Principles of Supply Chain Management

Case 3) Don’t shoot the messenger

1. If you were in Jeff’s position, what would you have done to preserve relationships? If I were in Jeff’s position, I would first have thanked my suppliers and expressed gratitude to them for being willing to work closely with the company in not only designing the new product line, but in then reducing supply prices by the asked for 10 percent. I then would have tried to explain the position of the company and how the price decreases were essential to ensuring a successful product launch.

Explaining why the additional cost reduction was requested may not make the actual price cuts easier to make, but it should help somewhat when it comes to maintaining the relationships with the suppliers. Hopefully Jeff has treated them honestly up until now and has a level of trust built up with them. 2. Describe the ethical issues involved.

It seems to me that the main ethical issue is in the letter that was sent to suppliers on July 5th.

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The implicit threat that business with suppliers would be cancelled if the cost demands were not met is not consistent with the type of relationship that Jeff had built with his suppliers, based on honestly, integrity, and hard work. In addition, Billing Equipment was asking for previously agreed upon contracts to be re-opened and re-negotiated in order to make the price cuts, essentially going back on their own word.

3. What is your assessment of the general manager’s approach to meeting target cost objectives? My assessment of the general manager’s approach to meeting target cost objectives is that it is not the right way to approach the issue.

I don’t like the strong-arm tactics, with the thinly-veiled threat of cancellation if they don’t comply. The General Manager should have involved the suppliers and been more open with them on the need to reduce overall costs for the product line. He could have explained the long-term benefit of partnering with Billings Equipment, even if there were a financial sacrifice in the short term. As the case pointed out, in essence, the suppliers that complied and tried to work with the company were punished by being asked to cut prices even more.

Case 5) John Deere and Complex Parts, Inc.

1. Discuss the strengths and weaknesses of John Deere’s Achieving Excellence Program. Consider and discuss other criteria to include in the analysis. John Deere’s Achieving Excellence Program is designed to develop long-lasting supplier relationships through an evaluation process that promotes communication, trust, cooperation, and innovation. I think that overall this is a very good program. It encourages suppliers to work with John Deere and collaborate to improve cost, quality, and timeliness of delivery. It includes some objective ratings that can directly measure supplier performance, and could be used to help identify areas of improvement. It helps to form long-lasting relationships with suppliers, which is in John Deere’s best interests. Some of its weakness are subjectivity, that it has no concern for what is good for supplier, and may have a difficult entry level since you only receive training if you rate highly in the system.

Subjective metrics like the Wavelength and Technical criteria are more difficult to measure accurately. Subjective measures leave things open to interpretation. Personal bias or even misunderstanding can result in an artificially low or high rating in a subjective measurement. The criteria would need to be very clearly defined. The AEP program is also benefits John Deere primarily, rather than the suppliers. Suppliers that rate highly do get additional John Deere training, but even that is in the best interests of the John Deere Company. While John Deere is a reputable company, and desirable to do business with, the main reward for performance excellence in the AEP program is a plaque, maybe a banquet, and more John Deere training. The program almost has a negative incentive for new suppliers.

John Deere should have some kind of outreach training for new suppliers that wish to be partners, rather than just supplying additional training for expert suppliers. It could be seen as a program that keeps the elite at elite levels, but does not offer assistance to those newcomers that may need the assistance and expertise of John Deere to improve. While responsiveness is encompassed in the wavelength measurement, I think that it is important enough to have its own evaluation criteria (Winsor, Tan, Leong p. 124). The case mentions some of the frustrations that John Deere experienced waiting for the return of quotes from Complex Parts. An unresponsive supplier can cause supply chain issues very quickly. 2. Do you think Complex Parts has performed adequately over the past year? Why or why not? Which of the Deere supplier assessment classifications should be assigned to Complex Parts?

I think that Complex Parts has adequate performance over the past year as a whole, however some areas of concern have arisen, specifically concerning delivery and communication. Their quality rating is very good, and until recently, their delivery rating was very good as well. Lately, an increasing number of deliveries had to be expedited, which costs John Deere money. The case stated that it seems as though expediting delivery has become a weekly requirement. Delivery ratings fell from 8,650 to 155,000 over the last quarter. That metric alone is enough to put the supplier in to Conditional status.

