John Deere's Microchip Shortage
It is rare to see supply chains that break at the strongest point, but you will notice that the average supply chain will often break because of a hidden weak link. John Deere’s microchip shortage between 2020 and 2022 is a typical example of this.
For decades, the company has manufactured and supplied machines, including tractors, harvesters, and sprayers, all of which are designed to last for many years.
However, as with many modern technologies, these machines rely on microchips with short life cycles in storage.
This is why when the global semiconductor shortage hit, Deere’s production lines slowed, farmers faced equipment delays, and the company was forced to improvise in unusual ways.
Key Nuggets
- John Deere’s microchip shortage between 2020 and 2022 highlighted the fragility of supply chains when they rely too heavily on single suppliers and just-in-time models.
- Deere’s supply chain responded by rethinking its production approach, sourcing strategies, and supplier support.
- The experience unveils lessons for global supply chains, including striking a balance between efficiency and resilience, diversifying supplier networks, and strengthening dealer relationships.
- African supply chains can adapt these lessons by investing in resilience, redesigning products to utilize available inputs, and collaborating more closely with distribution partners.
The Background Story Behind John Deere’s Microchip Shortage (2020–2022)
When COVID-19 swept the world between 2020 and 2022, one of the many challenges companies, especially those in the electronics and automotive industries, faced was the shutdown of plants because of a semiconductor shortage.
By the time demand surged in 2021, foundries like TSMC and Samsung were overloaded with companies scrambling for the same scarce chips.
With its modern farm machinery relying on microcontrollers, GPS receivers, and sensors, Deere’s supply chain and manufacturing operations were caught in the storm.
Executives admitted the risk openly. In May 2021, Deere informed investors that “semiconductor availability will continue to be limited” and warned of challenges that would persist through 2022.
Deere’s own supply manager summed it up bluntly: “We’ve had limited availability for our global positioning receivers…well over a year, probably 18 months, and we don’t see that improving anytime soon.”
Read More: Lessons From Home Depot’s Container Ship Charter in 2021.
The Circumstances Leading to John Deere’s Microchip Shortage
The timing and surge in demand exacerbated the situation.
Just as Deere’s factories were struggling to source for chips, farmers were flush with higher commodity prices, forcing them to order new machinery in large volumes. With the surge in demand, the company’s dealers saw their inventories drop to record lows.
That demand collided with low supply, and the crisis that followed created a supply chain bottleneck that couldn’t be cleared quickly.
The Impact
The microchip shortage slowed down Deere’s production lines. Tractors and combines often sat partially finished, waiting for missing chips. Deere had to hold machines in storage until the critical chips trickled in.
As the microchip shortage haunted the company, shipment delays continued to grow. And the lead time of new machinery stretched into many months.
In many cases, dealers could only offer farmers machines with “place-holder” functions and a promise that they would be upgraded later when the required chips arrived (for example, shipping with a basic display to be replaced by a smart display later).
They also had to rely on used equipment to support farmers during planting and harvest seasons. For farmers, the stakes were even higher as missing or delayed parts threatened their schedules.
A few weeks without a functioning tractor in harvest season could mean major losses. And the machine shortage from Deere had become a direct pressure point in agricultural operations.
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John Deere’s Response to the Microchip Shortage
Deere’s supply chain and manufacturing moved from survival mode to adaptation. To navigate the chip shortage, the company had to reshape production, procurement, and supplier support:
1. Cannibalizing Chips
Dealers were forced to pull chips from showroom tractors to repair customer equipment, and the machines, which were meant for display, suddenly became warehouses for spare parts.
2. Placeholder Systems
Deere’s supply chain shipped some tractors with older displays or stripped-down electronics, with a promise to retrofit them once the necessary parts were available. This way, the machines were able to work in the fields, even if they were not fully updated.
