Heavy equipment supply chains have long life cycles and strong requirements for customization. The industry is currently in the middle of a major transformation. The Intenet of Things is redefining service and maintenance. The industry is trying to adapt to new business models and embrace the short lifec ycles of software upgrades. At a recent conference we had this discussion with the team from John Deere. They were fascinated by the orbit charts and wanted to see how they stacked up. We agreed to do the financial analysis in exchange for sharing on Beet Fusion. Here we share the results.
Performance and Improvement
As shown in Figure 1, both John Deere and Caterpillar (a close competitor) struggled over the period of 2006-2015. Both companies experienced a decline in operating margin and inventory turns. While both patterns show a decline in supply chain performance, overall John Deere performs better on these two metrics of operating margin and inventory turns.
Figure 1. John Deere and Caterpillar Performance for the Period of 2006-2015
In a deeper analysis, John Deere, when compares to competitors, shows that while the company did better on these two important metrics, they were unable to drive the correlations in growth equal to their peer group.
Table 1. Performance and Improvement for Heavy Equipment for the Period of 2009-2015
So when John Deere looks for supply chain leaders within their peer group, they should look hard at United Tractors and Cummins Engine.