Caterpillar Analysis

CATERPILLAR ANALYSIS Caterpillar is an automotive company dealing in products such as construction and mining equipment diesel and natural gas engines industrial gas tur!ines and diesel electr electric ic locomo locomotiv tives" es" It also also provi provides des servic services es li#e li#e $nanci $nancial al reman remanu%a u%act cturi uring ng progress rail" The mar#ets served !y caterpillar include North America Asia paci$c Europe Europe A%rica %rica &iddl &iddle e East East common common'ea 'ealth lth o% indepe independe ndent nt states states and Latin Latin America" America" The !usiness !usiness division divisions( s( departmen departments ts are) are) po'er po'er systems systems construc construction tion industri industries es resour resource ce industri industries es and $nancial $nancial product products" s" The organi*a organi*ation tion+s +s main !ranch is in Illinois 'ith ,,-... people"  The company is e/periencing e/periencing poor $nancial per%ormance per%ormance eg declining revenues pro$ta!ility that is operating and net pro$t" The company+s products are sold under Caterpillar CAT Electro0&otive 12 3ilson &A4 &3& Per#ins Progress Rail SE& and Solar Sola r Tur!ines" Tur!ines"

CONTENTS OF COMPANY VISION; •

2lo! 2lo!al al !usi !usine ness ss lead leader er cust custom omer er succ succes ess s 'ith 'ith cate caterp rpil illa larr prod produc ucts ts compet competiti itive ve advant advantage age throug through h dis distri tri!u !utio tion n 'orld 'orld class class supply supply chain chain superi superior or !usine !usiness ss resul results ts compet competent ent 'or# 'or# %orce %orce that that o!serv o!serve e compan company y valu values es prom promot otio ion n o% su sust stai aina na!i !ili lity ty $nan $nanci cial al per% per%or orma manc nce e thr through ough sta#eholder sta#eholder motivation"

N5" Analyse the 'ays caterpillar can achieve its strategic intent"

SUPPLY SUPPLY CHAIN OPERATIONS AT CATERPILLAR CATERPILLAR.. • • •

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6ealership is a mechanism o% distri!uting the products 'orld'ide in glo!ally" Retailing and %ranchising through retail outlets and su!sidiaries" Per%ormance standards are set %or the dealer to avoid deviation %or company targets and goals Colla!oration 'ith supply chain partners to meet customer e/pectations" e/pectations" Empo Empo'e 'errment ment o% deal dealer er to'a to'ard rds s sell sellin ing g the the prod produc ucts ts and and serv servic icin ing g o%  machines to ensure responsiveness to customer challenges" Product availa!ility !y setting up o% 'arehouses to store spare parts re%erred to as large service parts !usiness 'hich provide components to dealers and customers" Responsiveness is supply chain per%ormance measure as customers require quic# service eg repair that has led to caterpillar holding inventory to ensure high service levels" Locali*ed production in that due to glo!al demand the company produces %rom %acilities located on the continents 'here the products are sold" Centrali*ed production %or e/ample the larger and speciali*ed products that are produced in a single location !ecause o% the high initial outlay"

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Repositioning through vertical integration 'hich !ac#'ard and %or'ard 'ith suppliers and customers respectively" Insourcing o% critical components+ production especially the ones that add competitive advantage o% its products" 7utsourcing production o% non critical items %rom a large supplier !ase" Stringent description o% products to ensure high quality dura!le goods so as to improve per%ormance and construction" Lo' supply !ase due to the tight speci$cations that limit local sourcing resulting into glo!al sourcing" Limited supply o% products due to production and sources o% supply !eing in di8erent countries o'ing to long lead times"

Discuss how cate!i""a ca# $ea" with the su!!"% chai# cha""e#&es; •

Strategic alliance !u8er stoc#ing closer relationship 'ith suppliers invest in production o% these component multiple sourcing !ac#'ard integration demand %orecasting"

SUPPLY CHAIN MANA'EMENT Rapid response supply chain •

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Innovation through introducing P9... product line to e/ploit e/pected gro'th 'hich relates to the product development strategy o% Anso8" This ne' product line 'as smaller medium to high volume standardi*ed product and selling cheaply at 9..... dollars" Sti8 competition %or the P9... product line due to its mar#et having very many mar#et leaders eg 5o!cat 6eere:Co and Case Corp" Sta;ng challenges as the company 'as em!roiled in 'or#%orce di;culties o%  disputes and stri#es over pay and 'or#ing conditions"  The economic do'n turn in Asia due to the $nancial crisis that cause uncertainty o% %uture pro$ta!ility and demand"  The net'or# #ey per%ormance indicators included) pro$t ma/imi*ation mar#et share SA and Canada and the company could provide demand %orecasts %or every district to ensure 'ere caterpillar+s responsi!ilities leading high material inventory in transit capital !eing tied up %or glo!ally sourced products" Inventory 'as held in pools at suppliers caterpillar 'arehouses and P7>" Single sourcing !y all caterpillar %acilities as inventory 'as not consolidated

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&RP system and purchase orders 'ere used to coordinate replenishment these systems are out dated and delay in%ormation e/change thus increasing lead times and order varia!ility" 6ecentrali*ed decision ma#ing as !oth suppliers and caterpillar made their o'n production plan and decisions 'ith limited in%ormation sharing"

Supplier involvement !y assigning the responsi!ilities %or material transportation to central points 'here caterpillar could pull them %or production 7'nership o% inventory at central inventory pool 'as trans%erred to suppliers and a%ter caterpillar pulling them then payment could !e e8ected depending on the contractual terms" Production %acilities could get inventory %rom the central pull hence eliminating inventory at the %acilities" Central stoc# locations could !e suppliers+ or caterpillar+s premises !ut %or provision o% these service suppliers charged a %ee" Centrali*ed demand %orecasting !y caterpillar to ensure IT delivery as suppliers 'ere a'are o% the quantity o% material and time 'hen they are required in the plant" Sharing o% P7> consumption in%ormation helps suppliers to produce and ship products !asing on actual demand( material usage" 5uyer0 supplier Communication led e/ceptions and shi%ts in production to !e addressed s'i%tly thus se o% a dealer called 1inning international 'ith !ranches and engineers >se national distri!ution centre run !y the CE=A logistics that holds inventory o% 1inning engines %or the ne/t day delivery" Purpose !uilt %acility designed !y CE=A 'ith GG sta8 to operate it over e/tended !usiness hours si/ days a 'ee#" CE=A committed to the ne/t day delivery o% all orders o% ,.... items a 'ee# in the contract" 5uilding( 'arehouse is located at the la#eside Estate and covers ,9.... sq %t 'ith 'ide aisle and cantilever rac#ing se o% ocean and air shipment hu!s to get scale on a lane 'hich ma#e caterpillar an important customer that can pre !oo# ocean capacity 'ith no d'ell time and in air mode it ships hu! to hu! to ma/imi*e cu!e" Caterpillar changed %rom