The encyclopedia · Engineering & Operations · Operational decision · 2001–2004
Deere's C&CE cut $890M of inventory and lifted on-time shipments to 92%.
Deere & Company set weekly inventory targets with multiechelon optimisation to pull orders, cutting inventory by $890M and lifting on-time shipments to 92%.
Deere & Company
the move
Deere & Company's Commercial and Consumer Equipment division had about $3 billion of sales and 2,500 dealers, but plants shipped late and inventory sat high while service risked falling.
The common fix is to trim inventory everywhere. Deere instead used multistage inventory planning and optimization, a state-of-the-art stochastic inventory approach, to set trustworthy weekly inventory targets by product family.
Those targets were then paired with dealer incentives to convert the division from pushing product to pulling it, so inventory moved only when a real order called for it.
The change lifted factory on-time shipments from 63% to 92% while keeping customer service at 90%, and between 2001 and 2003 Deere reduced or avoided $890 million of inventory, improving annual shareholder value added by $107 million.
why it works
- Push systems build inventory against forecast error, while targets make pull workable
- Multiechelon optimisation handles 100 product families and a 26-week horizon
- Trustworthy weekly targets let dealers order what they will actually sell
- Dealer incentives tied the new targets to behaviour, not just numbers
what transfers
Averages hide the problem; the lever is trustworthy per-item inventory targets that let a network run pull, not a single global number.
what came after
Deere's factory on-time shipments rose from 63% to 92% with customer service held at 90%. Between 2001 and 2003 it reduced or avoided $890 million of inventory and improved annual shareholder value added by $107 million, and by end-2004 was set to exceed $1 billion a year ahead of plan.
references
- Improving Asset Management and Order Fulfillment at Deere & Company's C&CE Division
- Improving Asset Management and Order Fulfillment at Deere & Company's C&CE Division
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