Adaptive and Resilient Supply Chain Management:
How John Deere Uses Scrum To Create Supply Chain Solutions In The Midst Of Disruption
|Introductory Note: John Deere is working with Scrum Inc. to implement a successful Agile transformation. While the implementation began in the Fortune 100 company’s Global IT division, its success has led other areas and functions to adopt both Scrum and Scrum@Scale. This blog is an excerpt of an upcoming case study that examines John Deere’s Agile culture, approach, and success.|
John Deere used Scrum and Scrum@Scale to accomplish what other major manufacturers could not - successfully navigate the challenges caused by a global pandemic and major supply chain disruptions. Additional results for the Supply Chain Solutions teams include:
- A 79 percent improvement in Cycle Time
- Time to Market was decreased by 66 percent
- Functions/Features Delivered per Sprint delivered by Supply Chain Solutions improved by 448 percent
- The number of Deploys increased by 567 percent
- Teams reduced Overall Costs by 20 percent
- Team eNPS Score improved to 60 (anything over 50 is considered excellent)
A global leader with more than 25 brands, John Deere relies on a complex supply chain and efficient logistics to ensure production and delivery go as planned.
More than 10,000 parts are needed to assemble just one of John Deere’s award-winning X9 combines -- twice the number of components needed to build a new car.
Modern combines, just like modern farming, also require far more technology than you likely think.
Sensors, antennas, and motherboards are now just as critical as tires, treads, and tines.
Of course, John Deere makes far more than combines. Its iconic logo appears on everything from tillers and tractors to marine engines, motor graders, and the John Deere Gator utility vehicle. In all, the company manufactures more than 100 distinct lines of equipment.
Each product relies on efficient and effective supply chain management -- from procurement and sourcing to cost control, shipping, customs, and final delivery.
Overall, John Deere depends on a complex network of thousands of suppliers from around the globe to build industry-leading John Deere products.
Coordinating and collaborating with that network through digital solutions largely falls to the company’s Supply Chain Solutions teams and Karen Powers, the Digital Product Manager for Supply Chain Management and Worldwide Logistics at John Deere.
“We have responsibility for every shipment around the world,” she explains, “ from any supplier to any factory, to any component operation in between, and for the end shipment of the completed good to the dealer.” To accomplish all of this, Powers’ team also works with aspects of the company’s global trade including imports, exports, customs, documentation, and duties.
It’s a mammoth undertaking even in the best of times. And 2020 and 2021 were hardly the best of times.
But John Deere’s Supply Chain Solutions teams were more than up to the task. They successfully used Scrum as a team framework to increase throughput and Scrum@Scale as an organizational framework to optimize alignment and value delivery. Together they helped Supply Chain Solutions navigate the challenges caused by a global pandemic and major supply chain disruptions.
John Deere didn’t just survive these complex times, the company thrived. At the end of November 2021, the company announced record profits.
Jay Strief, the Group Engineering Manager of Supply Chain Solutions, connects this success in part to managing through supply chain issues and puts it in personal terms. “The awesome story here is the change in the culture; innovation, risk-taking, and many clear examples of teams stepping out of their comfort zone to deliver new value.” All of this, he adds, “was made possible through our digital transformation.“
Why Supply Chain Solutions Went Agile
Powers has been a leader in the information technology space at John Deere for most of her two-decade career.
She helmed the company’s Business Process Integration organization and an ERP implementation for the company’s Construction & Forestry Division. Powers has also led John Deere’s global analytics organization and a variety of technical teams within finance and manufacturing. She is a master of the “classic” ways of working.
When asked if there’s anything Powers misses about those pre-Agile days she quickly answers “no,” before adding, “looking back at the challenges we had to overcome in the last 18 months, I can’t fathom trying to do that without being this agile.”
Traditional supply chain management tactics had long served John Deere well. After all, it’s impossible to grow into a Fortune 100 company with a large global footprint without efficiently coordinating your network of suppliers and deliveries.
But, as a company, John Deere understands that good enough today may not work tomorrow. Powers and her teams believed the traditional approach wouldn’t be fast enough or flexible enough to keep up with the rate of innovation and business demands for digital solutions from the global supply chain organization.
Powers says procurement of digital solutions could take months to materialize - or longer. The needs of the business line making the request often changed during that time. What was delivered was what they originally asked for but not always what they now knew they needed. It was clear that John Deere needed to adapt to continue to support customers with growing technology needs and increasing expectations for efficiency.
Supply Chain Solutions needed to move faster and more efficiently to help John Deere continue to be an industry leader. So, they started to wonder, “How do we eliminate as many handoffs as possible? How do we streamline this process? How do we better interact with the customer or internal partners?” And Powers asked herself, “How do we ensure we have the right skills and the right talent to be able to respond faster?”
