is one of the most applauded due to the efficiency in production and delivery of finished products. Existing for over a century does not come without challenges. This paper will focus on several ways through which the company can improve its inventory, flawlessly run its operations, and achieve a competitive advantage in the market. The paper will explore lean techniques that the company could employ to improve its current performance while effectively running its operations. Just-in-time techniques will also be evaluated and applied to aspects like safety stock and inventories of John Deere. Lastly, the paper will evaluate optimized production technology and theory of constraints. In this section, the primary focus will be on cost reduction and increase in productivity.

            Key Words: Supply chain, just-in-time, optimization, John Deere

Lean Practices in the Workplace and the Supply Chain-John Deere

John Deere is one of the most successful manufacturing companies in the world given its constantly praised supply chain management. However, there were several complaints about the company’s inventory which fell from 28 percent to 12.3 percent in only twelve months (Drohomeretski, da Costa, de Lima, & Wachholtz, 2012). The drop in inventory affected essential concepts like delivery time, production space, and the pace at which the company delivered their product to the market. With lean manufacturing, a company gets to be more dynamic in its response to market demands through the implementation of new systems. These systems are meant to reduce the amount of human effort needed in production while producing high quality goods. Due to the reduction of human effort and production time, lean management is one of the most economical strategies to adapt in a company that focuses on heavy manufacturing.

Lean Techniques and Potential Outcomes

            With lean manufacturing comes the need to create a strategic method that aligns the different aspects of supply chain. The relationship between parts of the supply chain allows for a company to grow in competitiveness. Focusing on supply chain management ensures that the company looks into the value it adds to its customers and stakeholders. Aligning both supply chain management and lean manufacturing has several advantages. Delivering value to clientele, reducing waste, value creation, and cutting on the number of suppliers is guaranteed once these two strategies are aligned (Drohomeretski et al. 2012). In the case of John Deere, supply chain management will be effective in performance improvement among the employees. Being an international company, employees need to be equipped with skills ranging from professional to problem-solving skills. These factors add to essential practices such as team work and continued professional growth. In this case, the employees get to share knowledge and work on problems at an accelerated speed. These properties play an important role in lean manufacturing since its success fully depends on socio-technical practices that focus on the elimination of waste within the value chain of a company.

            The primary problem identified in John Deere is the likelihood of a fluctuating inventory. Using lean practices, a monthly inventory turnover is likely to reach 20 times the normal rate depending on the production system that a company employs. In the case of John Deere, the company is likely to see more success since the production systems are sophisticated. On that note, lean practices are likely to add more stability to the variables in the supply chain. Lean looks into factors such as short lead time, continuous flow, and the level of production. Once problems are identified, corrections are made, and a viable program adapted to stabilize the inconsistencies. The company being a global manufacturer means that these inconsistencies need to be amended on several levels. With lean supply chain management, the cost of operations is significantly reduced while the quality of products is either improved or maintained. In multiple cases, a lean supply chain management focuses on the improvement of products and value by the time of delivery to the consumer. On a local scale, these factors can only be achieved once upstream and downstream supply chains are used dependently. The collaboration of these two aspects allows for the reduction of suppliers while delivering products as per the demands of the market. Conclusively, John Deere is likely to adapt concepts like delivering value as demanded by customers, acquiring a continuous flow in supply chain, and a large-scale reduction of waste; hence, focusing on value addition. With added value addition comes a competitive advantage that could allow John Deere to stand out as a market leader in its fields of expertise.

Just-in-time Practices

Just-in-Time (JIT) is a practice that allows for a company to implement better inventory principles. With JIT, operations have proved to be more effective, less expenditure is accrued, and a company becomes more responsive to clients’ needs. JIT in John Deere will help demand planners focus on optimizing operational factors such as equipment utilization, inventory targets for inventories, short and long-term customer demands, and uptime in production (Kannan & Tan, 2005). With these factors in check, the company is guaranteed of daily replenishing of products based on the market demand. Working based on customer demands will enable the company reach its inventory targets, thus saving stock. The inventory targets are meant to create a pull or a drive in production with regard to labor, need for raw materials, and distribution. Consequently, there are effective means for the company to manage short-term demands on a product. Once the demand focus shifts to another product, the company does not need to raise concern about excess stock since JIT regulates the supply and demand chain.

