According to a recent report from Supply Chain Dive, John Deere is taking multiple steps to improve its components supplies and improve its inventory levels. This includes dual-sourcing components, investing in additional manufacturing capacity for some of its suppliers and keeping a larger inventory of raw materials. This follows a rise in Deere's order backlog, which it hopes to tackle through higher production rates.
“Our factories are focused on finishing and shipping the remaining machines in the fourth quarter which will help our progress toward restoring productivity and efficiencies going into next year,” said Rachel Bach, Manager of Investor Communications, during Deere's third quarter earnings call.
John Deere has stated it will maintain higher production rates over the next two quarters, with executives noting the company’s been able to achieve its highest production line rate of the year.
“Any time we have to touch machines or move them in our factories more than once, it comes at a cost,” said Joshua Jepsen, Deputy Financial Officer at John Deere, during the earnings call. “In that respect, 2022 has been a challenge, given the ramp in demand juxtaposed with the lost production in the first quarter and a challenging supply environment. So, we’ve really been chasing production all year as a result.”
Editor’s Take:
Some interesting lessons to be learned from this article. One, we are seeing the shortcomings of “just in time delivery”. For many years, just in time was touted as the way to increase efficiency, cut down on inventory, etc. It worked well until it didn’t, so now we are going back to having some inventory on hand.
The second lesson is about having reliable suppliers and making sure they have the appropriate capacity, or perhaps having multiple suppliers for the same part or input. Once again, history is demonstrating that maybe we didn’t have it all wrong back in the day. If the pandemic demonstrated one thing clearly – we can’t put all of our eggs in one basket, especially if that supplier is overseas, such as China.
Last, having a reliable workforce and keeping production rates high enough to meet demand is a good thing. Many businesses are struggling to get the help they need and to maintain an economically viable business. Deere is adjusting to the “new normal”.
Perhaps we all need to re-think about the “new normal” and how we can adjust to thrive instead of simply survive. As a CAD member, we offer you several tools that can assist in meeting that challenge. We provide a marketing package for ways to communicate with farmers and ranchers; programs to show off your inventory, like AgTruckTrader.com that is targeted to the agricultural customer; and an array of products and services called AgPack® that will not only help your customer reduce their input cost on things they need and want, but, just as importantly, help you as a dealer to beat your competition and protect your margins while doing it.