Overall, I would assign a rating of Approved to Complex Parts. Their past performance is worth noting, but recent developments are of great concern. Reducing their supplier rating should send them a message that performance, specifically deliveries and responsiveness, must improve in order to continue doing business with John Deere. 3. If you were a member of the supplier evaluation team, what alternative course of action would you consider for Complex Parts? What recommendations should the team make to the project manager?

As a member of the evaluation team, I would recommend that a very close eye be kept on the Delivery metric, as that is where the supplier seems to be slipping the most, and would communicate that intention to Complex Parts. They need to understand that while they have been a good supplier in the past, current performance issues cannot be ignored. Delivery times and response times to quotes and other communications must be improved. I would suggest a meeting between the project manager and key team members at Complex Parts to discuss expectations and possible consequences of non-compliance with John Deere policies.

The team should recommend a rating of Approved to the project manager, with specific follow-up items detailed surrounding delivery and responsiveness. 4. What are the short-term and long-term implications of your recommendation?

Short term, I would expect immediate improvements in the delivery rating of Complex parts. The reduction in rating is very much a disciplinary action, and intended to be an eye-opener to the supplier. It sends a message that while they are still valued as a supplier, certain aspects of their performance have slipped in to the unacceptable range.

Long term, I believe that an action such as this should help strengthen the relationship. Disciplinary action usually comes off negatively, but if the right meetings and discussions take place and concerns are addressed openly and honestly, Complex Parts should be able to see that John Deere does have a vested interest in helping them improve and re-attain a raking of Partner. The fact that as a member of the evaluation team I am not just recommending dropping them or recommending a raking of Conditional shows that there is still hope in rebuilding the business relationship to a healthy, productive level. Case 7) Supplier Development at Deere, & Company

1. Is Deere’s tactic an appropriate one?

I do not think Deere’s tactic is the appropriate way to approach the situation. I agree from the details of the case that some improvements need to be made the help reduce they cycle time at Excelsior, but I don’t think a mandatory cost reduction is going to get the job done. I think it will create bad blood and irreparably damage the supplier relationship.

2. What are the implications of the tactic and the possible consequences, positive or negative?

The implications of the tactic are that Excelsior needs to fall in line with Deere’s demands or lose their business. The added implication is that Excelsior will essentially be out of business if this happens because 95% of their income is from Deere’s orders. Both of these outcomes are negative, and I am having difficulty seeing a positive consequence come out of this situation. I think that Excelsior is justified in their concerns, and while they may be dragging their feet, I feel like it is an appropriate reaction to the concept of restructuring their entire process.

3. If it is not an appropriate tactic, what are some alternatives?

I think that a valid alternative would be to emphasize the value that Excelsior has to Deere as a primary supplier of the connector that they manufacture for Deere, and to reinforce the desire to maintain a long-term, profitable relationship with them.

Additionally, Deere may have been able to supply examples of other suppliers that they have worked with to improve their efficiency. Rather than case studies and meetings, real world examples of success could be used to help persuade Excelsior’s top decision makers that this was the correct course of action.

4. Is this an ethical approach?

I do not think that this is an ethical approach. Deere is effectively using their position of power in the relationship to force Excelsior to take action that they are not convinced is the correct course of action. I think that they should act in an advisory role, not force them in to action. Ultimately, the decision is Excelsior’s as to whether to re-tool and comply with Deere’s wishes, and while there are big consequences to that decision, it should not be forced upon them.

5. What are some of the implications as far as human resource management is concerned? How can the group members better manage the consensus building to present an undivided front to Excelsior?

If Deere’s plan does not succeed, there is a large risk that they will have to put forth a massive human resource effort to replace Excelsior as a supplier. Deere would have to expend large amounts of time and resources to identify, secure, and develop a new supplier.

The group members could better manage consensus building by involving more people from Excelsior’s production teams. Deere should work towards a win-win scenario with Excelsior (p. 119). Perhaps they would be able to show the benefits of the proposed system to those that are closer to the actual work. Those individuals could then weigh in and lend support to the plan, possibly overcoming the resistance that Excelsior’s Frank and Sanderson felt. Deere’s associates could re-commit to Excelsior that they are a valued long-term supplier, but that these changes needed to be enacted to ensure long-term viability. Deere could explain that there are customers further down the supply chain requesting faster turnaround, and that these requests are not solely coming from Deere.

References
Joel D. Wisner, K.-C. T. (2012). Principles of Supply Chain Management. Mason, OH: South-Western Cengage Learning.