Join us for an Executive Interview with the Vice President, Global Materials, Logistics and Demand Planning at AGCO Corporation. We will discuss how AGCO was able to develop its current supply chain maturity and also how AGCO's global supply chain provides an advantage in the global market place including topics of technology, innovation, and inventory.
- Please provide some some history on how AGCO was able to develop its current supply chain maturity level?
- How does AGCO's global supply chain provide an advantage in the global market place?
- How does technology and innovation fit into the AGCO supply chain strategy?
- How does AGCO utilize inventory to support AGCO's global strategy?
- What is AGCO's global supply chain focusing on for the next 2-3 years?
Hello, everyone, and welcome to the scope supply chain virtual summit. My name is Britt Erler QN executive correspondent, thank you so much for joining us. today’s conversation will talk about supply chain strategy, innovation, and upcoming marketplace trends. I am proud to welcome our guest speaker here with us today, Gregory Toornman, Vice President of global materials, logistics and demand planning AGCO Corporation. Welcome, Greg. Thanks, right. Hello, everyone. Hello, and pleasure to have you here. I am thrilled to dive into this conversation today. But before we get started, if you wouldn’t mind giving me some context around your current role, and also what your team focuses on?
Sure, Brett, no problem. So my role at AGCO is one of leading change and transformation within the supply and demand chain. And within that ad goes view and really vision is to be able to provide the best customer service in the industry. Together with that comes their operational performance from an internal perspective that we also want to try and optimize. With that we set our global supply and demand chain strategies on a typically a five year rolling program. And within that we bring into the call it scope of what we’re working on, is what is the corporate strategy? Where do we where do we work? Where do we prioritize that we need to be in the future, versus fighting to where we want to be today. So our role within leadership is to kind of paint that future state enable our teams with resources with technology, and prioritization of where we want to take our functionality, performance, and direction of how and what we support.
Now agco has been around for over 30 years. So it’s been through a lot of ups and downs. Talk to me a little bit more about the history and how the company was able to develop its current supply chain maturity level.
Great question, Brad. And really, it’s something about really organizational optimization. As you said, we’re a young 30 year old company, we’ve just entered into our third senior leadership call it group. So when we started back in 1990, our founder Bob Ratliff, started, the company supported aftermarket from that grew a number of acquisitions, 40 plus acquisitions over his tenure, which really went in about 2004. So the first 14 years at Google focused on growing our revenue, our brands or product offerings across the globe. And then in 2004, Martin Rican hagon, came in as our CEO and chairman, and be able and began to drive the operational improvements. And how is it that we take this group of acquisitions, turn it into a synergize company, and within that leverage some of the benefits from it from a cost perspective performance, and full line agricultural OEM offering in the global marketplace, we had great results with that. Within that, you know, the big focus was somewhat functional optimization, that takes us to where we’re at today, just in the last couple of weeks, where we’ve entered our third stage, very exciting time for agco, with Eric Hanzo, to come on board. And within this stage, we’re taking it to the next level of optimization going from that functional excellence focus to one true demand driven value network, if you think about kind of the the Gartner hierarchy, and within that drive the optimization of the synergies across the functions to deliver a competitive advantage in the marketplace from a product offering, and from a service level. So that’s where we’re at right now. And along those lines, you know, within supply and demand chain, where is it that we’re going to be what is it that we need to do to drive to support the new corporate strategy? Right? It’s a very exciting time for us.
Now, how do you make sure that these values and the optimization that you’re trying to drive within the company, how do you make sure that’s aligned across all the different departments?
And this is a this is one of, for me, the most fundamental basis of success questions that organization can have. And part of that is understanding where are we at today versus where we want to go tomorrow, and ensuring that our tactical execution layer, our call it frontline, leadership, and above, are fully aligned with where we want to go. And when we want to be there. Part of success in that is having people embrace that new strategy that direction, because with any type of change, there’s going to be some challenges, there’s going to be some headaches, well, that’s part of the life right, you can choose not to change, and we know what happened to the dinosaurs, or you can choose to change and adapt and be flexible, and sometimes you have an accelerated moment. But if everybody is aligned and on the same page and striving for the same thing, And then that attainment of those strategies of those changes will happen because people own the process transition, because they’re part of the process transition design. And they own it. We’ve we’ve done that for a number of years with the the activities that I’m leading. And the success factors are super strong. Because anytime you’ve got ownership and a new process, you tend to have solution orientation, right? As opposed to some organizations which have a very strong top down effect. That can have maybe a different path to success, not to say you can’t get there. But our path is a little bit different. And it’s based on ownership.
