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

Author

Listed:
  • Valerie Tardif

    (SmartOps Corporation, Pittsburgh, Pennsylvania 15212)

  • Sridhar Tayur

    (SmartOps Corporation, Pittsburgh, Pennsylvania 15212)

  • James Reardon

    (John Deere Worldwide C&CE, Cary, North Carolina 27513)

  • Reid Stines

    (John Deere Worldwide C&CE, Cary, North Carolina 27513)

  • Pete Zimmerman

    (John Deere Worldwide C&CE, Cary, North Carolina 27513)

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.

Suggested Citation

  • Valerie Tardif & Sridhar Tayur & James Reardon & Reid Stines & Pete Zimmerman, 2010. "OR Practice---Implementing Seasonal Logistics Tactics for Finished Goods Distribution at Deere & Company's C&CE Division," Operations Research, INFORMS, vol. 58(1), pages 1-15, February.
    • Handle: RePEc:inm:oropre:v:58:y:2010:i:1:p:1-15
    DOI: 10.1287/opre.1080.0641
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    References listed on IDEAS

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    Cited by:

    1. Lixin Tang & Feng Li & Zhi-Long Chen, 2019. "Integrated Scheduling of Production and Two-Stage Delivery of Make-to-Order Products: Offline and Online Algorithms," INFORMS Journal on Computing, INFORMS, vol. 31(3), pages 493-514, July.
    2. Sheu, Jiuh Biing & Kundu, Tanmoy, 2018. "Forecasting time-varying logistics distribution flows in the One Belt-One Road strategic context," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 117(C), pages 5-22.
    3. Chuang, Chia-Hung & Zhao, Yabing, 2019. "Demand stimulation in finished-goods inventory management: Empirical evidence from General Motors dealerships," International Journal of Production Economics, Elsevier, vol. 208(C), pages 208-220.
    4. Sridhar Tayur, 2017. "OM Forum—An Essay on Operations Management," Manufacturing & Service Operations Management, INFORMS, vol. 19(4), pages 526-533, October.

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