In 2001, the commercial and consumer equipment (C&CE) division of Deere & Co. started to realize that it had a problem when it heard from dealers that they were running out of garden equipment even before hitting the height of the spring sales season, the period in which C&CE was supposed to be taking in 65% of its annual revenues, then $2.53 billion. Yet, at the same time, the division decided it was also carrying too much inventory for its sales volume. Executives knew the system needed some serious automation. The question–with 100 product lines and a network of 2,500 dealers in the U.S. and Canada–was how and where to start.

After some initial research, C&CE decided to put its money on inventory optimization software by Smart-Ops Corp., based in Pittsburgh. The software helped C&CE to determine the optimal product mix and quantities to be shipped to each dealer, based on such things as seasonal demand, manufacturing schedules and shipping constraints. "The idea here was to achieve good order fill performance for your customers, the dealers, and improve your asset turnover," says Michael Mack, now Deere's corporate treasurer but formerly senior vice president of marketing and administration for C&CE and a member of the team that brought in SmartOps. "Doing one of them well is at times easy, but to do both of them well, that's hard and requires you to do things differently than you did in the past."

As a result of the inventory management program, asset turns at C&CE rose from 0.9 times in 2001 to 2.7 last year, and on-time delivery rates to dealers shot up to more than 90% in 2004, from 63% in 2001. The SmartOps system also allowed C&CE to reduce dealer inventories by $500 million. Mack estimates that the division avoided another $500 million of inventory expense by maintaining lean and more efficiently stocked inventories as sales continued to grow.

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