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

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.