Is Your Supply Chain Missing A Link
Michael A. Bailey, C.P.M., CPIM, MBA
Michael A. Bailey, C.P.M., CPIM, MBA, Project Manager, Deere & Company, Moline, IL 61265, 309-765-5631, www.deere.com, MB11545@Deere.com
Donald R. DeDobbelaere, MBA, C.P.M.
Donald R. DeDobbelaere, MBA, C.P.M., Administrator, Deere & Company, Moline, IL 61256, 309-765-5194, www.deere.com, DY00345@Deere.com
85th Annual International Conference Proceedings - 2000
Abstract. As Supply Management professionals pursue continuous improvement and improved relationships with their supply chains, a cost-effective Supplier Education & Training Program can produce significant results for both the customer and the supplier. The supply chain is critical to the overall performance and the survival of your business. By educating and training the supply chain in the methods of cost reduction, value improvement, organizational effectiveness, quality, and improved delivery, it will ultimately lower your costs and help sustain growth into the new millennium. Deere & Company has created a model that provides training to its supply chain at a low cost via state training grants.
The Opportunity. Supplier training and education can be an effective method of lowering your company's total cost. This presentation will show the progression of developing and administering Supplier training programs subsidized by state grants. The results (both anecdotal and quantifiable) of the three programs presented are considered successful by the suppliers and help achieve Supply Management goals and objectives.
Objectives. The objectives of this presentation are to:
- Present a cost effective approach to educating and training suppliers
- Demonstrate a way to build and maintain relationships with your supply base and be more competitive in the marketplace
- Link Supplier Education and Training to Supply Management results
Introduction. Since its founding in 1837, Deere & Company has become the world's leading producer of agricultural equipment and a major producer of industrial equipment for the construction, forestry, and public works markets, lawn and grounds care products for homeowners and commercial users, engines and other powertrain components, and replacement parts for its own products and those of other manufacturers. During the past years, many changes have been made to refine all aspects of the business in order to significantly improve internal manufacturing operations.
Recognizing that Deere's continued position in the worldwide marketplace required similar changes for our supply base, initiatives were taken throughout the supplier organization to optimize supplier efficiencies to assist quality, delivery and value to our customers. Deere & Company Supply Management chose the following strategic direction for supplier development:
- Suppliers represent a significant part of Deere's manufacturing resources
- Training programs are integral to continuous improvement
- Well trained, flexible workforces ensure the overall competitiveness of Deere products
Supplier Training Program - State of Illinois. In 1992, Deere & Company was awarded a training grant through the Illinois Department of Commerce and Community Affairs (DCCA) to train employees of John Deere suppliers based in Illinois. The supplier selection criteria for participation was to target small to medium sized companies that employed less than 500 employees, annual purchase volume with Deere North American Units greater than $50,000, and nomination by a Deere & Company unit. This pilot project, where a grant was provided to fund a training network of companies rather than an individual company, was unique for DCCA. The State of Illinois viewed this as an opportunity to assist smaller companies with improving the quality and productivity of their employees. Deere & Company concurred that by upgrading the skills of the supplier base through this cost-effective approach, Deere and its customers would benefit through improvement in quality and service.
The course curriculum was selected from a wide variety of sources including Deere's own World Wide Learning Department, courses contracted through external providers, training offered by Deere manufacturing units, and skill-based training offered by community colleges throughout the state. A diverse set of twenty-nine courses was targeted which would address the needs of the machine operator on the factory floor, the staff engineer in the office and key management personnel. The curriculum included classes in: supply management, financial operations, employee development, operations improvement, and skill-based training. Training classes were offered in various locations throughout the state to minimize travel for supplier employees attending classes.
During 1992, ten Illinois community colleges provided training in: basic blueprint reading, computer skills, computer numerical control programming, geometric dimensioning and tolerancing, industrial math and measuring, and statistical process control to over one thousand supplier participants. A total of five thousand employees from ninety-three Illinois based companies attended four hundred fifty state funded training sessions.
Expansion of Supplier Training Program. From that beginning in 1992, Deere & Company Supply Management Education has expanded its state training grant programs to Iowa and Wisconsin. The success of the Illinois program encouraged the creation/development of supplier training grant programs in Iowa (1997) and Wisconsin (1998). The Illinois program served as a proven model for development and as an example to the State Agencies who administer training grant funds.