Now, for companies that are looking to put together a similar strategy that you have in place, what do you believe are some of the key factors that they should really focus on?
Sure. Don’t just focus on trying to catch up to your competition or attain a kind of a short term performance level? Understand, really, you know, where is it, you’re gonna go over the long term? And some people will say, well, that that doesn’t deliver anything today. But but it will deliver something 12 months from now, when you’re asking that question about what’s happening today, it does take a little bit longer out of the gate. So I would definitely say tab, a long term vision define that’s one understood to that as embraced ownership, as we just discussed. So that three, that journey can be one that is stare stair stepping, right? It used to have one, okay, look back, whoa, you know, there’s a lot of work. But hey, we’re past step zero. And then a year later, you’re at step two, oh, wow, we made some great results, great progress, we’ve only got three more steps to go, you get the inertia going, based on those initial successes. And at the same time, you’re not, you know, doing all this tap dancing all the way around that often time loses a lot of value, because you’re shifting your resources, right? All over the place. People don’t understand that time.
Exactly. And like you said, keep that momentum going, you know, because once you kind of stop, it’s really hard to pick it back up again. And I want to dive in a little bit more deeper into the strategy that you have in place, and talk about how adpost supply chain really is an advantage in this global marketplace that we’re seeing today?
That’s a great question. And that kind of goes back to the previous questions that you asked. So back in 2012, when I was asked to lead on the materials management side of global transformation, we set our vision of where is it that we want to go? And what is it that we want to be at that point in time? It was we said we want to be a competitive advantage. Well, what does that mean? Well, that means understanding the marketplace we were at at that point in time, you know, kind of the challenges that we had, but also where what’s going to what is the future going to be? And what we said back in 2012 and 13 was the future will be significantly different than it was then why global trade? Okay, with that global trade, there’s all kinds of global risk. Okay, how do we protect ourselves from that? How is it that our readiness in 2018 with a systemic and, and integrated set of b2b as well as transportation will allow us to be agile and flexible, in a much different environment, at that point in time in 2012, that was much different than what success would look like in 2012. So part of that strategy was not just trying to get some short term incremental, but really big picture change that takes time resource to realize, but with with that breadth, be able to set your standards and along the way, get your organization behind you to demonstrate that you can deliver a competitive advantage in the marketplace. And for us, there were so many tools that we’ve developed along the way that were integrated in a global structure that allowed us what we call the real test drive during the COVID duration during 2020. And our tools pick things up as early as December of 2019. those tools that lead the next series of things to happen for us from a predictability of where the COVID infections would go and where they would cause our supply network to struggle. We were able to pull things ahead. And why is that because we had the tools and drive to look at the data earlier and ask the question, What if, if this happens, what do we do if that happens? What do we do? What decisions do we have to take now? And as a result of that we were able to migrate through most of those headwinds where there was government restrictions in place particularly, and support our business, support our customers Most importantly, at the most critical time in agriculture when you put the seed in the ground, and we were very successful in taking care of our customers. Customer, customer advantage right or a competitive brand. in the marketplace,
definitely. And I think that’s something most companies struggle with, because they didn’t have that in place beforehand, and they weren’t prepared for what was to come. And obviously, you know, with COVID, we’ve seen everything change into this virtual world. But it’s also no secret that technology and innovation have always become a huge factor in any side of the business. Talk to me a little bit more about that and how it’s played a role in the supply chain strategy for you.
