SUPPLY CHAIN GROUPS CASE STUDY

Caterpillar Logistics

Caterpillar Logistics has increased delivery schedule compliance

and reduced the total inventory in the supply chain for the MG The Supply Chain
Rover aftermarket by working with key suppliers on a two-year Groups programme
Supply Chain Groups project. helps UK companies in
the automotive and
The Challenge aerospace industries
Caterpillar has been providing a logistics service to external clients since build globally-
the mid-1980s. Caterpillar Logistics (UK) was established in 1987 and its competitive Supply
Chains. It offers a tried
200 employees now manage logistics for several clients in the automotive
and tested, flexible
industry, including the aftermarket for MG Rover.
model for structured,
hands-on development
Poor schedule compliance in the supply base had resulted in high levels of activities led by a host
inventory, with associated cost to MG Rover. At the same time, delays in company working with
the supply of spare parts impacted directly upon the service delivered by at least eight suppliers.
MG Rover dealers to the end customer – owners of MG Rover cars.

Caterpillar Logistics set an objective for this project to achieve 95%

schedule compliance by the end of 2005, for the eight suppliers involved.
In 2003, supplier delivery performance was closer to 45%. Improvements
in delivery performance would eliminate the need for inventory in the
supply chain, and underpin higher levels of customer service.

The company was also keen to use the Supply Chain Groups project as a
pilot, to develop an approach to supplier development that could be cascaded
across their supply base. Indeed, Caterpillar Logistics estimated that £1.1m
worth of inventory could be removed from the whole supply chain.
 SUPPLY CHAIN GROUPS CASE STUDY

Caterpillar Logistics

Caterpillar Logistics wanted to show suppliers, many of whom also

supplied parts to the (then current) ‘original equipment’ (OE) production
lines, that sales to the aftermarket could be profitable, albeit on low
volumes. For suppliers, this represented a fundamental shift in orientation,
moving from a focus on sales to focus more on ‘end-customer satisfaction’.

The Solution
The two-year project was launched in January 2004, with training and
consultancy delivered by SMMT Industry Forum.

Change Agent training was structured around the Plan-Do-Check-Act cycle,

covering continuous improvement, standardised work, visual
management, the ‘7 wastes’ and the 5S. In addition, Change Agents were
taught a set of tools and techniques for problem solving, line balancing
and process set-up improvement.

• Prior to the project, only one of the suppliers was measuring their own
delivery performance. One of the objectives for this project was to
implement a measurement system, in particular: not-right-first time,
delivery schedule adherence, people productivity and overall equipment
effectiveness.
• The Partnership Assessment survey confirmed logistics and
commercial issues as the areas of focus.
• Value Stream Mapping was used to identify areas for QCD
improvement; priority was placed on activities that would deliver
maximum benefit to the businesses involved.
• Caterpillar Logistics applied its own six sigma resource to resolve
internal issues that impacted on delivery schedule compliance.

Caterpillar Logistics asked its suppliers to identify their needs from the
project. The broad objectives listed below were translated in to a set of
practical improvement activities, for which targets and benefits were defined:

• ‘Improvements to our business as a whole, by applying the knowledge

and techniques learned across our other customers.’
• ‘Identification of areas/processes that are not currently developed to
their full potential.’
• ‘Customer satisfaction… and an increase in future business.’
• ‘Financial benefits… we want to apply these tools in every area of the
business to reduce costs continuously and further reduce waste.’
• ‘Culture change… involvement and understanding of the situation at
all levels.’
• ‘To develop business knowledge in order to prosper and grow.’

Results
Delivery schedule adherence has increased by 35% to 82%.

The Supply Chain Groups programme managed by Pera