OR Practice—Implementing Seasonal Logistics Tactics for Finished Goods Distribution at Deere & Company's C&CE Division

Abstract

In 2004, Deere & Company's Commercial & Consumer Equipment Division (C&CE) engaged in a new logistics initiative to further enhance its outbound distribution network. The goal was to offer faster and more reliable replenishment to 2,500 North American independent dealers while keeping logistics costs in check by deploying different tactics during the peak (February–July) and offpeak (August–January) selling and shipping seasons. Deere and SmartOps worked together under a shared reward contract based on actual cost reductions accomplished (that are additive over the benefits that may have accrued for other reasons). Through careful analysis, validation, and verification of the data available, the team was able to develop detailed models of the current and alternative distribution systems. By formulating the key replenishment and transportation decisions and constraints as a mixed-integer mathematical program, the team was able to use powerful off-the-shelf solution software to find improvements. The ability to fix variables to perform what-if analysis also helped in the acceptance of the recommendations. Over a period of three years, Deere significantly improved service to 82% of their dealers (without any reduction in service to the other 18%) while reducing logistics costs by over $10 million. The novelty of this work stems from the dynamic seasonal optimization of Deere C&CE distribution network and replenishment decisions as a way of meeting service and cost reduction mandates, the creative use of tactical network optimization operations research models and what-if analysis to meet the implementation goals under time constraints and in the scrutiny given to the results.

OM Forum—An Essay on Operations Management

“…These multiyear relationships enabled me to execute under a entirely new type of contract. Specifically, at Deere we designed a flexible supply chain that depended on the season: in the "on-season," April-September, the distribution network, logistics strategy, and forward inventory placement were different from in the off-season (Tardif et al 2010). This in itself was a new approach to designing supply chain flexibility for Deere.…”

Recovering the Divide: A Review of Strategy and Tactics in Business and Management

“…A further example is provided by Tardif et al . (), who show how a manufacturer of agricultural machinery profited from adopting a tactical focus on taking small steps and close coupling with the environment, continually adjusting their management approach to local circumstances without any strategic fixing of the content or direction of these changes.…”

“…Similarly, Kolb (1983) describes how sustained tactics in labour mediation processes represent a strategic modus operandi, as turf wars that come with fixed and entrenched negotiating positions are avoided by repetitively getting parties to meet and (re)negotiate their claims. A further example is provided by Tardif et al (2010), who show how a manufacturer of agricultural machinery profited from adopting a tactical focus on taking small steps and close coupling with the environment, continually adjusting their management approach to local circumstances without any strategic fixing of the content or direction of these changes.…”

Logistics Cost Accounting and Management in Malaysia: Current State and Challenge

“…Moreover, identifying total logistics costs accurately is useful in evaluating the tradeoffs between each cost of the logistics activities to optimize the use of available resources [4], [13], [18], [19]. The deepen understanding can provide practical guidance on how to overcome the complexity issue in the logistics cost management and find a balance between complexity and reliability, leading to a renaissance in logistics cost management use.…”