Absolutely. So there’s really three key areas that we would we would consider technology a huge advantage. One of those is just your data, right, your data transparency. So in a global organization is what agco has, we have what we call a rolling 24. So if I have an issue around the world, I can call upon our Chinese team or in Asia, or European teams spread across our South American team or North American team to help each other. They can follow activities through the systems we have in their local language, in real time with the same series of information that their partners on the other side of the world are working. Within that it enables us to act as one globally integrated team that is very effective with a common set of data, local language, local timezone execution, which helps things happen faster, it also enables our supply network to have a more efficient working relationship with agco. So with that, a customer of choice becomes or comes into play, which for us is a big thing, right? So the second area would be the standardization and ease of doing business with agco with their global supply network. So the standardization piece is quite important, because as I referenced earlier, agco is a company that grew through acquisition. And each of those acquisitions may have had a little bit different way of working with our supply network. When we asked our suppliers back in 2013, how is agile to do business where they said complicated, you’re you know, you’re you’re called agco. But you operate in so many different ways. We said, we want to fix that because we will benefit because you benefit. As a result of that. We implemented our global b2b, we utilize SAP as our back end on the ECC side. And we use SMC for a portion of our suppliers right in the small to medium range. And the traditional EDI II activities for those larger suppliers that are have a whole bunch of workload. As a result of that, again, it helps to work in efficiencies, because our teams can can work and help each other local language, local timezone. But the suppliers are now working with a standardized set of agco tools, which allows them to become more efficient. The other side of that, if we’re going to change what we produce in different parts of the world, we don’t have to go through training suppliers on how it is to do business with a new region or new factory. For them, all they see is when they print out their their billing invoice is it’s going to a different location, the invoice and everything will be electronic to us what helps us and helps them. So that would be the second element that helps and again, that drives performance, simplicity, cost, and just overall efficiencies. The third element, very, very important is that connectivity, you’ve heard me share over the course of time, or last bit of time is how we’re connected and how the teams can help each other. That’s only as effective as the leadership and the operating culture, right. We call that our family. So if the China group has a challenge, and it with a European supplier, the European team jumps over it like you would not believe in support of their, you know, their brothers and sisters in China and vice versa. We see that operate outside just over the the traditional supply chain activities. If you think about COVID last year, and this year, for that matter. Unfortunately, when it started in China, one of the biggest things of getting our factories and supply network restarted was what type of operating conditions do you need? What type of personal protective equipment Do you need and all of those flows? Well, when we saw what was happening from the Chinese government reopening requirements, we said Wow, we have a challenge with in China have enough masks and gloves and all this stuff to support ourselves and our supplier. So immediately the call went out to our the rest of the agco family. And I think they’re like 70,000 masks were like in the air within 24 hours. And after that it just kept going and going. And then as the crisis moved out of China, China started up, the same thing happened out of China going to the rest of the world, right? So that third element, that network, that connectivity, that family of fighting for each other, versus fighting each other is something we don’t deal with, right we fight for each other and that time and that efficiency is then converted to drive more value to the organization. And also be the things.
I think that’s fantastic. And one of the key elements of that is you almost don’t give yourself time to panic, because instead you come together and you figure out how you’re going to solve it. What are you going to do to make these changes as quickly as possible and pivot in the direction that you need to, as opposed to kind of sitting back and letting it all kind of take you over? So I think that’s a great strategy to have in place. And not one that you know, like I said, smaller companies necessarily, may not have had the tools and things like that in order to handle it. And now I do have a question. What are some other technology disruptors in your experience that you believe deserve immediate attention, especially right now?
So one of the challenges that we asked ourselves back in 2013, we were looking at our transportation management was, where do we need to be with our carrier performance management, you know, and how the suppliers are shipping from their point of origin to the point of destination, Frankel, wherever that may be. Some companies have went after this kind of real time, you know, track and trace and be able to see where my shipment is at a point in the transportation cycle. We’ve taken a little bit differently, where we focus on the performance, right? Did the supplier create their transportation order on time, that typically starts 24 hours before the shipment starts? That’s your first point of opportunity. Did the carrier show up on time did the carrier depart on time and all the way up through arrival, we have 13 different we call KPI points that we effectively manage. And what we’ve found is that typically, these days now we’re last, you know, 12 months as the performance has gone down a little bit, because of the global shipping will be called crisis right now. But we focused on driving that execution and the 95 plus percent. And as a result of that, we don’t necessarily need to invest a whole bunch of money into the track and trace piece that eventually leads you to try to drive the performance. We said, Let’s drive performance first. And that will yield the confidence to our sites and distribution centers that the logistics network, the freight movement network is going to be on time or if it’s not, we’re going to catch it before a outside firm would would be able to tell us so from a differentiation perspective, again, our our TMS has been probably one of the leading type of innovations that we brought to the table a definitely a differentiator, right, when you talk about four PL that I’ve spoken with you folks about in the past, we were one of the very early adopters of that back in 2013. And as a result, we learned so much along the way to what people now are just starting to conceptual above conceptualize about, you know, we’ve got 3000 suppliers connected into it across, you know, 50 plus agco sites. And, and then the second that I think a lot of people may be interested in is our risk management, right? And the things that you talked about how do you identify risks that are real, but also have time to mitigate it, and then that point, risk management is managing and saving time. So in that particular case, what we were able to do again, during the COVID, kind of q1 q2 of 2020, in Europe, North and South America was utilize our risk management system to determine where those infection rates were going by postal code, we then could tie that to where suppliers were, and I could with surgical precision, tell you which suppliers were likely to have issues. A, B, or C? Well, C is because their local hospital beds are likely to be filled in eight days, start pulling things. And so those two, you know systems complement each other. And to the question earlier about innovation, It sure has helped agco during the last year.
