Supply Chain Diversity Spells Success for Caterpillar

Leading companies today need to excel at both product innovation and supply chain excellence. Behind every great company is a great (and well-managed) supply chain.

In early November the Caterpillar facility in Akashi, Japan produced 100 excavators in a single day. This milestone was attributed in large part to the collaboration between the operations team in Akashi and its suppliers.

Caterpillar has become something of a benchmark for companies looking to understand, plan and execute on a successful global supply chain strategy. Last year it was named in Gartner’s Top 10 Industrial Supply Chains. Quite simply, Caterpillar understands the ROI of optimizing supplier collaboration.

Business has been good for Caterpillar and product demand has been significantly increasing over the last few years. In 2010, revenue for the industry-leading manufacturer increased 64 percent. But with high demand comes a greater strain on managing the supply chain, so Caterpillar’s focus on supply chain optimization goes all the way to the top.

When Douglas R. Oberhelman took the helm as CEO last year, BusinessWeek reported that, “Improving the supply chain is a key piece of Oberhelman’s strategy to pull 25 cents of profit from each new dollar of sales as demand in emerging markets surges. He plans to apply engineering and quality-control expertise from suppliers inside Caterpillar factories to help build the company’s signature yellow-and-black machines more efficiently”.

According to Caterpillar, the overarching theme of its supply chain strategy is diversity. Through this supplier diversity it is better able to provide a variety of specialized products to unique business markets and regions.

A recent example of this is a new product offering by the Caterpillar brand Perkins, one of the world’s leading suppliers of off-highway diesel and gas engines in the 4-2,000 kW (5-2600 hp) market. Perkins has designed a new engine that packs the punch of a much larger machinery engine into a 7.1 liter compact engine that saves both space and fuel. The kicker is not only is it a good investment for OEMs today, but it is built on a common platform that will be easy to reuse with machinery and equipment yet to come.

Bringing supply chain into the earlier stages of product development to optimize supplier and manufacturer selection across multiple product lines, programs and geographies is a major challenge for product companies today, with huge implications on product cost and time-to-market. Product Lifecycle Management (PLM) solutions are in the best position to manage the intricacies of making important early supply chain decisions. With the right PLM software, organizations can:

  • Shorten time-to-market and improve quality by using preferred suppliers with good cost, quality, compliance and delivery track records
  • Lower product costs by leveraging early sourcing and product costing
  • Lower inventory and spend costs by eliminating hidden part duplication
  • Manage approved manufacturer and vendor lists (AVL / AML) to eliminate “hard-to-get” or obsolete commercial parts in new designs
  • Prevent expensive redesigns by involving suppliers early in the design process
  • Improve supply chain communication and collaboration with a secure, Web-based collaborative project workspace

How does your company manage, analyze and communicate supply chain information?


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