AGCO Optimizes Operations Among Different Business Units ...

Case Type: ; operations strategy, supply chain optimization.
Consulting Firm: Diamond Management & Technology Consultants (now PwC Advisory) second round job interview.
Industry Coverage: industrial equipment; agriculture, farming.

Case Interview Question #00489: Your client AGCO (NYSE: AGCO) is an agricultural equipment manufacturing company based in Duluth, Georgia, United States. As a leading global manufacturer of agricultural equipment, AGCO offers a full line of tractors, combines, hay tools, sprayers, forage and tillage equipment, which are distributed through more than 2,700 independent dealers and distributors in more than 140 countries worldwide.

Although geographically constrained, the client company has been very aggressive in developing new products. However, with sales of USD $7 billion, AGCO is showing slow growth (3%) recently. Although this growth rate is higher than industry average, the client is concerned about the slow growth rate. They would like you to find out why this is happening and to come up with a solution. How would you go about the case?

Possible Answer:

Interviewer: What immediate thoughts come to your mind (or should have) when you heard the problem statement of this case?

Candidate: (As soon as I heard ?Geographically Constrained?, I wanted to know what exactly that meant) What do you mean by ? geographically constrained??

Interviewer: In this case, the client?s product mix is such that 80% of products are growing at 2% and 20% of the products are growing at 20% ? 30%. Why do you think this is happening?

Candidate: Are there too many businesses?

Interviewer: There are ten discrete businesses.

Candidate: What kind of products are we talking about here?

Interviewer: For simplicity, let us assume all ten product lines are agricultural equipments, such as farming tractors, combines, hay tools, sprayers, forage tillage equipment, etc.

Candidate: Are there any synergies or complimentary functions existing between these businesses?

Interviewer: Right now each business has its own Product Development, HR, Accounting, Sales and Marketing, Finance, etc. How would you prioritize the issues and what information do you need to filter out?

Candidate: I would like to assess the possibility of finding synergies between the different businesses, thus lowering costs. The biggest benefits would come from synergies in procurement.

Interviewer: OK, what additional information do you need?

Candidate: How much would costs go down if we converge the operations of each of the business units?

At this point, the interviewer provided some visual representation of the supply chain, and some data about the client?s business units. The whole supply chain was laid out as follows:

Raw Materials => Manufacturing => Distribution => Sales => Customers

The candidate further discussed possible operational convergence among different business units:

• Procurement, Capacity utilization, Distribution
• Product Development, HR, Accounting, Sales and Marketing, Finance, etc.

Interviewer: We are running out of time. Can you summarize your findings for the client?

Candidate: OK. It is very clear that the main problem in this case is that the different business units of the company do not coordinate with each other.

The existence of different product development, procurement, manufacturing and distribution departments suggests that there is a huge opportunity to optimize operations.

Given the fact that one of the main problems faced by this company is that 20% ? 30% growth rate comes from only 20% of the products and the rest 80% of the products are growing only at 2%, coordination of the product development groups is a must. It is very likely that 80% of the products manufactured by the company are those that the market is not ready as yet.

Interviewer: Great! I think you did a good job. Let?s stop here for now.

Source: http://www.consultingcase101.com/agco-optimizes-operations-among-different-business-units/

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