Yeah, I can imagine that’s incredible. Like I said, not many companies have their system, their strategy is organized as you guys do. And I think part of that was probably trial and error, as well. It’s not always a perfect system. But you guys have found something that works for everybody across the board globally. Now, I want to shift a little bit and talk about your inventory and how that’s been a huge factor in your global strategy.
Sure. inventory at the beginning was one of those things that it’s gonna go down, right, like most companies, it’s too much. Okay, well, let’s ask ourselves a question, what is the right level? What should we have? At the time we focus a bit more on value, we evolved to looking at the days of supply, data supply goes up and down as your market does value doesn’t necessarily and that can lead to some bad decisions. So what we’ve really done is taken a more objective view of how and where we want to use inventory to solve what type of need in the past we focused on finished goods inventory is it’s kind of unnecessarily evil. Well, let’s put that into our raw material where we’ve got more flexibility and drive or true BTL built order in support of it. demand driven value network. And as a result of that inventory for agco is not necessarily viewed as a negative, it’s used as a tool to support our growth strategy, and different segments of our business brand or product, we may utilize inventory or use inventory to help support our growth.
Exactly. And I think that’s another major factor as well is, you know, deciding how you want that inventory to look, how is it going to benefit your company and the strategy that you have in place, and based on what you’ve seen this year, and this may be too early to tell, but in two to three years, what is your company going to focus on to ensure that this strategy stays in place, but it’s also continuing to evolve with the changing marketplace,
starts with the customer. Right? Absolutely starts with the customer, whether aftermarket business, or OEM original equipment, business, whatever it might be. So we understand where we will be going for us corporate strategy relative to customer need customer experience, satisfaction and excellence, we will build our strategy in support of that, to what may be changing on top of what we understand from a supply and demand chain perspective is happening in the markets across the globe. When we say the markets across the globe, the risk factors, right. If I have the potential to grow in this market, because of exchange rate, I then need to be prepared to respond quickly to that market, I need to have some inventory, I need to have shorter lead times. So with that, as we’re developing our sourcing strategy, we get in this level of supplier segmentation that says what are the right suppliers that we need to support that go to market strategy? And if that may mean that I may have to pay a little bit higher price to get a better supplier that supports this go to market strategy, then we’ll take that decision, because it’s in support of that customer experience.
And do you foresee any trends that you expect? Or is that something as well that you think will come within, you know, just months and months of experience? What’s going to change? Well, we
know trends are going to change, right? We’ve experienced over the last 12 months, at least from agco perspective, something that we didn’t plan for, we plan for being able to be flexible and adaptive and change. But not something of this, this magnitude. We were I won’t call it lucky. But we were successful in guessing of what that future would be back in 13. And we put the proper tools and processes and things in place to support that success. Okay. So as as a result of that we will continue to understand where we need to go in the future. But it’s really going to be driven by that whole customer experience. And understanding what is it we need to do to protect that experience? That means understanding where the markets are going, where those potential risks may be? And how was it from a technology innovation perspective, we need to prepare to support things that we don’t even know are coming our way.
I couldn’t agree more. And before I let you go, any final pieces of advice that you would have to leaders that are in a similar position as yourself,
it goes back to your question about the strategy and current together, ensure that you’ve got you know, the tactical layer of execution involved. They’re so they’re so educated, so aware of some of the headaches that they were fighting. And as an organization we have to overcome, get their ideas. Secondly, get their input to what that future state looks like. So that they can own it along the way, right and feel good about it. But also take a look at your talent, right, the type of individuals that we’re going to need in the future within our teams are going to be very adaptable, right, and they’re almost become problem solvers. And what they’re solving isn’t really that important. It’s the process, the technique, it’s the leadership and working with people and solving through people that delivers the advantage. So if you’re able to tie together your strategy with your organization, and that is in support of your corporate strategy, and you’re trying to be prepared for what you don’t even expect to happen. And you’ve got the right people, you’ll be more successful than chasing the carrot each year. And you know, tried to have the right people make sure you’ve got the right people that can operate in that uncertainty, because culturally they know how to do it.
Absolutely. I couldn’t agree with you more. I think people is at the top of everyone’s list this year and really creating that culture that helps you Everyone, you know, everyone’s at a different kind of place in their life, whether they’ve got kids that are going to school at home while they’re working full time. So really creating that environment that’s best for everyone. Thank you so much, Greg for providing these insights. And hopefully this will kickstart a lot of companies that are looking to put together a supply chain strategy Such as ad posts, and I want to thank everyone for joining us as well at this summit. If you have any final questions for Greg, please be sure to comment in the discussion forum below. Be safe, be healthy and enjoy the rest of the show. Thanks, everyone.
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