[From iSource Business, July 2001] It would be hard to find a major manufacturing company that isn't feeling the urgent need to adopt competitive new technologies. And that's especailly true for farm equipment maker Deere & Co. In fact, for several years, the $13.1 billion Moline, Ill. giant has taken great strides in finding ways to deploy advanced technologies in its business, by doing everything from buying more than a dozen small technology firms to launching an Internet-based service to help farmers better manage their crops.
So, it's not surprising that the company has also turned its attention to enabling its supply chain in an equally ambitious way. Jon Stegner, director of supply management and strategic sourcing, talked to iSource about the strategies that manufacturers need to follow to successfully apply Internet-based technologies to the supply chain and the benefits they can reap as a result.
iSource: What's the key to using enabled technology effectively in the supply chain?
Stegner: The key is to see the potential, while keeping the technology in perspective. The potential for huge changes in speed and the lowering of costs is impressive, but that can be successful only if there's a larger strategy at play.
Let me explain. Some people look at a new technology and say, That's our strategy. But the more effective approach is to look at it as a tool, one step of a process. Technology is not a strategy, in and of itself. It's part of an intelligently designed, strategic supply chain.
iSource: Where do you begin?
Stegner: Each company has to evaluate the technology and tools out there and decide, first of all, whether they're going to use them, and then how to use them to compete.
Companies must also realize that using any of these tools requires a lot more than just installing them. It requires the transformation of business processes.
iSource: So, successful deployment involves fundamental changes in the business?
Stegner: We feel a company needs to transform its business processes first, and then select the technology that would best support those processes. As a second phase, form the backbone, and then apply the technology. If a company doesn't do that work up front, there's really not much to enable, other than just going from doing lots of transactions on an old system to doing them on a new one.
There's been a lot of hype and the promise that if you use these technologies you'll gain significant cost reductions. But that may be a hollow promise if you don't take the time and effort to transform your company's processes. The point is that the technology can allow you to create and use more efficient strategies. If all you do is automate or speed up an old strategy, however, you're not advancing.
iSource: What are the risks you might face if you don't follow through?
Stegner: Take auctions, for example. You can send conflicting signals to your suppliers if you embark on a strategy that says, Whenever I acquire materials I'll just auction off that request. In other words, whenever you have a need you just put out an auction. That doesn't build a lot of supplier loyalty and long-term partnerships, which you need if you're going to have long-term staying power.
iSource: What other risks do you see in the use of enabled technology? What about sharing information?
Stegner: If you have a solid relationship with your suppliers, there are probably more benefits to sharing information than there are risks, especially when it's done with a sound, strategic intent in mind. I suppose if you don't have that strong connection with your suppliers, there might be some risk when it comes to sharing information. If your supplier doesn't view the relationship as being long-term, he could potentially take the information gained and use it to his own end. If you're in a partnership with him, that lessens the risk.
At Deere, we've been building partnerships with our suppliers. Relationship building is really the foundation of what we do.