Innovation is one of John Deere’s core values and the company prides itself on creative problem solving. This is part of the DNA of the company and its culture. When Powers and her team learned about the Agile Operating Model (AOM) — a transformation strategy that had been introduced to modernize the John Deere Global IT group — and the collaboration with Scrum Inc. they pushed to be included in the second wave of the transformation.
In early 2020, while still in the immersion phase of their training, Supply Chain Solutions was called on to support the Global Supply Management organization dealing with the volatility, uncertainty, complexity, and ambiguity (V.U.C.A.) that has now become the norm for supply chains worldwide.
Overcoming V.U.C.A.: COVID-19 and Supply Chain Disruptions
Designated as an essential business — John Deere has continued operating and building products that help build and maintain critical infrastructure and feed the planet — throughout the pandemic.
The challenge of keeping all of John Deere’s assembly lines running would be immense. But as Powers notes, “John Deere always rises to the challenge.”
No longer slowed by the overly burdensome and bureaucratic approach, the teams quickly pivoted from a primarily strategic focus to one that balanced both the tactical and strategic needs required during the pandemic.
Working in two-week Sprints allowed the teams to replan and reprioritize faster. They pivoted to overcome new pain points or the constantly changing conditions on the ground. John Deere’s Supply Chain Solutions teams have always had strong and reliable analytics and could see potential bottlenecks in their network. When paired with Scrum and Scrum@Scale, these teams now had the flexibility to act to counter the bottlenecks before they choked off critical parts.
Perhaps the most important change, however, came from the stronger alignment and team empowerment that both Scrum and Scrum@Scale helped build.
In the old ways of working, Supply Chain Solutions teams would often be told to undertake a predetermined solution by buyers and supply base managers, limiting the opportunity for Supply Chain Solution team members to share their expertise.
The Agile mindset Scrum and Scrum@Scale bring means those who do the work, and know it best, are free to figure out the most effective way to get it done. “To me, that was the big game-changer,” explains Powers, “because you have that collective brainpower, the folks who know the data and know the ins and outs that can provide things the business didn’t even dream of.”
Take the example of the shortage of materials brought on by the pandemic. Within their ferrous components commodity group, the supply chain analytics and sourcing teams took a new approach to manage cost and risk. John Deere leveraged its bill of materials to generate greater visibility into everything it purchased throughout its supply chain. John Deere used a tier taxonomy to indicate the difference between a completed component (Tier 1) and the pieces needed to make it (Tier 2). Heightened visibility into these different tiers allowed the company to creatively overcome bottlenecks before problems arose. Thus, better managing cost and risk.
“While the initial scope started as a single commodity, additional opportunities quickly came into view as the analytics group developed comprehensive views of our total spend by category,” says Powers. “The evolution of the tiered spend project was a great illustration of Agile in action. The iterative development and ongoing connection between category managers and analytics team members ensured that the end result was useful for a broad group of internal teams.”
The team’s solution to 2021’s worldwide microchip shortage was even more creative.
As Powers explains, Supply Chain Solutions knew the shortage could detrimentally affect their businesses because “if the suppliers can’t get the chips, they can’t make the boards and we can’t put them into machines.”
So, Supply Chain Solutions asked their network how they could help suppliers secure the microchips directly. They assigned a few team members to create automation scripts that scoured the internet for microchips that would meet their specific needs and when they would be available. This new system helped supplement their suppliers.
All this, Powers explains, came with just one caveat for their suppliers, “all the chips John Deere helped secure would be sold back to us on a completed board.”
Again, John Deere’s lines kept running. That’s something other major manufacturers could not say. “Obviously we’re facing the same challenges other companies are,” explains Powers, “the difference is our ability to step out and do things we normally don’t do to help our suppliers. This, in turn, helps us secure what we need.”
Same team, new operating model and a new mindset, and the “ability to successfully operate in any situation.” That is what the Agile Operating Model, Scrum, and Scrum@Scale delivered for John Deere’s Global IT organization.
Strief puts it this way: “The digitalization of our supply chain business is not just about new technology, it is transformational in terms of new business value we are delivering. Along the way, we have delivered higher job satisfaction for our software engineers and continue to invest in developing cutting-edge skills in our people.”
Structured to Deliver Strategic and Tactical Goals
As we know, 2020 and 2021 were some of the most challenging years supply chain professionals had faced in the modern era. Just delivering tactical goals could be a major accomplishment given the level of V.U.C.A. the function faced.
The ingenuity and dedication of John Deere’s Supply Chain Solutions team members, and their use of Scrum and Scrum@Scale, meant they could deliver both the tactical and strategic.
Along with their Scrum training, Supply Chain Solutions Agile journey began with two significant structural changes which helped the teams deliver beneficial outcomes.
As Powers explains, the first such change evolved how the unit was led. “We took what use to be a single management position and broke it out into two roles with different, more focused accountabilities.”
One role, the business digital product lead, focuses on the business problems the unit was helping to solve as well as examine ways technology can help drive those desired outcomes. This is Powers’ role.
