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Table of Contents
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Introduction

The number of farmers has decreased compared to previous years. Therefore, food provision requires

the use of agricultural machinery and tools because human energy and horses alone will not be sufficient to

meet the required needs, so the development of technology made one farmer produce food for more than 100

people.

The agricultural techniques that traditionally depended on human labor lacked efficiency, and they

were time-consuming as well. According to Wadhwani and Gankar (2020), the innovation of agricultural

equipment aims to minimize production time, improve the efficiency of production, and enhance the quality

of the product for the farmers.

Since the start of the combustion engine that started to replace steam power over a century ago,

farming factors have not changed. The machines have proved to be more powerful, smarter, cleaner, lighter,

and powerful than ever in the current era. Austin Weber (2012) stated that more software code lines are

boosted by the large tractors than the earlier space shuttles.

The industry of agricultural machinery is expected to conduct its operations in a more dynamic

environment of production. Numerous socio-economic and natural factors are expected to have some minimal

variabilities. The government's evolving regulations and the changing consumer demands are the factors of

variability expected to cause some fluctuations in the agricultural demands of the machinery section (Gankar

& Wadhwani, 2020).

In 2019, the market size of agricultural equipment surpassed $150b. in the same year, the shipments

were over six million units. The trend is projected to increase by around six percent CAGR between 2020 and

2026. The attributed growth in the market is predicted to rise in the increasing demand for the packaged

foods, meat, high energy foods, processed foods, and the increase in disposable income (Gankar &

Wadhwani, 2020).
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Figure 1: Agriculture Equipment Market (Global Market Insights, 2020).

Nutract, since its conception in 1983, has dominated the agricultural machinery market by

outcompeting the initial giants in this market, such as John Deere, CNH Industrial, and Kubota. However,

with the critical significance of this manufacturing industry in the agricultural realm lie impediments that

greatly curtail Nutract's market prowess. The supply chain is one of the critical aspects of every business

(Nizar, 2009).

With the ballooning demand for the new Nutract vehicle, NT3050 tractor, Nutract struggled last year

to keep pace with demand. There were many unnoticed risks about the supply chain's ability to keep up,

which led to a significant problem originated from manufacturing in the form of design fault and another issue

of supply network bottlenecks and lack of technician's staff.

The supply chain entails procurement, processing, and distribution. Therefore, there is a need to devise

a strategy that would alleviate negative impacts resulting from the failed designs, outsourcing which carries

along with risks such as the possibility of weak management, inexperienced staff, and loss of innovative

capacity and the global operations (the differences in infrastructure such as existing modes, number, and
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nature of intermediaries and facilitators), and the economic challenges. For instance, the exchange rates, tax

rates, and transfer prices significantly affect logistical strategies (Manuj, 2008). In conclusion, this report is

obligated to examine Nutract's supply chain by providing a promising approach to avoid risks associated with

it and make a recommendation based on supply chain insights.

References

Wadhwani, P., & Gankar, S. (2020, March 17). Agriculture Equipment Market worth over $230bn by 2026.

https://www.gminsights.com/pressrelease/agriculture-equipment-market.

Weber, A. (2012, March 30). Assembling Tractors and Equipment. ASSEMBLY RSS.

https://www.assemblymag.com/articles/89827-assembling-tractors-and-equipment.

Souiden, N., & Pons, F. (2009, April 17). Product recall crisis management: the impact on the

manufacturer's image, consumer loyalty, and purchase intention. Journal of Product & Brand

Management. https://www.emerald.com/insight/content/doi/10.1108/10610420910949004/full/html.

Manuj, I., & Mentzer, J. T. (2008). Global Supply Chain Risk Management. Journal of Business Logistics,

29(1), 133–155. https://doi.org/10.1002/j.2158-1592.2008.tb00072.x

Global Market Insight. (2020). General Agricultural Machinery". Purdue Agriculture.

http://www.ag.purdue.edu/.

2. Industry Evaluation & Methodology

2.1 PESTLE Analysis:

PESTLE analysis is a structure for planning, presenting, and report writing. It is also an analytical tool

to consider external factors and analyze the impacts (Perera, R., 2017). PESTLE is mainly used to identify and

summarize environmental influences on an organization to assess actual and future strategic contexts. Besides

that, it is also a useful tool for understanding the external macro-environment in which involved. PESTLE
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helps an organization adapt proactively to the ever-changing environment and allows forward-thinking to

anticipate issues in advance (Simon Teague 2009). Moreover, PESTLE analysis can help to take advantage of

the opportunities and minimize the threats. PESTLE can help to avoid strategies that may be doomed to

failure for reasons beyond control.

