Richmond, VA (PRWEB) February 20, 2006 ––
A college intern working part time at the headquarters of the John Deere Company uncovered a way for her employer to save half a million dollars a year, according to author Patricia Moody, who learned about the incident when doing research for her new book, "The Big Squeeze: Ten Ways to Cut Your Company's Expenses 10% Right Now!"
Moody said that an executive needed to keep the intern busy and gave her the assignment to dig into purchasing data to see what savings suggestions she might come up with. Apparently, no central data base existed to provide her with ideas––what items were purchased from which suppliers, or how much they cost over the life of many purchase orders. But the intern was persistent and creative. She found that by talking with key suppliers, as well as digging through accounts payable files, she was able to construct a pretty good picture of what the company was spending in different areas.
Moody said, "One thick folder in particular drew her attention. She took a close look and found that in a twelve-month period, Deere’s fifteen North American plants had purchased more than 424 different SKUs of gloves at a total cost of $1.4 million. That’s more than 424 different part numbers for a supply chain planner to track, schedule, receive, pay for, and occasionally expedite."
Practically every order covered a different part number––different sizes, materials, linings, palm configurations, colors. And the prices ranged from $6.00 per pair to more than $7.50 for the same glove. A discrete call to the supplier revealed an even more interesting fact. The same welding glove that Deere bought for $7.50 was also being purchased by a big yellow competitor for $1.50. Plus Big Yellow washed and sent the gloves out to the line for other uses after welding, while Deere operators ran to the stockroom for a fresh pair after each and every use.
"John Deere’s managers soon realized that their $7.50 custom solution was overkill," Moody said. "You might say it was cash thrown into the trash at the end of every shift."
Planners came up with a simple solution. They estimated that instead of 424 different SKUs, Deere production could easily “make do” with only twenty-five varieties for an immediate savings opportunity of 35%, or about a half million of the 1.4 million dollars being spent on gloves.
"Imagine that," Patricia Moody said. "A half million dollars to the bottom line because a college intern spotted a fat file of invoices for work gloves. Just think what might happen if top executives now doing business this way gave their supply chain managers the proper tools and a directive to find cost savings wherever possible."
Patricia Moody's new release, "The Big Squeeze: Ten Ways to Cut Your Company's Expenses 10% Right Now!," is published by The Oaklea Press and retails for $23.95. The International Standard Book Number (ISBN) is 1-892538-45-8. More information about the book can be found at Oaklea's business book website, http://www.leantransformation.com.