The second role, held by Strief, focuses on ensuring teams have the right capabilities with digital skills, technical acumen, and depth of experience to successfully and rapidly innovate and deliver.
This new leadership structure ensures both Powers and Strief are laser-focused on their specific areas of expertise. They have clear accountabilities, know what each is responsible for, and allow for cleaner lines of communication and minimal bureaucratic hurdles. Powers believes that this split structure, “is what really makes this model work.”
The second significant structural change involved the teams themselves.
“In the past, teams were structured around an application or specific technology,” says Powers, “so a shift from a strategic project to a tactical need could slow that strategic project down significantly.”
Powers says, “We started really looking at our applications and processes,” in new ways. They identified what was obsolete as well as what could be streamlined or grouped together. Supply Chain Solutions then completely revamped their product taxonomy around these newly identified value streams and restructured their teams accordingly.
Besides being more efficient, Powers notes this new product structure also created, “a stronger sense of empowerment and ownership,” throughout the team -- from the product owner to the team members. “That's their baby and their pride and joy. So, they get to really take that to the next level and know they had a real hand in making a positive impact,” versus just checking off a list of requirements and requests.
The teams also changed how they worked.
In Scrum, teams break large work into smaller increments. This, says Powers, along with a well-prioritized backlog meant “the teams were able to move from the tactical to the strategic without losing momentum.”
The net result of these changes in structure and process, combined with John Deere’s strong analytics, is clear; John Deere’s lines kept running — through the pandemic, supply bottlenecks, and shortages.
At the same time, the Supply Chain Solutions teams were able to deliver multiple award-winning strategic initiatives that helped the company control or recoup costs and boost efficiency. These included:
- Modernizing the ‘Cost Central’ internal application that is a hub for material cost management throughout the company. The upgrades included increased its ease of use, visibility of data like expected cost, and an overall improvement in user experience and engagement.
- A strategic initiative that leveraged analytics and the increased visibility spurred by John Deere’s Agile transformation for digital products that allowed the company to recoup some $20 million in duty drawbacks.
- A strategic initiative that combined machine learning and analytics to increase leverage buying power and cost control by creating visibility into parts with similar dimensions, components, performance, and material characteristics but different part numbers.
Additional Results and Metrics
John Deere’s leadership began their Agile transformation by setting ambitious goals. Each represents a level of targeted improvement any company would love to achieve.
Throw in the unprecedented level of complexity and V.U.C.A. that have been the hallmark of supply chains throughout 2020 and 2021 and you might expect that John Deere’s Supply Chain Solutions teams would, at best, come close to achieving them.
Instead, just six months after the end of the immersion phase of their training, Supply Chain Solutions has smashed through those ambitious goals and has achieved far more than anticipated. The data collected by John Deere on five specific areas tell the story best:
- Cycle Time: Before John Deere’s Agile transformation, the time it took for Supply Chain Solutions to go from idea to delivery was 54 days. Now it takes just 11 days. This represents a 79 percent improvement, far more than the 40 percent targeted by leadership.
- Time to Market: Leadership wanted to decrease this by 40 percent. Supply Chain Solutions has decreased it by 66 percent, from a baseline of 89 days to 30.
- Functions/Features Delivered per Sprint: Supply Chain Solutions was delivering nine functions per sprint before their Agile transformation. Leadership wanted that number to increase by 125 percent. Six months after their immersion phase ended, Supply Chain Solutions is now delivering 49 functions per sprint, an improvement of 448 percent.
- Deploys: Here leadership targeted a 125 percent increase over the baseline of 10. Instead, Supply Chain Solutions has increased that to 67, a 567 percent improvement.
- Cost Efficiency: Hiring the right people, with the right skills for the right roles allowed Supply Chain Solutions to eliminate ‘middlemen’ and costly handoffs. This allowed the teams to deliver the above results while reducing overall costs by 20 percent.
- Team eNPS: Employee Net Promoter Score, or eNPS, is an effective way to measure team happiness and engagement. A score above 50 is considered excellent so leadership set a target score of 50+ for this metric. Supply Chain Solutions’ current eNPS score is 60.
To Powers, that last data point personifies their Agile transformation. “Having fun at work and getting things done are not mutually exclusive,” she says, “we went through this journey and people started having fun, and we’re seeing the difference in the results.”
At the start of their Agile journey, many questioned if it would work in the structured and intertwined environment. “Lots of people doubted that Agile would work here. That you could do an Agile transformation in Supply Chain Solutions.”
Powers freely admits that she was one of those doubters.
Then, she had her “a-ha” moment.
“Suddenly I saw how it absolutely applies to everything you do,” no matter how complex or intertwined. She admits that “It may take a little blind faith to start your Agile journey,” before adding,” the pieces will make sense. The teams will deliver more, you’ll accomplish more, and everybody will love what they’re doing.”
That, she says, is the game-changer. For Supply Chain Solutions, Agile allows them to adapt while the game itself keeps changing.