3. Flexible Manufacturing
Instead of pausing production lines for linear assembly, Deere paused production lines when parts were missing, restarted them later, and even shipped incomplete equipment. To compensate for the speed, the company relied on air freight to move scarce components more quickly.
4. Multi-Sourcing Suppliers
John Deere began qualifying additional vendors for semiconductors and related components as part of its supply chain. In some cases, Deere sent its own staff to suppliers to assist in meeting output targets.
5. Inventory Buffers
After years of just-in-time sourcing, Deere’s supply chain shifted its strategy. The company ordered “double or triple” the number of parts required each day. This safety stock enabled batch production, even in the event of uncertain chip arrivals.
6. Redesigning Components
Deere initiated plans to adapt certain machines to work with less advanced but more available chips, simplifying its electronics design. This mix of improvisation and redesign allowed Deere to get creative in serving customers and meeting their demands—though not without delays.
Read More: Caterpillar’s Dual Sourcing Strategy for Critical Components.
Lessons From John Deere’s Microchip Shortage
The chip shortage that plagued Deere’s supply chain and how the company was able to navigate it holds critical lessons for global supply chains across the globe:
1. Balance Efficiency with Resilience
When the Deere’s supply chain was under pressure, its favoured just-in-time sourcing failed, forcing the company to rethink its inventory strategy by stockpiling critical components.
Although lean operations are favoured, especially in the automotive industry, there is still a risk of pursuing lean models without sufficient buffer capacity.
2. Multi-Sourcing and Supplier Support
Depending on one supplier for its semiconductors exposed the vulnerability of Deere’s supply chain. This is why diversification became an urgent need for the company.
Considering all the trouble and effort Deere’s supply chain went to add vendors and even send labor to supplier plants, it is clear that supplier stability is as important as internal efficiency.
3. Design for Long Equipment Lifecycles
Farm machinery can last 30–40 years, but the chips inside may become obsolete in just 5 years.
Deere’s strategy of redesigning its electronics to run on widely available chips was an innovative approach, but it also reflects the need for products that can adapt across multiple generations of technology.
4. Agility in Manufacturing and Logistics
By pausing and restarting production at will, airlifting parts, and shipping incomplete machines, Deere’s supply chain demonstrated operational agility. That ability to flex processes during disruption can mean the difference between partial output and total stoppage.
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Comparisons: Deere vs Other Industries
John Deere’s struggle mirrored the automotive and electronics sectors. Within the same period, automakers such as GM and Toyota had to cut production multiple times due to chip shortages.
Toyota and other car manufacturers responded by stockpiling months of chip inventory—reversing its traditional lean model.
Meanwhile, electronics makers diverted chips to high-margin products. In each case, the affected companies discovered that resilience required compromise, such as maintaining extra inventory, slowing down design cycles, or shipping incomplete products to navigate the crisis.
Deere’s experience fit the same pattern.
Read More: Lessons From Peloton’s Excess Inventory Crisis.
How African Supply Chains Can Apply These Lessons
African supply chains face their own unique pressures, including weak infrastructure, a heavy reliance on imports, and limited supplier diversification. Deere’s experience offers practical lessons:
- Build resilience over efficiency: Local firms must strike a balance between lean inventory and stockpiles of critical inputs. Holding even a few weeks’ worth of safety stock can buffer disruptions.
- Diversify sourcing: Importers should avoid relying on a single supplier or route. Regional partnerships can also reduce exposure to global shocks.
- Collaborate across tiers: Governments, OEMs, and suppliers need shared visibility of risks and capacity. Public-private cooperation, similar to the CHIPS Act response, may support long-term stability.
These measures don’t eliminate shocks, but they reduce the risk of total stoppage.
Obinabo Tochukwu Tabansi is a supply chain digital writer (Content writer & Ghostwriter) helping professionals and business owners across Africa learn from real-world supply chain wins and setbacks and apply proven strategies to their own operations. He also crafts social content for logistics and supply chain companies, turning their solutions and insights into engaging posts that drive visibility and trust.