Regional and global law - National law - Trade unions - Taxation

policies - Vulnerable people - Subsidizing firms

Interest rates - Taxation - Insurances - Economic

competitiveness - Labor cost
Hardware - Software - Materials - New developments -
New technologies - New product
maturity of technology, competing technological
developments, easily access to information technology,

Local by-laws - Health and safety legislation

Pollution and deforestation - Sustainability - Recycling -

Waste disposal/ management

Figure 2 : PESTLE Analysis

Political disputes between America and China are increasing at a rapid rate and affecting the supply

chain between Chinese and American factories. Indeed, some Chinese products have been banned from

entering America and vice versa. The EU imposes high tariffs and import restrictions on products that come

from outside the EU to encourage local industries. It also gives financing facilities to factories within the

union and prioritizes buying local products. Local supplier markets break down due to some of the major

political problems in Ukraine, including changes in government regulations, strikes, and political differences.

Nutract should use the economic factors of the country, such as the growth rate of the agricultural machinery
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industry, economic indicators of inflation and industry, consumer spending, etc. to forecast the growth

trajectory . The Gardening and Agriculture Equipment market in the U.S. is estimated at US $9.6 billion

in the year 2020. China, the world’s second-largest economy, is forecast to reach a projected market size of

US $9.3 billion by the year 2027, trailing a CAGR of 6.1% over the analysis period of 2020 to 2027. Among

the other noteworthy geographic markets are Japan and Canada, each of which is forecast to grow at 0.9% and

2.5%, respectively, over the 2020-2027 period. Within Europe, Germany is forecast to grow at approximately

1.6% CAGR (NASDAQ OMX Corporate Solutions, Inc, 2020).

India, together with Mexico, faces a social problem involving corruption, illiteracy, inflation and many

other factors that directly affect the efficiency, product manufacturing, and distribution of local suppliers,

ultimately resulting in faulty finished products sold by Nutract. Despite that, the demand in India for this

equipment is increasing year after year due to the shift from traditional methods of agriculture to more modern

methods.

China, South Korea and Japan have a strong infrastructure in terms of information technology, easy

access to ports and other relevant services, but China stands apart due to the availability of many suppliers,

their diversity, the availability of skilled technicians and the low cost of manpower.South Africa does not

have any competitive advantage, but it is an entrance to the African market, where the demand for agricultural

equipment is growing.

Industry in the European Union is characterized by the availability of solid supply chains with factory

infrastructure, technology, and good roads. The availability of skilled technicians is also an advantage.

Economic indicators of the agricultural equipment market demonstrate that the demand for agricultural

equipment is increasing there, along with a qualitative advantage of farmers having purchasing power.

Environmental laws in the European Union are strict in order to reduce carbon emissions, and this has an

impact on the future of industry and supply chains in this region.

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2.2 Porter’s Five Forces Analysis:

Porter's Five Forces is a critical framework that analyses the level of competition within a specific

industry (Dobbs, M.E., 2014). According to this framework, competitiveness does not come exclusively from

competitors. Instead, the state of competition in an industry depends on five elemental forces: the threat of

new entrants, suppliers' bargaining power, buyers' bargaining power, the threat of substitute products or

services, and existing industry rivalries.

Figure 3 : Portar Five Forces

Rivalry among existing competitors

Nutract faces competition from big companies like John Deere, CNH Industrial, and Kubota. With

these global market competitors, Nutract needs to improve their supply chain process. Nutract should also

consider satisfying the stated needs of consumers, e.g., the quality of the product, effectiveness, and ensuring

critical factors of the product, e.g., safety. Nutract's product NT3050 should be fitted well with the module
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(Ground Pressure Sensor) to enable safety. Nutract should improve their supply chain operation to overcome

competition from their rivals.

Threat of new arrivals:

Among the obstacles facing a newcomer to the agricultural equipment market is the difficulty of

owning the technology and the significant investment amount, high customer loyalty to existing brands,

government regulations, and restricted access to distribution networks. Nutract possesses this advantage,

making the threat of new investor entry to the industry low.

Power of suppliers:

The power of suppliers is a factor that helps or threatens the supply chain. In some regions, Nutract

does not own the tire plants, such as in Malaysia, or the plant for the hydraulic system in Germany and

elsewhere. These suppliers have more negotiating power than Nutract and also have customers other than

Nutract. This is a serious threat that may have affected the supply chains in Nutract and led to bottlenecks in

the supply network and to quality issues.

Threat of Substitution:

When there are close substitutes available in the market, there is a better chance that the customer can

shift to those. In the case of Nutract, where they are having issues with the pressure sensor of NT3050,

customers can easily go to other sellers, which will affect Nutract’s overall sales volume and company

reputation. This is a key element that Nutract must address, and it must sort out its operational issues as soon

as possible to retain its customers.

Buyer Power:

This is determined by the number of buyers in the market, the importance of every single buyer to the

company and the cost to the buyer of shifting from one supplier to another. If a business has even some of
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the strong buyers, those buyers are often able to command terms. In the case of Nutract, we see that they have

a good number of customers that can be considered powerful buyers, but if the quality of the product declines,

powerful buyers will run away. Mitigation of Nutract’s supply chain disruption can help it retain buyers and

remain successful.

