John Deere and Company Essay
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Complex Parts, Inc. has been a supplier of specialized parts to Deere & Company for the past 10 years, with annual sales of $3. 5 million. Over the past year the supplier has fallen behind in its ability to satisfy the guidelines outlined in Deere’s Achieving Excellence Program (AEP), a supplier evaluation process that promotes communication, trust, cooperation, and continuous improvement. Due to this decline, one of Deere’s supplier evaluation teams, consisting of four employees, has to make a quick recommendation about the future relationship between Deere & Complex Parts.
The Achieving Excellence Program (AEP) evaluates, on a yearly basis, key parts of how a supplier is performing. It focuses on five key areas: quality, delivery, cost management, wavelength and technical support. The program classifies each supplier, from best to worst, as either Partner, Key, Approved or Conditional. AEP effectively assesses the supplier’s commitment to its relationship with Deere in such areas as enhancing communication, lowering costs, and improving design.
The biggest drawback to the AEP is that it does not consider the full history of the supplier’s relationship to the company.
The evaluation only focuses on the past year and not the historical highs and lows of productivity. The program also does not take into account the current economic conditions and how the market is performing. It examines what the supplier is doing to increase profits for Deere, but does not explore what Deere could be doing to help the supplier, beyond training, plaques and honors.
The Achieving Excellence Program is an ideal way to analyze how a supplier is functioning, but it would be beneficial to include an assessment of how or what Deere & Company could do to aid the supplier. Historical information of how the supplier has performed, its current financial situation and the current market state or trends should all be considered as part of the appraisal of a supplier. Using the AEP evaluation, it is difficult to determine how Complex Parts has performed over the past year.
While the supplier has done extremely well, it has also done very poorly, resulting in an adequate performance. Overall, the supplier has performed well, achieving a quality rating of 666 and a delivery rating of 8650, both well below the ideal for a Partner classification. Unfortunately, the past quarter showed a sharp drop in Complex Parts’ performance, achieving a delivery rating of 155,000, higher than the ideal rating for a Conditional supplier.
Looking closer at other areas of the AEP, Complex Parts received a tepid score with both positive and negative aspects in all categories. The supplier was great at following through on suggestions for quality improvement and was very proactive, but had little plans for cost reductions or how to eliminate problems resulting in late deliveries. The company took an active role in keeping up with required specification changes, but did not return phone calls to the customer service group and cost Deere tremendously with weekly expedited deliveries.
Complex Parts excellently internalized the Deere Quality Plan elements, took a lead role in getting the elements implemented, and improved quality performance over the past year, but did fall behind in employing the plan in its new facility, now 5 months into operation. Finally, Complex Parts’ R&D department was very impressive with several suggestions resulting in new product programs, but the supplied parts did not meet cost targets which reduced Deere’s projected profits, and new parts quotes were not being received in a timely fashion.
Using the information received from the AEP evaluation, Complex Parts should be classified as a Key supplier. While there are many troubling areas, the exceptional performance in most areas of the AEP cannot be ignored. The supplier should not retain its Partner status, but it should be recognized as an important supply chain member. There are two main courses of action that the evaluation team can consider in regards to Complex Parts. The supplier can be downgraded to a Key or an Approved supplier or it can retain its current classification as Partner with a re-evaluation in six-months.
Due to the low aspects in every category within the AEP assessment, Complex Parts should be downgraded to a Key or an Approved supplier. The company was given a performance summary every quarter and should not be surprised that its classification has dropped. The best alternative course of action would be to allow the company to keep its Partner rank with the provision that it will be re-evaluated in six months to determine the future of the relationship.
Included in each alternative should also be the appraisal of the other two possible suppliers. Each company should receive an in-depth evaluation and classification for comparison with Complex Parts. There are both short-term and long-term implications to these recommendations that should also be considered before making a decision. In the short-term, Complex Parts would be rewarded for its high performance, but would recognize the need for improvement.
The supplier would either enhance its troubled areas or it would risk being downgraded or replaced. Deere & Company stands to lose revenues due to increased costs in the short-term if the supplier does not quickly improve its performance. In the long-term, Deere & Company would show that the AEP is taken seriously and that long-term supplier relationships are a true goal of the company. It would also prove how dedicated the company is to achieving excellence and how continued improvement is a vital part of the company’s goals.
While Complex Parts is currently a Partner supplier to Deere & Company, its future rests in the hands of the supplier evaluation team. Complex Parts has performed adequately over the past year, but falling aspects indicate that the company may not be able to live up to expectations in the coming year. With an assessment of other possible suppliers and by allowing Complex Parts to retain their supplier classification with an interim evaluation in six months to determine their fate, they will either increase performance or risk demotion.
Deere & Company strives to develop long-term relationships with its suppliers and a quick decision based on only a year’s worth of data, and more specifically a low-performing quarter, would be detrimental to the company’s goals. More information needs to be included in the evaluation in order to gain the full picture of how the supplier is operating. With this additional information, Deere & Company will be able to fulfill its goal of a better supplier relationship.