            JIT also focuses on low cost of production. It controls the quantities in which raw materials are purchased and the time it takes for them to be delivered. Without JIT, the only way John Deere could handle its purchases was through bulk quantities. This strategy has a lot of pitfalls given that a lot of products could stay in storage before they are used, which is detrimental to their quality and the actual floor space they consume (Kannan & Tan, 2005). In addition, raw materials could seize to be useful if the market shifted its interests. JIT focuses on the minimum costs possible, thus placing a limit on storage, transport, and the total costs placed on materials of units. Based on the needs of a company, JIT ensures that a company revisits its relationship with a supplier and cut links where necessary. In such a case, unit cost and supplier quality are given paramount priority. Given that John Deere is a global company, logistics managers will naturally need to look into shipping and strategies that could be effective in transporting smaller loads. Once cost is kept at a minimum and production is purely dependent on demand, then the company is likely to be more profitable through minimizing wastage and using economical means to create finished products. 

Optimizing Production Technology (OPT) and Theory of Constraints (TOC)

Low inventory should be a priority for all companies when it comes to minimizing the burden of having to hold inventories for so long owing to the event that such inventory may become obsolete. On the same note, a company has to have clear logistics in the face of omnipresent globalization.  Logistics chains and inventories work hand in hand to ensure that the financial and productivity aspects of any company are balanced. Given these two factors, maintaining a stable supply chain for a global company becomes a necessity in maintaining a higher competitive advantage. John Deere has the advantage of having modern logistics at its disposal. Having been in the market for over a century, the company is facing the least troublesome time due to the presence of the internet and a lot of resources. The consumerism culture allows for the company to explore different ideas and present them to their consumers. The company needs to create a complex logistics network that focuses on the comfort of the client and the optimization of its supply chain.

Optimizing the Company’s Supply Chain. Flow of goods play a very important role in optimizing the supply chain. However, a flow of information is what keeps the business growing and thriving. Information flow is the most strategic resource that John Deere could use at gaining a competitive advantage. The value of information is vivid in functional effectiveness for a global company. In the case of John Deere, logistics concerning demographics and the most popular products could increase the company’s productivity. With information, activities concerning supply chain participants are effectively collaborated and managed. An integration of these factors allows for an easier process in decision-making; hence, prompting better supply and distribution of finished goods (Wu, et al., 2013). This logistics directly feed into the theory of constraints (TOC) that is meant to guarantee low inventories and delivery of products to the customers. John Deere being a global company should use a multi-echelon supply chain. The TOC in this case allows for the company to decouple bullwhip and to maintain the next nodes. These strategies will ensure that John Deere only supplies based on demand. A node can only be replenished once it is sold. Consequently, wastage is kept at a minimal, thus a low inventory.

            The supply chain of the company is likely to encounter a conflict. Given the size of the company, irregularities in normal operations are common. To correct this, John Deere could assess the response capacity of the SC using technology. Technology in the manufacturing industry comes with perks like forecasting trends based on market feedback. Forecasts could then be pushed to retailers. An accurate forecast keeps a company standing since it creates a reliable cycle of production in warehouses.

TOC Guaranteeing of Low Inventory. TOC allows for a company’s inventory to depend fully on the source of the supply chain (Walasek, 2016). Consequently, products are not immediately delivered to downstream companies prior to their depletion. On the same note, there should be a waiting period before warehouses distribute products they receive from upstream companies. John Deere also gets to ensure that all their sales points have enough inventory for a replenishment period. This is to mean that if a product replenishes within a week based on sales records, and the demand for a product for the next week is 1000 pieces, then the sales point should only have 1000 pieces within the inventory. That being the case, TOC will ensure that John Deere only replenishes its shelves based on the frequency of sales of a product. Such strategies allow inventories to remain at a minimum while supplying based on demand.

Conclusion

            John Deere stands to gain from the modern supply chain techniques that seek to enhance lean practices. The use of just-in-time manufacturing is one of the best lean practices whereby production occurs when it is needed. This reduces lag time and maintains the relevance of products as much as there are changes in the market. Optimizing production technology and the theory of constraints are modern supply chain platforms that can benefit John Deere in the pursuit of lean practices. As such, the company will experience reduced costs, proper supply, and efficiency in production.

References

Drohomeretski, E., Da Costa, S. E. G., De Lima, E. P., & Wachholtz, H. (2012). Lean Supply Chain Management: Practices and Performance Measures. In IIE Annual Conference. Proceedings (P. 1). Institute of Industrial and Systems Engineers (IISE).

Kannan, V. R., & Tan, K. C. (2005). Just in Time, Total Quality Management, And Supply Chain Management: Understanding Their Linkages and Impact On Business Performance. Omega, 33(2), 153-162.

Walasek, R. (2016). Supply Chain Optimization and Competitiveness of an Enterprise-Results of The Study. Research in Logistics & Production, 6.

Wu, H. H., Liao, M. Y., Tsai, C. H., Tsai, S. C., Lu, M. J., & Tsai, T. P. (2013). A Study of Theory of Constraints Supply Chain Replenishment System. International Journal of Academic Research in Accounting, Finance and Management Sciences, 3(3), 78-88.