References:

1-
2- https://www.proquest.com/wire-feeds/global-gardening-agriculture-equipment-
industry/docview/2434749895/se-2?accountid=11528
3- NASDAQ OMX Corporate Solutions, Inc, 2020, Business And Economics, viewed Aug 18, 2020, <
https://www.proquest.com/wire-feeds/global-gardening-agriculture-equipment-
industry/docview/2434749895/se-2?accountid=11528 >
4- Perera, R., 2017. The PESTLE analysis. Nerdynaut. https://www.proquest.com/wire-feeds/global-
gardening-agriculture-equipment-industry/docview/2434749895/se-2?accountid=11528
5- Dobbs, M.E., 2014. Guidelines for applying Porter's five forces framework: a set of industry analysis
templates. Competitiveness Review.
6- Grundy, T., 2006. Rethinking and reinventing Michael Porter's five forces model. Strategic Change,
15(5), pp. 213-229.
7- Simon Teague LLP, 2009, “The Ultimate Leadership Guide – Secrets to success”, Simon Teague LLP
2009, Buckland Press, Dover, Kent, UK, pg. 13 – 14.

3- Review & Evaluation of Nutract’s Supply Chain:

Globalization has led to the establishment of multinational factories and increased the number of

suppliers spread around the world. Nutract is one of those factories (see figure 4 ).

Nutract has many suppliers globally; this can be cost-effective and possibly offer other benefits, but

Nutract must make a smart trade-off between this feature and the loss of other features.
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Nutract's supply chain faces many issues. Some of these issues led to defects in the ground pressure

sensor and others led to a bottleneck in the supply network, as well as a shortage of technician manpower.

Primary:
Primary:Hydraulic
Hydraulic
Secondary:
Secondary: systems
systems
Diesel
Dieselengine
engine Tertiary:
Tertiary:Large
Large
castings
castings
Primary:
Primary:Final
Finalassembly
assembly Primary:
Primary:Interior
Interior
Primary:
Primary:Vehicle
Vehiclebody
bodypanels
panels and
andcontrols
controls
Primary:
Primary:Diesel
DieselEngine
Engine Secondary:
Secondary:Hydraulic
Hydraulic
Secondary:
Secondary:Tyres
Tyresand
and seals
seals systems
systems
Secondary:
Secondary:Interior
Interiorand
and Tertiary:
Tertiary: Dieselengine
Diesel engine
controls
controls

Secondary:
Secondary:Electrical
Electrical
System
System

Secondary:
Secondary:Fuel
Fuel
System
System
Tertiary: Interior
Tertiary: Interior
and
andcontrols
controls

Primary:
Primary:Electrical
Electrical
system
system
Secondary: Primary:
Primary:Tyres
Tyres
Secondary:Large
Large and
casting
casting andseals
seals
Primary:
Primary:Fuel
Fuel
system
system
Primary:
Primary:Large
Large
Casting
Casting
Secondary:
Secondary:Final
Finalassembly
assembly
Secondary:
Secondary:Vehicle
Vehiclebody
body Secondary:
Secondary:Final
Final
panels
panels assembly
assembly
Secondary:
Secondary:Vehicle
Vehicle
body
bodypanels
panels

Nutract sources parts for its NT3050 vehicle from several suppliers around the world and assembles

the product at its factory in America. There are reports of faults in the NT3050 sophisticated module (the

Ground Pressure Sensor, which is important for the safety and efficient operation of the vehicle). This

situation puts Nutract in a position where it must solve the problem as soon as possible to maintain customer

satisfaction.
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Sourcing parts from distant companies may have hidden costs. In a new study, Rob Bray, an associate

professor of operations at Kellogg, analysed the supply chains of more than 600 car models. Researchers

found that the further a component travelled to reach the vehicle-assembly plant, the higher the risk that

consumers would report defects in that component (Bray, Serpa and Colak, 2020).

From the data that Bray, Colak and Serpa collected, as expected, researchers concluded that the greater

the distance between the supplier and the car manufacturer, the greater the defect rate. When the distance

decreased, so did the defect rate. Also, the per-mile effect was three times as strong if the supplier was based

in a different country than where the assembly plant was located, even if the distance was the same. “A mile

domestically is not as harmful as one mile internationally,” Bray says. Why? He speculates that perhaps the

road infrastructure in other countries is less developed, making components more likely to get damaged en

route (Bray, Serpa and Colak, 2020).

The researchers also stated that one reason they suspect distance may lead to more flaws in general

is the collaboration between manufacturers and suppliers as manufacturers continue to improve product

quality with each new release. Thus, if the relationship between distance and quality is a result of cooperation,

the product quality should increase faster when the supplier is closer to the assembly plant (Bray, Serpa and

Colak, 2020).

1- Bray, Serpa and Colak, 2020, Having a Far-Flung Supply Chain May Lead to More Product Defects,
kelloggInsight, Viewed May 15, 2020. < https://insight.kellogg.northwestern.edu/article/supply-chain-
distance-defects-communication >

.
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