John Deere Offshore Production
- The Reasons why John Deere wants to offshore Tractor Production
Offshoring refers to the relocation of production functions and services to a different country by a company. John Deere is a company based in the United States and is well known for its assembly and production of agricultural tractors. Its CEO, Samuel Allen, believes that offshoring the company’s tractor production would, by 2018, increase their total sales to $50 billion, with half of it coming from other countries except the United States and Canada. In addition to an increase in the company’s revenue, offshoring production would help in expanding the firm to global levels.
On the global scale, the production functions and services of the company would go on for 24 hours due to variations in time zones. Offshore tractor production would equally lower the costs of production. The company would cut off the transportation costs associated with ferrying tractors from the base production center to overseas countries. Other reasons for offshoring include the need to exercise more control, an attempt to lower the risks, and the desire to focus on business development.
- Evaluation of Offshoring Production
Even though offshoring production might lead to the exposure of a company to the risk of a data breach, it promotes diversification of the company’s functions and services, which ultimately leads to a reduced risk of collapse. Offshoring equally divides the company into smaller, manageable units, which allow the exercise of total control over the processes. Increasing the company’s total sales is, of course, the aim of every management. Offshoring promotes the expansion of the company into new markets, which considerably boosts its selling potential. It is, therefore, valid that relocation is a good management practice.
References
Johansson, M., Olhager, J., Heikkilä, J., & Stentoft, J. (2019). Offshoring versus back shoring: Empirically derived bundles of relocation drivers, and their relationship with benefits. Journal of Purchasing and Supply Management, 25(3), 100509.
Radlo, M. J. (2016). Explaining and Modeling Offshoring and Outsourcing in Enterprises. In Offshoring, Outsourcing, and Production Fragmentation (pp. 98-126). Palgrave Macmillan, London.
Tate, W. L., & Bals, L. (2017). Outsourcing/offshoring insights: going beyond reshoring to right shoring. International Journal of Physical Distribution & Logistics Management.