iSource: Tell us about the strategy at Deere.
Stegner: We've gone through a very rigorous process to establish a global commodities strategy. That's meant analyzing and understanding how to design a supply chain that can give us a competitive advantage. It has also meant looking for tools to help us execute those strategies. And we've been pretty diligent in trying different tools and different approaches.For example, we've looked at how to use reverse auctions to speed up certain steps of the process and reduce overall cycle time. We've done pilots, working with a range of materials, to find out where the technology works best. And we continue to look at other tools.
iSource: But you've done much more than just experiment with reverse auctions, correct?
Stegner: We began examining our strategic sourcing process several years ago, as well as transforming our business processes throughout the company.
First we take on a commodity, studying it in depth and looking at the industry and the requirements. Then we study how to change the business process and how suppliers' processes need to be integrated into our own. Then we create a plan for that area and form strategic supplier relationships.
Once we have a well-articulated commodity strategy and supply chain design, we're able to move to the next stage, which is adopting the best tool to enable the commodity. For example, we're in the process of a pilot test in our corporate headquarters with a core group of users in purchasing. They're replacing our 20-year-old system with new B2B software from Ariba. Once we have the infrastructure in place we hope to expand that throughout the corporation.
The ultimate goal has been to allow people who work for Deere to have access to our new, strategically sourced agreements from their desktop, and to get the goods and services they need to them in a faster and easier fashion.
iSource: What are the potential roadblocks companies face in these efforts?Stegner: You face challenges in many areas with employees, suppliers and even the technology itself. It means people must change their ways, and change is hard. The degree of the challenge depends on the company and its structure. But to one degree or another, anytime you're going through process design, people are going to have to change the way they do their work. People who have always done things one way are now asked to consider new ways. And that can take time.
The promise is that using enabling technology will make the supply chain, and business, more effective. But delivering on that promise is the real challenge.
iSource: How has that affected Deere?
Stegner: The company has been highly decentralized. Now, things are done in a more coordinated, collaborative fashion. We are radically transforming past practices. That's led to some change management issues we've had to face. For example, it used to be that individuals were responsible for making decisions that now must be made by a team. The team must make decisions based on the good of the whole, as opposed to each members' own, individual set of criteria. In the past, a factory may have selected its own suppliers; today, we'll have a common supplier who works with us to standardize the goods and services it provides to all factories. The change piece is that, before, each factory had its own system for getting materials, and that may have worked well for that factory. Now, however, factories have to work together. This means they have to change a basic, critical function of their operations. And if you run a factory, that can make you nervous. So, although the potential benefits are huge for both the company and suppliers, the process has taken longer than we'd thought because these issues are present.
iSource: What about moving this technology to other parts of the company?
Stegner: Our objective, as we've made arrangements with our new strategically selected set of suppliers, is to take what we've done and carry it down our supply chain, so our suppliers will experience the same benefits we experience. We're currently exploring with a small group of key suppliers to see how to take that model forward. We also want to offer these benefits to our dealers and employees.
iSource: Are these strategies possible for all companies?
Stegner: Probably not. What I'm describing depends on a critical mass of resources and a relatively high level of business activity. It's harder for a smaller company to do.