Supply Chain Management for Caterpillar: Operations Strategies and Lean Management

This report analyzes and evaluates the various operations strategies that Caterpillar can use to align the supply chain with the marketing functions existing. It also provides recommendations for lean management and overall competitiveness.

Running head: SUPPLY CHAIN MANAGEMENT
Supply Chain Management
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Introduction
Caterpillar is one of the leading firms that exercise its operational functions in the field of
manufacturing and production of equipments, engines and locomotives that are associated with
mining, construction, diesel and natural gas. The firm manufactures diesel electric locomotives,
turbines and other machineries and equipments that are associated with mining. Besides these
products, the firm has also recently taken up the business of providing financial services
(cat.com, 2018). As the company has a long history and record of innovation in terms of
technology and customer solutions, operations strategies governing supply chain is very
important and crucial for the firm. This report tends to analyze and evaluate the various
operations strategies that the firm can use to align the supply chain with the marketing functions
existing.
Resources Required
As the firm manufactures equipments and machinery that are used for agricultural and
mining purposes, the resources required by the firm include the most updated forms of
technology in addition to the large infrastructural requirements (Brewster 2017). Apart from
these the other resources required by the firm include a meticulous network of distributors and
logistics that will help in maintenance of proper relations with the suppliers as well as other
stakeholders.
Marketing Functions
The marketing functions that are used by Caterpillar include the market research and
other promotional activities and initiatives that help the firm to figure the array of products that

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will help it to gain and capture a larger share of the market and hence increase its cohort of target
customers.
Operations Strategy Integrating the Resources and the Marketing Functions
The operations strategy used by a firm in its functioning are primarily involved with
reaching the set objectives and goals for the quarters or for that financial year. The two main
types of operations strategies used by the firm in reaching its objectives of higher revenue
generation as well as capturing a higher customer base include both corporate strategies and
customer driven strategies. The other most important strategy used by the firm includes
development of newer products and services. These strategies help in the amalgamation and
integration of resources utilized by the firm along with marketing functions. The corporate
strategies used by the firm help in efficient and easy networking and cohesion between all the
departments and additional resource relations present within the firm. The firm is also actively
involved in utilizing and implementing corporate strategies that help in capturing higher sections
of the target market by use of disruptive business models that help in catering to the needs and
demands of customers and the changing trends of the market. The last set of operations strategy
used to cater to the changing technological innovations taking place in the firm as well as in the
market include, manufacturing and providing increased research and development of goods and
services that are new and will help in capturing higher share of the market as the firm makes sure
that they are the only firm in the market producing the newest variety and quality of goods.
Managerial Skills Required
The managerial skills that is required for efficient working of the supply chain amidst the
rapidly occurring changes in the spheres of technology and commerce include the skills that are

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needed to be present in the new era of management supply (Jacobs, Chase and Lummus 2014).
Some of these skills include concepts of project management, accounting costs efficiently, and
technical viability. In this context the ability to understand financial statements and work on the
same is also very important. The other set of management skills include understanding of e-
business plans and e-procurement plans. The duties of supply chain managers are varied and also
include the responsibilities of trouble shooting and problem solving on an everyday basis
(Christopher 2016). Especially in the context of the functioning of Caterpillar, the
responsibilities of the supply chain managers include understanding and evaluating global issues
or situations that affect the smooth functioning of the already existing branches or that affect the
expansion of the firm into other countries (Schönsleben 2016). Essentially as Caterpillar is
concerned and involved with machinery and equipments for earth moving and agriculture, the
core responsibilities of the managers demand more than just logistics handling and inventory
purchasing. As the firm is currently facing issues of emissions from the vehicles produced from
the customer feedbacks obtained, the complete set of responsibilities and accountabilities facing
the supply chain managers are enlisted and described as follows:
 Ensuring the production quality is maintained and ensured with the new products and
services that the company is now producing or planning to produce. It is one of the most
crucial responsibility for the managers to propose and monitor both research and product
designs for any new services or products that the firm is planning to launch for the first
time in the target market.
 Ensuring that issues of leakage and other disruptions do not happen in the context of
inventory or other raw materials storage

