Manufacturing:

In the design of the products Cat follows a global mentality, irrespective of the location of
manufacturing all the products were almost the same. In order to meet the world demand Cat
bought some state of the art technology for its US plants. Components were exported from these
plants to other countries and final assembly was done overseas with some local customisations. This
saved lot of transportation costs as well cat was able to meet the local demands.

Cat used to manufacture across continents through JVs as well as its own plants.cat was very
fast in expanding its manufacturing base.

In 1981 when almost $7 billion was required to breakeven and Cat estimated a sales of $12
billion, Cat reduced its profit margins in order to retain customers and get new ones. They also
worked on the quality issues of the production as well as that of the delivery mechanisms.

Given the potential of the earth moving market Cat invested a lot of capital in improving its
manufacturing facilities and start flexible manufacturing. In response to the Japanese competition
Cat invested lot of effort in improving the quality.

Poor labour relations were the weakness of the company, as a result of e=which productivity
suffered and the automation was not received well by the workers. The high share of labour
cost(two-thirds) in the total costs made it compulsory to bring down the costs considerably.

However, some of the flaws with the manufacturing system was the concentration of
production in the U.S and the outdated technology in most of its plans. The Japanese were far ahead
in the terms of technology.