A leader in the agricultural equipment world, AGCO was founded in 1990 and has been developing a global network ever since. Of course, the quicker a business grows – particularly at the rate AGCO has done – the more often its processes need to be overhauled and improved, at which point talented transformation specialists must be recruited.
Enter Greg Toornman, an AGCO employee since 2004 who stepped into his current role as Vice President, Global Materials, Logistics, and Freight Management six years ago after a trio of successful transformational assignments within the company’s Global Purchasing organization. He is responsible for leading the transformation of AGCO’s Global Materials and Logistics functions, the issues inherent in which were identified back when Toornman was first hired.
In 2004, AGCO realized that the mergers and acquisitions approach was having a huge impact on the top revenue line. With the view to create greater synergy, two SVPs were brought in – one to focus on manufacturing, one on purchasing and materials management – and AGCO embarked on integrating its operations in North America, South America, Europe, and Asia.
“That took from 2005 until about 2012,” Toornman explains. “In 2012, we saw that there were still opportunities within the materials management and logistics, and that the tools we utilize in supporting our factories from a global-wide network perspective were not well integrated and not well connected. The product development roadmap direction we embarked upon was moving towards a Global Platforms Strategy, similar to what you’d find in the automotive industry where you have a similar platform produced in multiple regions with a common supply base.”
Looking at the options the business had, the team came up with a global material management transformation initiative, GMMT. This initially involved bringing in experts from within manufacturing, logistics, IT, finance, and purchasing to brainstorm where to focus first.
In 2013, a vision was in place to have a globally-integrated network for all transportation and all direct material supplier B2B information exchange (forecasting, releases, order confirmations, ASN’s), by 2018. Regional Supply Chain leadership members were invited to develop what the future of the business would look like; rather than a top-down approach, the company worked with a tactical execution layer to understand the challenges involved and ensure a better service would be provided.
The plan and approach proved so successful that, rather than being a challenge, it was very efficient to move forward with the globally aligned five year strategy as the regions were key contributors to the future state vision.
“In any type of corporate-led global initiative, typically you’re fighting with the regions or sites for them to embrace change,” Toornman explains. “In this case, we had to fight high demand because we couldn’t implement it as quickly as everyone wanted. So that was kind of a good problem to have.”
The inbound-outbound transformation became standard after its success in Europe; it has since been successfully implemented in our China and North America regions. South America is in the implementation phase and will be completed by January 2019.
“If you are part of the ownership and you embrace the change, typically you’re more open to delivering solutions rather than pointing the finger, because it’s your project,” he explains. “Really, the key strategies that we focus on are within various levels of the organizational function are one – to believe in it, two – to understand it, three – to embrace it, and four – to enable it.”
This cooperation has to extend away from the company itself, of course, and through the supply chain.
“We paint a picture to the supplier, saying ‘yes, we hear you as a collective group – here are the things we are doing and investing in to make it easier for you, as the supplier, to do business with AGCO’,” says Toornman. “You start working on that a year in advance, and when you then reach out to those suppliers and ask them to change what they do, how they do it and when they do it, they are aware of why you’re doing it because it helps them satisfy their opportunities or the needs they’re expressing to you.”
It’s all about teamwork and collaboration for AGCO. Thanks to this approach, when the initial European regions inbound 4PL freight initiative roll-out occurred, only 10 suppliers out of 1,550 proved resistant. Toornman says: “We were very happy with that because we focused on how to get supplier participation and compliance to the level we needed beforehand.”
Technology helps AGCO interact with every element of the supply chain, from freight management tracking through the company’s performance measurement system, to openly sharing of AGCO’s own performance statistics. Whether purchasing, quality, logistics, materials, or engineering, there is one transparent, standardized way that supplier performance is evaluated and made easily visible both internally and externally. We have seen great improvements in our direct material suppliers as well as our freight carrier performance over the past four years as we have started to measure, track, and drive delivery performance improvements. The freight carrier performance is something that we have truly realized the benefits of taking a global approach to evaluation and awarding.
“We are able to share the supplier performance results cross-functionally,” Toornman says. “A lot of times we heard that some of the supplier engineering team members or sales engineers may not know how their company is actually doing in terms of quality, purchasing, or logistical performance. At the same time, on our side, if we have an engineer developing a new product with a supplier that has terrible quality or delivery, we don’t want that.”
The main advantage of this visibility is that it makes both the suppliers and AGCO itself work harder and forge stronger relationships, both internally (at every level) and externally. This is all part of AGCO’s Supply Chain digitalization initiative, which focusses on elements of what Toornman calls ‘truly innovative manufacturing’, utilizing such advancements as Google Glass and IoT. “We have many companies wanting to come and see our sites digitalization levels, this is occurring across global level we share what we have done, how we have done, and also learn from these visits says Toornman.
The work AGCO is doing to increase its digital capabilities is viewed by Toornman as an “opportunity to differentiate ourselves from what our competition is doing at a much more intimate level,” because customers spend a lot of hours in the machines AGCO produces, and when the process of acquiring the high-quality item is as simple as it can be, brand loyalty is born.
“We are really proud of what we’re doing,” he concludes, “but at the same time we have a long way still to go in our journey to supply chain excellence.”
