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John Deere Supply Chain Risk Management
GSCMI 2017 Spring Conference – Purdue Krannert School of Management
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John Deere Today Founded in 1837 (180 years) Over 100 Locations
Operations in 35 Countries ~60,000 Employees Globally 2016 Sales $26.6B
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Our Strategy Agricultural Equipment Construction Equipment
GLOBAL GROWTH OPERATIONS Agricultural Equipment Construction Equipment John Deere’s agricultural and construction equipment operations help our customers meet the food and infrastructure needs of a growing, more affluent population. 3 | John Deere Today
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Our Strategy Turf Equipment Forestry Equipment
COMPLEMENTARY OPERATIONS Turf Equipment Forestry Equipment John Deere’s turf and forestry products help customers make smart use of the land through innovative, high-quality equipment and complement our global growth operations. 4 | John Deere Today
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Our Strategy SUPPORTING OPERATIONS Power Systems Financial Services
Worldwide Parts Services Intelligent Solutions Group Financial Services, Power Systems, Intelligent Solutions Group, and Worldwide Parts Services respond to customers’ needs, making their lives easier and their work more successful. These operations strengthen and further differentiate the global growth operations and complementary operations and support activities critical to the success of the equipment operations. 5 | John Deere Today
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Supply Chain Resiliency at John Deere
Our Risk Management Journey Deere Supply Chain Risk Management Process Supplier Financial Risk Managing Critical Events Strategic Risk Management Deep Supplier Understanding John Deere Today
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Evolution of Supply Chain Risk Management
Total quality Management Defined performance goals and Tracking ATD Goal 2500 Suppliers Risk & Performance Monitoring Reactive Processes Risk Contingency Planning Pro-active Processes Supply Chain Resilence 1990 Deere Quality Manual 1999 Achieving Excellence Program 2010 Supply Base Optimization 2011 Supply Chain Risk Tool 2014 Strategic Risk Management
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Deere Supply Chain Risk Management Today
Proactive Strategy and Risk Management Processes Robust Event Management Tools Efficiently execute Contingencies and Recover Supply
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Deere Supply Chain Risk Management (SCRM)
Supplier Performance Risk Supplier Financial Risk Compliance Risk Strategic Risk Management John Deere Today
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Deere Supply Chain Risk Management (SCRM)
Delivery Quality Trends Supplier Performance Risk Supplier Financial Risk Compliance Risk Strategic Risk Management John Deere Today
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Deere Supply Chain Risk Management (SCRM)
Supplier Performance Risk Supplier Financial Risk Compliance Risk Strategic Risk Management Core Health Resilience Default Probability Trends John Deere Today
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Deere Supply Chain Risk Management (SCRM)
Supplier Performance Risk Supplier Financial Risk Compliance Risk Strategic Risk Management Code of Conduct Environmental Restricted Materials Adverse Media John Deere Today
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Deere Supply Chain Risk Management (SCRM)
Supplier Performance Risk Supplier Financial Risk Compliance Risk Strategic Risk Management Reactive Processes Measure of what has already occurred… Input for Strategy Improvement John Deere Today
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Deere Supply Chain Risk Management (SCRM)
What do we mean by Strategic Risk Management? Moving from Reactive to Proactive Processes What can we do today that will improve our position tomorrow? Requires a much deeper understanding of our Suppliers Includes both Risk Mitigation and Contingency Planning Supplier Performance Risk Supplier Financial Risk Compliance Risk Strategic Risk Management John Deere Today
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Deere Supply Chain Risk Management (SCRM)
What can we do today that will improve our position tomorrow? Supplier Performance Risk Supplier Financial Risk Compliance Risk Strategic Risk Management High Dependency John Deere Ag or Construction Industries Other Industries Union Agreement tracking Succession Planning Raw material disruption Intellectual Property (IP) Single Source Geo-political concerns Logistics Currency Risk Regional Holidays & customs Emerging Risks……… John Deere Today
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High Dependency Suppliers
What action can we take today that will improve our position later if the supplier fails? Review current Performance and Risk trends Develop Contingency or Mitigation plans Identify alternate suppliers Gauge complexity to resource Part and print information Tooling and testing requirements Review supplier’s strategy to diversify Risk
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Risk in Strategy Development Process
Reduce overall risk within strategy suppliers Supplier Risk Mitigation Align supply base capacity with Deere needs Supplier Optimization Focus on top tier supplier performance goals Supplier Performance
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Ag Industry Downturn Measure impact of the downturn for each supplier
Acknowledge suppliers are reviewing schedule revisions Confirm appropriate action taken to adjust their business John Deere Today
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Supplier Financial Risk
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Financial Risk Process
Financial Risk Action Plan 3rd Party Financial Assessment Public and Private Companies Core Health: How is the supplier performing from an operational perspective? Resilience: Can the supplier meet their short and long term obligations? Trends, Default Probabilities, Peer Benchmarks, Financial Dialogue
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Developing Employees to Manage Financial Risk
JD Learning Building Highly Effective Action Plans Question: How can I verify that I developed a comprehensive Financial Action Plan for high risk suppliers? Answer: The ESFR CoP has developed criteria to evaluate the robustness of action plans.. Important Elements to Verify: - The Commodity Manager provides approval. - The DA action plan “spot the dot” matrix is complete. - Short term and Long term (>1 yr) actions are documented. - The DA action plan is up to date, less than 90 days old. - The DA includes an action for regular supplier communication. - The DA identifies what the supplier is doing to address the high risk. - The DA identifies what we are doing to address the high risk. Financial High Risk Action Plan Guidance
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Managing Critical Events
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Event Risk Process Global tracking of events with potential to impact our operations. Natural disasters Labor relations Transportation Facility fires Geopolitical risks Trade barriers Duties and tariffs
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Event Risk Process - Hurricane Patricia, October 2015
Review of severity Define regions impacted Identify suppliers and logistics concerns Supplier communication Mitigation and recovery
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Event Risk Process - Hurricane Patricia, October 2015
157 Suppliers identified in Hurricane Patricia‘s path Demand review and mitigation in advance of the storm Immediate support and recovery post storm impact
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Deep Supplier Understanding
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Deep Supplier Understanding
Assessment of Capability Performance measurement and feedback Frequent Communication Annual Surveys Flexibility to support changing business needs John Deere Today
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In Summary
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In Summary… Supply Chain Resiliency is a journey at Deere
We continuously evaluate our supply base capability Deep understanding of our supply base Risk is a key part of our Supply Strategy We train and equip our employees with tools to support success Events will occur that impact supply continuity We plan today for what could happen tomorrow Robust and efficient event management tools Flexing our processes to meet changing business needs. John Deere Today
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