Bloomberg BusinessWeek ran a short piece this week about how John Deere’s lean inventory has created a predicament for its most loyal customers: Do they forgo immediate equipment needs and risk missing part or all of their harvest, or purchase new tractors and combines from AGCO or (gasp!) Caterpillar?
Deere has the lowest inventory as a percentage of sales among fifteen farm equipment makers. That’s not only inconveniencing its customers, it’s frustrating its dealers – one of whom was quoted as saying his sales would be 20 percent higher this year if he simply had enough stock.
Deere’s strategy is a good example of the Loss of Nerve principle at work, as organizations can all-too-easily cut back too much when growth stalls. Of course, the company didn’t make the decision to trim inventory lightly and has navigated its way fairly well through the recession.
But James Field, Deere’s Chief Financial Officer, admitted that the company had been too pessimistic about the recession’s effect on farming. As a result of the sudden, unexpected demand, Deere revised its late-2009 prediction of a 1 percent decline in sales for the coming year to an 8 percent increase. The company’s customers and dealers – not to mention shareholders – are caught in the spread.
No one ever said managing through a recession was easy, as we’ve all discovered over the past two years. But in an industry where loyalty runs deep, it’s got to make the folks at Deere see red each time a customer gives up the green to go yellow.
Steve McKee is a BusinessWeek.com columnist, marketing consultant, and author of “When Growth Stalls: How it Happens, Why You’re Stuck, and What To Do About It.” Learn more about him at www.WhenGrowthStalls.com and at https://twitter.com/whengrowthstall.