However, just because a highly successful training program is in existence, doesn't mean it can be duplicated in other states. Deere & Company is the sole 'OEM' of the training grant dollars in Illinois. What that means is John Deere controls all aspects of the grant from curriculum, training providers, facilities, suppliers, administration, etc. This is not the case in Iowa and Wisconsin. Due to the legislative climate, it is politically correct to provide state dollars to a consortium of OEM's and not a single OEM. So, a consortium of seven companies in Iowa and six in Wisconsin make decisions on the most effective utilization of the grant dollars. Each of the consortiums meet regularly to discuss ideas on how to improve the program and make it beneficial to suppliers of all consortium members.
Deere & Company's corporate headquarters is located in Illinois and with several major manufacturing facilities in Illinois, Iowa and Wisconsin. So, a high percentage of our suppliers are located in the surrounding states, which have supplier training grant programs. However, for the suppliers not located in Illinois/Iowa/Wisconsin, a separate program is available to them. Actually, it is the combined class schedules of the grant programs made available 'to all other Deere suppliers'. Unfortunately, they are required to pay 100% of the per person cost.
During 1998-1999, over 5,100 employees of Deere & Company suppliers attended one or more classes made available in the three states. Training class locations are at regional sites throughout the state or can be scheduled at the supplier's facility. Community colleges are generally used for classes that are open to all nominated suppliers. However, if a supplier has the minimum number of students required, they can host the session 'on-site' thereby reducing the training costs even more. The state breakdown follows:
|Supply Management Training Program 1998/1999|
Cost Effective Training. The grant programs objective is to improve the quality and productivity of small to medium sized suppliers to John Deere in a cost-effective approach. By utilizing state grant training monies, the suppliers receive high quality education at a very low cost. A high percentage of the nominated suppliers could not afford to attend classes offered via the programs without the subsidy. The attached slide shows the total cost of each state program and the total paid by the suppliers in 1999.
Figure not available in text-only version of this article.
Suppliers in Illinois and Wisconsin receive a 50% subsidy and in Iowa the supplier price is only 40% of the total price. For example in Illinois/Wisconsin, a class that costs $200 per student, the supplier pays $100, and the state grant pays $100.
Supplier Evaluation. Deere & Company uses a supplier evaluation process called 'Achieving Excellence' (AE). 'Achieving Excellence' strives to develop relationships through a supplier evaluation process that promotes communication and continuous improvement throughout the entire product cycle. Suppliers are evaluated in five key areas: Quality, Delivery, Cost Management, Wavelength, and Technical Support. The quality of our suppliers' product and performance will be evaluated by internal customers including supply management, operations, quality engineering and product development.
The classes offered in the supplier training programs directly support the goals and objectives of AE and other Supply Management initiatives. The classes are aligned to the five categories of the AE rating process and can be recommended to a supplier to facilitate improvements in a particular category.
Identifying Benefits to Training. The objective of all Supply Management Education Training programs is to teach employees of John Deere's supply chain new skills that would enhance the quality, productivity, and profitability of their respective companies. To identify the actual outcomes of the training programs, a follow-up survey is sent to all participating suppliers asking for both anecdotal and quantifiable results. Some of the responses include:
- Inventory reduced by 4.8%
- Cost of quality for external failures reduced 31%
- Expecting a 15% reduction in set-up or 780 hours per year
- Inventory turns approximately doubled
- Parts per million quality rejects reduced from an average 3,000 per month to approximately 1,800 per month
In addition to the supplier survey, annual supplier focus meetings are held. At the sessions, open discussion between the supplier and Deere & Company representatives take place concerning the grant program. The suppliers do the 'talking' about ways to improve the program and what should be done to make the program a better value for them. Based on their constructive comments, curriculum has been improved, facilities changed, etc.
What is in the future? The future is 'driving out cost' in the entire supply chain. Training and education will play a significant part is doing so. The state grant programs will be made available to the entire chain, not just the Tier One suppliers. This includes customers to Deere in addition to suppliers. 'Distance Learning' will also make the classes more assessable to the supply chain. Technology has advanced so far that two-way communication between several sites around the state will allow the training to get closer to the supplier's location, thereby reducing travel costs. 'Distributed Learning' which could include Web-based training and the utilization of CD-ROMs are further possibilities to bring education/training to the entire supply chain.
Conclusion. John Deere is committed to "delivering the world's finest solutions and value in equipment, service, and support…on time, everytime". The goal remains to select and support suppliers who share Deere's commitment to quality and innovative design; whose reliability and consistency in on-time delivery will contribute to Deere's ability to control assets; and who will regard the John Deere product as if it were there own.
The future belongs to those companies that excel at leveraging their competitive advantages. We must work closer together with suppliers to bring superior products to the marketplace.