John Deere Logistics Cost Analysis

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John Deere & Company manufactures and distributes agriculture equipment as well as a broad range of construction and forestry equipment. The company is partnered with FedEx in order to maintain the logistics flow involved with the company’s transactions. FedEx is responsible for providing outsourced transportation services to 11 Deere facilities across the US and Canada. The 11 Deere facilities have different service agreements with FedEx in terms of cost and service depending on the type of business unit.

With different prices and services across the facilities, management is trying to identify opportunities to standardize costs and services across the business units. The goal of this case study is to update Deere and Company’s logistics by recommending solutions to cut logistics cost by 69 million over 3 years

Analysis and Recommendations

At the moment, all 11 Deere & Company facilities operate under a different level of on-site transportation service. The onsite transportation services and associated costs shown in Exhibit 2 (OSTMS, OSRF) vary for each facility indicating lack standardization. Inflated costs may arise from local managers having individual operating principles that are not reflecting the best interests of the corporation as a whole. Confusion among employees may result because similar objectives are being dealt with differently at each business unit. Time and money is lost, as workers will need time to organize and communicate information from facility to facility. Unproductive costs are incurring which need to be resolved though consolidation of on-site transportation service.

On-site transportation service is currently favorable with managers at Deere’s plants and could be improved by standardizing the ...

... middle of paper ... deal with inbound and outbound logistics, one that is made up mostly of the personnel from outbound logistics. These professionals deal with the second core competency of Deere, logistics, separate from the manufacturing of tractors and lawnmowers. The creation of this team helps eliminate the risk Fedex’s poor performance (managers were not pleased with Fedex’s centralized transportation management service) and need to measure performance of a 3rd part continuously. As a result, performance is self-managed. We expect as the IT system is used to optimize and plan transportation routes amongst inbound and outbound trucks, cost savings will increase more rapidly. We believe internal continuous improvement, leaner logistics operations and synergies amongst all logistics activities will lead to the $69 million goal being met by the third year after implementation.

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