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    Case Study 2: Drive Shaft Decision

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    Rayan Hafeez
    The document discusses a case study involving John Deere Company's purchase of drive shafts from a Korean supplier, BPT. BPT had supplied 75% of John Deere's Korean parts purchases since 1987 at prices 40-60% lower than US suppliers. However, the quality of new shaft parts from BPT did not match previous standards, despite the long-standing relationship. While John Deere was saving significantly on costs, they pushed BPT for even lower prices without proper quality checks, resulting in a catastrophic loss. The recommendation is that quality should take priority over costs, and all shipments must undergo thorough checking regardless of trust between companies.

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    Case Study 2: Drive Shaft Decision

    Uploaded by

    Rayan Hafeez
    26 views2 pages
    The document discusses a case study involving John Deere Company's purchase of drive shafts from a Korean supplier, BPT. BPT had supplied 75% of John Deere's Korean parts purchases since 1987 at prices 40-60% lower than US suppliers. However, the quality of new shaft parts from BPT did not match previous standards, despite the long-standing relationship. While John Deere was saving significantly on costs, they pushed BPT for even lower prices without proper quality checks, resulting in a catastrophic loss. The recommendation is that quality should take priority over costs, and all shipments must undergo thorough checking regardless of trust between companies.

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    The document discusses a case study involving John Deere Company's purchase of drive shafts from a Korean supplier, BPT. BPT had supplied 75% of John Deere's Korean parts purchases since 1987 at prices 40-60% lower than US suppliers. However, the quality of new shaft parts from BPT did not match previous standards, despite the long-standing relationship. While John Deere was saving significantly on costs, they pushed BPT for even lower prices without proper quality checks, resulting in a catastrophic loss. The recommendation is that quality should take priority over costs, and all shipments must undergo thorough checking regardless of trust between companies.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    26 views2 pages

    Case Study 2: Drive Shaft Decision

    Uploaded by

    Rayan Hafeez
    The document discusses a case study involving John Deere Company's purchase of drive shafts from a Korean supplier, BPT. BPT had supplied 75% of John Deere's Korean parts purchases since 1987 at prices 40-60% lower than US suppliers. However, the quality of new shaft parts from BPT did not match previous standards, despite the long-standing relationship. While John Deere was saving significantly on costs, they pushed BPT for even lower prices without proper quality checks, resulting in a catastrophic loss. The recommendation is that quality should take priority over costs, and all shipments must undergo thorough checking regardless of trust between companies.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Case Study 2: Drive Shaft Decision

    Introduction
    John Deere Company is a chief international manufacturer and distributor of industrial farm and
    lawn equipment with 16 plants worldwide. Every year it earns around 7.2 billion dollars and
    45% of it is pure profit. Amongst the 16 plants worldwide and the plant that bought the shafts
    was Des Moines Works (DMW).

    BPT is the largest Korean source for DMW since 1987. Around 75% of DMW’s Korean
    purchases were from BPT. They bought over 2.7 million dollar worth of parts from them. BPT,
    on the other hand, also sold them parts at a price that is 40-60% below us sources.

    Problem statement
    The main problem with this case is given below –

     Reduced performance of a new seller: Although BPT is well known to DMW for its
    excellent parts supply (75% of their Korean purchases of DMW is from BPT only), the
    quality of the new shaft parts did not match with their track record.

     DMW’s Extreme cost cutting: DMW was already saving 40-60% price reduction
    compared to US sources. This gave them additional profits. But they wanted to lower the
    price even more so. This resulted in a catastrophic loss for them.
    Recommendation

     Cutting costs should only be taken into account after proper quality is managed.
     Product quality should be checked and re-checked for every shipment, no matter how
    much trust the companies have for each other.
     Delivery time should be separate from shipment time and only after a thorough check has
    been done, should a company proceed to deliver the shipments.

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