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 Ensuring there is a reduction in costs of travel and connectivity for both finished goods as
well as raw materials and also ensuring that the supply chain is smooth and is the most
convenient way of transferring goods across different points. In this context it is very
important to mention the importance of network design that will help in ensuring that the
allocation of accountability across the networks is also maintained in a fastidious manner
 One of the most important responsibilities lying in the aspect of technology and
innovation is for the managers to ensure that the most updated forms of technology is
being used and at the cheapest rates through maintenance of good will and long term
relationships with the suppliers.
 For the supply chain managers it is also important to use the data collected and processed
by the application of smart devices for developing and using disruptive business models
to produce goods and products that are the latest and the newest in the market
 The managers of Caterpillar should also increasingly involve manufacturing and
procurement training and workshops so that the employees are able to handle increased
levels of work through maximum capacity utilization. This again involves process design
wherein the process of both developing a new product as well as skills associated with
the manufacturing of the product are designed in such a way that the profits accrued out
of it are maximum.
 The monitoring of all the above prescribed measures should be done with the help of
customer feedbacks based on which objectives pertaining to the supply chain
management should be laid
Operations Functions

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The layout and the areas wherein the operations functions will be formulated and
exercised are described with the help of the following table and the key areas which are to be
addressed are also mentioned:
Finance and
Accounting
Marketing Human Resources Suppliers
Management of
inventory and
production data
Capital Budgeting
Monitoring
Formulate capacity
expansion, utilization
and technology
Monitoring the
availability of the
products and services
in high demand
Planning and
executing deliveries
according the
schedules
Determining the lead
generation methods,
conversations and
optimum timings for
the same
The entire process of
operations related to
hiring the right fit of
employees for the
firm forms the central
most important
component of human
resource supply
component
Monitoring the legal
aspects of the firm
along with evaluation
of the training and
development process
so that the capacity
utilization is increased
This is the most
important cohort of
operations functions
for the supply chain
managers and
involves management
of delivery schedules
and timings
Proper monitoring of
the availability and
use of raw materials
and other equipments
The other
responsibility is in
terms of supply
design that integrates

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the various points of
supply to the
manufacturing units
of the firm and also
between the
manufacturing units to
the retail stores or the
business hubs that are
customers of
Caterpillar
Formulation and
monitoring of budgets
for financial quarters
Performing cost
analysis based on the
objectives of the firm,
the various
expenditures incurred
on a daily basis, the
investments and the
upcoming projects at
hand
Planning programs
and other methods of
promotion for the new
services and products
Collecting and
processing data with
the help of smart
devices as mentioned
before for estimating
and forecasting sales
and lead generation
It is equally important
to include in this set
of operations
functions the personal
needs of the
employees so that
they can increase their
productivity along
with their quality
Monitoring the
required skill sets and
integrating them in
The orders for the
various products and
services should also
be integrated in
relation to the amount
of supplies available
and being used
currently based on the
methods of cost
reduction
Performance
evaluation of the

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Monitoring capital
investments and the
requirements of the
stockholders
Monitoring and
formulation product
and process design
depending on
customer feedbacks
and demands
the job design is also
crucial for the supply
chain managers
Finally the
development of
performance
evaluation and work
measurement is also
important
manufacturing
production units and
processes should also
be performed and
evaluated
The above segregation of operations function will help eventually in the efficient and
effective process of change and lean management (Heizer 2016). This will help in the growth of
the firm while catering to the needs of customers and their changing preferences and demand
trends specific to different parts of the world. This is very important for the firm as it will also
help the firm to cater to the corporate social responsibilities which is essential for the sustainable
production and functioning in the long run for the firm.
Recommendations for Lean Management and Overall Competitiveness
The following set of principles should be evaluated to ensure smooth functioning of lean
management of Caterpillar:

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 The value that the customers place on the products and services of the firm should be
analyzed and monitored by the management and a top down approach should be taken up
for deciding cost of the products and services in the target market (Martínez-Jurado, P.J.
and Moyano-Fuentes 2018). This process will also eventually help the firm to remove
excess costs incurred by the firm.
 The value stream for the products and services of the firm should also be determined and
evaluated. This required intensive monitoring of the product cost and features starting
from manufacturing to delivery of the product to the reduction in usage and expiration of
the product (Martínez-Jurado and Moyano-Fuentes 2014). Lean thinking helps in linking
the suppliers with the customers and integrates the demand and supply in such a way that
the waste generated reduces and is even eliminated in most cases. Caterpillar should thus
take up initiatives and activities that will help in bringing about lean management through
the implication of value stream monitoring activities.
 Lean management basically focuses on elimination of waste which is done by
maintaining a good and smooth flow of products and services through the monitoring of a
good value chain that never brings about a stop or halt in the production system or
process. This process ensures that the processes of production and delivery are
synchronized and aligned to the changing types and quantities of customer demands
(Bhasin 2015). In fact this is the most crucial of all the processes of lean management as
it causes reduction and sometimes even complete elimination of the waste and increases
the value of the product and services to the customers.
 Next, is the concept of pull approach which ensures that the inventories of the firm are
managed efficiently and effectively and too much of production does not happen ahead of

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time. In this particular context, a framework and estimation is very important as it helps
in regulating the amount of production and also the cycles of product generation. This
step should be carefully assessed by the supply chain managers as it should consist of
cycles which are short and flexible so that nothing is produced without the order from the
customers. Efficient delivery networking and schedule is also ensured and monitored by
the pull approach. It also caters to the process of keeping the production units informed of
what is required as of the present month or the quarter and not the entire year so that the
present needs can be focused on.
 The last step involves setting of targets that ensure that perfection is maintained in the
entire supply chain so that the quality is maintained and the production processes are
made to be perfect in terms of less cost incurrence and the key reason behind this whole
process is the maintenance of the attitude of best quality services and products.
Of late the process of ensuring and maintaining overall business competitiveness has become
very difficult due to the processes of globalization and increase in the total supply and demand of
a lot of products and services in different sectors (Sala-i-Martin et al. 2015). Thus it will be very
important for caterpillar as a firm to perform product differentiation and produce products that
are heterogeneous and are not perfect substitutes. Further, the firm should also increase the
amount of investments in the assets that are intangible as the returns from these are much higher
as compared to the returns from the fixed assets. The fact that Caterpillar is well known for its
innovation and technological improvisation itself proves that they are on the right track towards
enhancing overall business competitiveness. The complete set of recommendations for the
different aspects of supply chain management of Caterpillar to adopt and execute are mentioned
in the subsequent parts of this section:

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 As mentioned earlier the pull approach of lean management must be used for maintaining
the stock of goods and products according to the current demand of goods from the
customers
 The systems that are associated with providing and receiving information that is smart
devices that will help in collection, processing, evaluation and analyzing of data which in
turn will help to build products and services that are new and innovative and different
from other products existing in the target market. The data processed by the smart
devices will also be used for building disruptive business models that will help ensure
that the processes and the procedures as well as the networking measures used in the
context of supply chain management are the most up to date and in accordance with the
changing patterns and trends of demands of the customers and the ongoing factors that
affect the market as a whole
 In the context of supply chain management of costs, the use of outsourcing is very
important as it will help Caterpillar to reduce costs associated with production and
maintenance of products substantially. Thus, this can be used as a strategy to reduce the
costs and also obtain better quality of equipments which can further be used together to
produce the best quality finished goods
 Lastly, the firm should also develop strategies that will help faster delivery speed through
shipping or air freight routes that are both feasible and cheap and help in keeping up to
the speed and quality of delivery together at the same time

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