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NB. Analyse the ways caterpillar can achieve its strategic intent.
SUPPLY CHAIN OPERATIONS AT CATERPILLAR.
Discuss how caterpillar can deal with the supply chain challenges;
Pricing marketing strategy for BHL series of small backhoe loaders in the
Building Construction Product division.
Focus strategy has been adopted by concentrating on a few popular
caterpillar models to majority o customers.
Prior the company had a complicated supply chain due to many product
offering that were built to order and priced basing on itemized price lists but
this could lead to customer satisfaction.
High demand/ customer base led to holding of large stock levels to provide
choice for customers. This resulted into much documentation and service
provision hence increasing operational costs.
Suppliers frustration was rampant due to the fragmented nature of
caterpillars products demand as forecasting was a challenge.
Rationalization Building Construction product was made basing on customer
reaction, cost saving opportunity.
Cost analysis was also performed in line with direct and indirect costs using
the cost data and surveys of engineering and marketing experts based on
variety, attributes and benefits of product diversity for all the operations
along the supply chain.
The right product mix was determined by amalgamating customer and cost
models basing demand patterns and market conditions thus offering wide
choice and controlling complexity costs.
The lane strategy was the deliverable of the two analyses thus the birth of
express lane built to stock, standard lane built to order and A-La- Carte
lane customized built to order. The observable trait is that as complexity
increases also lead time increases form days to months.
A phased roll out approach was adopted where by two price lists were used
that is a-la-carte and lane price lists in 2010 but in 2011 transitioned to a
single lane price list. This led to increased demand, reduction in warranty
costs by 10%
Further expansion and refining of the BHL lane strategy by rationalizing lane
1 to two and implementing cost analysis to other divisions which a
fundamental strategic change for caterpillar.
Caterpillar operates on six continents and growth in South East Asia, china,
India, Australia, and Central and South America.
The rapid expansion has led to challenges of how to evolve and develop a
logistics network to meet the increase in capacity, and capability/processes
which can be done through partnership and insourcing strategic functions,
develop data and analytics, having talented people, technology.
Product distribution centre for finished product that aim at increasing velocity
and improve delivery time to dealers, high level of service and short
availability.
Dubai PDC imports caterpillar machines globally and exported by road and
sea to Middle East and East Africa destinations. This hub was chosen due to
its strategic location and good port facilities.
Tendering exercise was used to have a competitive supply base to provide
regional clearance, forwarding and distribution, customer brokerage, road
transportation.
Al Futtain logistics selected using the evaluation criteria of capabilities,
continuous improvement, transport experience, solid infrastructure base,
strategic location, supply chain experience, competitive pricing.
Transportation
What customers want and what they will pay determines the transportation
mode choices made product by product.
Achieving product cost saving of 400-500 dollars is possible with low cost
transportation mode by working with customers on the price/ delivery
tradeoffs.
Technology has facilitated use of low transportation cost modes utilization.
Caterpillar built a control tower using visibility solution from GT Nexus to
achieve end to end visibility.
The control tower measure carriers performance and variability in different
carriers performance. Lower variability translates into lower need to carry
inventory.
Use of ocean and air shipment hubs to get scale on a lane which make
caterpillar an important customer that can pre book ocean capacity with no
dwell time and in air mode, it ships hub to hub to maximize cube.
Caterpillar changed from flying spare parts overnight to using many more
three to five day flights where customer expectations were aligned on a lower
cost but slower delivery.
Supply chain technology
Recruitment of randy krotowski as vice president and chief information officer
in 2012 who was experienced by being at chevron for 30 years.
He conducted consultative meeting to understand peoples goals
Built relationships with dealers and customers
Put an IT strategy and got top management support with completion date of
2018
Techonological breakthrough
Job site solution program use in quarries and mining operations.
Training operators and rebuilding engines to improve fuel efficiency of
operations by 30%
These are all added value customer relationships.
Remanufacturing or recycling to preserve 85% of energy for making products
eg in a 170 million pounds material saving and 400 million kilowart hours of
electricity while avoiding 180 million pounds of green house gases in 2011.
Partnerhips with waste management, world resource institute on a four plan
to create sustainable cities and use of biogas to power equipments.
Achievement of a zero waste goal in Leicester and Desford UK due to
recycling in 2010
Waste management goal and savings of 183,984 dollars were achieve
through adding six waste streams to the 30, bundling/ baling waste and
providing workers with desktop containers for offices rubbish, development of
a total waste management system at Leicester, consolidating shipments by
use of large vehicles and use of plastic containers while phasing out steel
ones.
This will reduce weight and packaging, improve routeing and scheduling,
create opportunities for streamlining shipping protocols, reduce carbon
emissions.
Supply management
Supplier relationships
Analyse the STEEPLE factors which might impact on the caterpillar supply
chains
Demand planning, coordinating inbound and out bound logistics, route and
network planning, location of facilities, selecting the best transport mode,
management of third part logistics providers, currency differences, legal
differences, custom duties, long distances, security of items in facilities and
transit, transportation costs due to the weight of the machines.
Reducing non value adding activities, reducing total cost, reducing cycle time,
improving responsiveness to requirements, enhancing quality and service,
improving communication, balancing service level and cost, improving supply
chain relationships, cost and risk management transparence.
expertise
to
achieve
NB: The tools for segmentation include Kraljic matrix, Pareto analysis, Supplier
preferencing model
Evaluate approaches that can be used to meet the needs of stakeholders.
Evaluate the extent to which the supply chain of caterpillar was lean or
agile.
Methods; balanced score card, focus groups, survey and feed back, KPIs,
SCOR model etc
Performance metrics: profitability, revenue, market share, time to market,
stock availability, savings, customer satisfaction, on time delivery in full,
stock turn over, efficiency, order cycle time.