John Deere Creates Dynamic Network Design

Taps SmartOps to provide analysis and optimization of the supply chain logistics network

Taps SmartOps to provide analysis and optimization of the supply chain logistics network

Pittsburgh, PA — March 2, 2005 — SmartOps Corp., a provider of supply chain optimization software solutions, announced today that it has entered into another commercial agreement with Deere & Co. to provide the SmartOps Multistage Inventory Planning & Optimization (MIPO) software solution for dynamic network design.

Since 2003, the $3.5 billion Commercial & Consumer Equipment Division — which manufactures and markets John Deere-branded lawn and turf care equipment — has used MIPO to automatically develop recommended stocking levels (RSLs) at 2,500 North American dealer locations, plants and warehouses for more than 300 commercial and consumer equipment products.

The scale of the optimization makes it one of the largest and most complex examples of multi-echelon stochastic inventory theory applied in practice. The impact to date has been an $890 million reduction of finished goods inventory and an increase in on-time shipments from factories to dealers from 63 percent to 92 percent.

Historically, supply chain design projects have been mere analytical exercises and have not resulted in real value due to the difficulty involved in actually executing to the newly adopted design, said Dr. Sridhar Tayur, CEO and founder of SmartOps. We are grateful for Deere's continued belief in and passion for coupling leading-edge operations research with enterprise software to make their supply chain more agile, adaptable and aligned.

Tayur said SmartOps is working with John Deere's Commercial & Consumer Equipment Division to broaden its use of MIPO to include the analysis and optimization of the supply chain logistics network. However, unlike traditional supply chain design tools and desktop inventory safety stock calculators, MIPO enables overall network optimization in conjunction with the optimization of millions of actual inventory targets. This ensures that the expected savings from any design changes are immediately actionable and, ultimately, achieved.

MIPO determines the best possible inventory and product availability plans given inherent uncertainties, time-varying data, multi-location and inventory stage complexities, and aggressive customer service goals. MIPO generates optimal inventory targets for each stage of the supply chain while providing visibility into each reason inventory is needed, including safety, cycle, pre-build, pipeline and merchandising stock requirements, by item or stock-keeping unit (SKU), to meet desired service levels.