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Early Supplier Integration in the Design
of the Skid-Steer Loader
Teaching Note
Scott has been offered a new position as supply management manager for a
new Deere & Company manufacturing facility of a yet-to-be-designed product
(i.e., skid-steer loader). As part of his new job, he must make a proposal to
identify specific suppliers to integrate into skid-steer loader development
process and specific ways to effectively integrate these suppliers in order to
meet aggressive target costs.
Immediate Issues
• To identify and define criteria for integrating suppliers into the early phases
of the skid-steer loader development process.
• To identify and specify critical principles, practices, and techniques for
integrating suppliers effectively into the early phases of the skid-steer loader
development process.
Basic Issues
• Why is supplier involvement important?
• Why should certain suppliers be integrated into the product development
process, particularly in the early phases?
• How should suppliers be integrated into the product development process?
• What structural and infrastructure support should be provided to ensure
effective integration of suppliers into the product development process?
1. To understand the meaning and significance of supplier integration.
3. To recognize contextual factors that would increase or decrease the
effectiveness of early supplier integration in the product design process.
4. To specify critical principles, practices, and techniques for successful early
supplier integration into the product design process.
Suggested Student Assignment
2. Birou, L. M. and S. Fawcett. 1994. “Supplier Involvement in
3. O’Neal, C. 1993. “Concurrent Engineering with Early Supplier
4. Smith, G. B. 1990. “Co-makership: The Japanese Success Story in a
5. Wheelwright, S. C. and K. B. Clark. 1992. Revolutionizing Product
Development: Quantum Leaps in Speed, Efficiency, and Quality. New
York, NY: The Free Press.
Discussion Questions for Use in Class
1. Suppose there are 100 potential suppliers, how many suppliers do
you think should ideally be integrated in the early skid-steer
development process? Why that many or that few?
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% of Final Product Value
Impact on Final Product Reliability
Costs of Production Tooling
Time to do Production Tooling
High
Low
Low
Low
Low
The first factor, Percent of final product value, refers to the relative value of a
supplied item – part, component, subassembly, etc. – to the value of the final
product. When the value of the supplied item relative to the final product value
is high, the supplier should be integrated early in the product development
process.
The second factor, Impact on final product reliability, refers to the extent to
which a failure in the supplied item compromises the primary functionality of
the final product. When a supplied item failing can significantly compromise
the primary functionality of the final product, the supplier should be integrated
early in the product development process.
The third factor, Costs of production tooling, refers to the monetary investment
to design and to implement the production tools necessary for making a
supplied item. The higher the total costs of production tooling, the earlier the
supplier should be integrated in the product development process.
The last factor, Time to do production tooling, refers to the length of time it
would take to design and to implement the production tools necessary for
making a supplied part. This factor is related to the third factor. Again, when
it takes a supplier a long time to design and implement the production tools
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necessary for making a supplied item, the supplier should be integrated early
in the product development process.
Integration Principles, Practices, & Techniques
Again, a number of principles, practices and techniques can be elicited.
Clearly, there must be resources available to support the activities needed for
effective integration. But generally, one critical guiding principle should be the
development of mutual trust and open communication. To this extent, such
practices as sharing of confidential information, providing common meeting
spaces, providing access to organizational and supply chain-wide resources
can support the development of mutual trust and open communication.
Finally, with technological advances, the creation and protection of an
electronic repository for design related information that can be accessed by
both parties would go a long way towards generating trust and facilitating
communication. In Exhibit 2, a summary of Deere’s evaluation categories for
supplier integration into the product delivery process should shed some
insights into how Deere & Company tries to integrate suppliers.
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Early Supplier Integration in the Design
of the Skid-Steer Loader
Exhibit 2
Supplier Integration into the Product Delivery
Process – Evaluation Categories
Evaluation Category Justification for Inclusion
Metrics
To successfully implement new products, Deere and the supplier
need to agree on the objectives of the program. This includes
performance objectives, quality, schedule, cost and investment. If
results are not supporting objectives, Deere and the supplier need to
have regular communication on metrics and change direction.
Resources
In order to meet project objectives, a sharing of Deere and supplier
resources is necessary. Suppliers and Deere need to have access to
the resources of all the companies in our supply chain (people,
tools, alliances with other suppliers, alliances with customers, etc.)
and use these resources to meet mutually agreed objectives that
enhance the value of both Deere and the supplier’s business.
Sharing of these resources includes,
but is not limited to these
activities: establishing product performance, establishing cost
targets, quality planning, detailed design and verification.
Responsiveness
Deere demonstrates a commitment in our responsiveness to your
needs. This includes
timeliness and accountability of information,
availability of personnel to help resolve issues and the degree of
assistance required to achieve closure on business issues.
Attitude
A high degree of commitment is required from Deere and its
suppliers t
o have a successful business relationship. Deere’s
commitment is measured in the degree of teamwork,
professionalism, and acceptance of change and new ideas.
Communication
Deere’s acceptance of responsibility to communicate is critical in the
Deere/su
pplier relationship and is measured by the quality,
accuracy, conciseness and professionalism of Deere’s
communications. The issue of confidentiality of information and the
degree of follow-up and clarification required of supplier personnel
to reach closure is also addressed. Deere needs to communicate
long-term plans and objectives with the supplier to help them plan
their future needs.
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Two Examples
Two examples, the Fuel Tank and the Headliner, can be used to illustrate how
the successful application of the ESIDS helped Deere and its supplier.
The Fuel Tank Example
The fuel tank on the skid-steer loader is a component that can be mapped onto
the early supplier integration decision scheme as follows:
• Percent of final product value: low = 2 percent
• Costs of production tooling: high
• Impact on final product reliability: low
• Time to do production Tooling: high (typically 12-14 weeks)
Two out of the four criteria on the Early Supplier Integration Decision Scheme,
suggest that the supplier should be integrated in the early phases of the skid-
steer loader development process. Once the supplier was selected, Deere
engaged in a close collaboration with the supplier to establish a climate of
trust. This was a prerequisite for the supplier to openly share sensitive cost
data with Deere.
The collaboration with the supplier was key to the meeting of the project goals.
For example, in order to assess product quality, Deere required that tank
prototypes be manufactured with the same process they would have gone
through in volume production. This required metal dies to be cut.
Unfortunately, after six months of work, the fuel tank was still 30-40 percent
above target cost, so that many engineering design changes would likely be
required to comply with target cost requirements. Given the 12-14 weeks lead-
time for the fuel tank die cutting, this situation was seriously threatening
Deere’s capability to meet the 24-month deadline. By collaborating with the
fuel tank supplier it was possible to reduce the die cutting lead-time from the
typical 12-14 weeks to just 7 weeks. This successful collaboration ensured on-
time and on-cost fuel tank design release.
This supplier was integrated by multiple methods. For example, the suppliers’
design personnel regularly visited the design team at the Knoxville facility every
two weeks to discuss advances in design, as well as engineering changes
needed to meet cost targets. Moreover, Deere and the supplier shared CAD
drawings and files through a shared database to ensure timely exchange and
alignment of product design information.
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The Headliner Example
The skid-steer headliner is a component that can be mapped onto the Early
Supplier Integration Decision Scheme as follows:
• Percent of Final Product Value: low = 1%
• Costs of production tooling: high
• Impact on final product reliability: low
• Time to do production tooling: relatively high
The headliner, located just below the cabin roof of the skid-steer loader, houses
instrumentation, provides sound insulation and contributes to interior cabin
aesthetics. The decision not to integrate the headliner supplier early in the
beginning of the product development process led to a number of problems. In
fact, when the supplier was contacted at an advanced stage of final product
design, Deere discovered that the design of the skid-steer loader up to that time
made it impossible for the headliner supplier to meet cost targets. At the same
time, component design changes became problematic because the design of
interfacing components had already been frozen. For this reason, the supplier
had to make a set of tentative die changes, increasing the cost of production
tooling from $40,000 to $120,000.
Additional Points to Raise
1. These four criteria are based on the experiences of Deere & Company,
and, hence, might be biased by Deere’s corporate culture and the
types of products that exist in its portfolio.
2. The four criteria probably have different weights depending on the
type of item that is being supplied. This may explain why the
Headliner supplier was not selected for integration early in the
product development process.
Teaching Suggestions and Suggested Time Plan
1. This case can ideally be assigned to students before assigning the
2. This case is best used with students who have been introduced to new
3. Depending on student profiles previous exposure to the new product
development process, etc., the instructor might want to quickly sketch
4. Otherwise, the instructor might want to begin by dividing the board
into two equal halves. On one half, the instructor should solicit a
broad list of supplier integration screening criteria. The instructor
5. On the other half of the board, the instructor should solicit
principles/practices/techniques that enable effective integration of
6. When discussion on the two listings has been concluded, the
instructor might want to show Exhibits 1 and 2 and ask students to
