Who is Caterpillar?

Dealers
Worlds leading manufacturer ofCatconstruction
& mining
Businessand
Unitsindustrial
equipment; diesel & natural gasCat
engines;
gas turbines.
Provider of financing, insurance, leasing, counter-trade
and logistics
$20.15B sales in 2002, $5.2B exported
from the U.S.
Expect sales growth to $30B by the
end of the decade

Who is Caterpillar?
Employs 68,990 Worldwide Cat Dealers
Cat Business Units
Manufacturing facilities in 21 countries.
Marketing headquarters in 11 countries.
Distributions Centers in 19 countries.

Our Dealers
Dealers
Products distributed around theCat
globe
by independent
Cat Business Units
dealer network
90,000 people dedicated to the customer
60 Dealers in the US and over 150 outside
1840 branches / 1100 Rental Stores

Work Tools & Services

Our aim is to be the leader in providing work tools and related
services that enhance Caterpillar machine performance.
Manufacture tools for construction, mining and forestry
equipment.
Over 2,500 end items sold in 2002.
Employ 450 in three facilities.

Customer Overview
(Dealers)

High Sales $
Medium Sales $
Low Sales $

Finning
Toromo
nt
Toromont
Krame
r

NC
Machinery

Hewit
t

Toromont

Atlanti
c

NC
Machinery

Western
States

Pape'

Tractor &
Equipment

or
th

Wester
n
States

Butler

Fabco
Ziegler

Wheeler

an
st
er

Dean

ph
erd

Fabick
Thompson
Mchry

Johnson

h
wt
Ha

Empire

Ohio
Holt of
Ohio

Walker

ne
or

Mustang
Holt of
Texas

Greg
Poole

Blanchard
Yancey

Warre
n Cat
Louisiana

Carter

Stowers Carolina

JA Riggs

Rust

Alban

Whayne

Fabick

Foley Tr

C
d l ev

el

Martin Tr

Wagner

M
ac
Al
li

Altorfer

Sh
e

Quinn

Cashman

Be
th ckw
i

Patten

Nebraska
Holt
of
Cal

Syracuse

Michigan

Wyoming

Peterson

Thompson
Tractor
Puckett

Carlton
Ring
Power
Ringhaver

Kelly

Our Demand

S
M out
ilt h
on w

Halton

HO Penn
Foley

G&R

Customer buying criteria

3). Cost
2). Quality
1). AvailabilityAvailability Availability

Customer availability expectations

1998

Today

1. Customers held 2 to 3 months

of Work Tool inventory

1. Customers hold limited inventory

2. Make-to-Stock Products
Order to ship in 34 weeks

2. Make-to-Stock Products
Order to ship in 05 days

3. Make-to-Order Products
Order to ship in 7-8 weeks

3. Make-to-Order Products
Order to ship in 3-5 weeks

Customer availability expectations have changed

Why?
1998
1. Dealers held 2 to 3 months
Work Tool choices
inventory

Today
1. Dealers hold limited inventory

have increased 50% since 98

Make-to-Stock
Productsfor
2. Make-to-Stock
DealersProducts
are not willing to2.invest
in inventory
Order to ship in 05 days
Order to ship in 34 weeks
fear of obsolescence
3. Make-to-Order Products
3. Make-to-Order Products
Competition
toughothers
are
Order
Orderproviding
to ship in 3-4quick
weeks
to ship in 7-8isweeks

availability.

Our Challenge.
Create a Supply Chain that
External

Internal

1). Meets Dealer / Customer availability expectations

2). Meets Dealer / Customer price & quality expectations
3). Meets increasing expectations of inventory turnover
4). Meets our financial expectationsmargin & profit

Product Supply

85% of Supply is
from North America

Overview
Canada: 13%

Europe: 5%

Sweden: 1.5%
Japan: 1%

U.K.: 6.5%

U.S.: 52%
Mexico: 20%

Over 2500 End Items Sold

Indonesia: 1%

High Sales $

3 Mfg Facilities
2 Partners
6 Key Suppliers
3 Distribution Centers

Medium Sales $
Low Sales $
Finnin
g
Toromo
nt
Toromont
Krame
r

NC
Machinery

Hewi
tt

Toromont

Atlant
ic

NC
Machinery

Western
States

Pape'

Tractor &
Equipment

rt
h

Wester
n
States

Butler

Fabco
Ziegler

Wheeler

n
r

Walker

Fabick
Thompson
Mchry

Johnson

Ha

Empire

Ohio
Holt of
Ohio

h
wt
ne
or

Mustang
Holt of
Texas

Greg
Poole

Blanchard
Yancey

Warre
n Cat
Louisiana

Carter

Stowers Carolina

JA Riggs

Rust

Alban

Whayne

Fabick

Foley Tr

he
rd

Al
li

st
e

Dean

C
d lev
e

la

Martin Tr

Wagner

M
ac

Altorfer

Sh
ep

Quinn

Cashman

Be
th ckw
i

Patten

Nebraska
Holt
of
Cal

Syracuse

Michigan

Wyoming

Peterson

Thompson
Tractor
Puckett

Carlton
Ring
Power
Ringhaver

Kelly

Product Supply vs.

S
M ou
ilt th
on w
o

Halton

HO Penn
Foley

G&R

Component Supply
200 Suppliers
8500 Part Numbers

The speed of replenishment

is critical for meeting
Customer demand while
minimizing Inventory
investment.
Quebec

Kansas

Florida

Understanding Our Customers Demand for Products

Resource Planning Model
Marketing Companies'
Forecasts

Strategic Plans

Sales & Operations Planning

Plans

Volume and Rates

Feedback

Rough-cut Capacity
Planning

Mix Planning
Products

1). 18 Month Sales Plan

19 Product Families
2). Supply Plan

Do we have capacity
to supply?
Determine Forecast Split
Make-to-Stock (MTS) vs.
Make-to-Order (MTO)

Master Production Scheduling

Materials Planning

Materials & Parts

Detailed Capacity Planning

Purchasing Execution

Schedule Products per

the new Supply Plan

Hours

Production
Execution

Commit to:
1). Ordering Products &
Materials
2). Manufacturing Products

Caterpillar Confidential: Yellow

Forecast provided
by
Dealers & Reps.

2003 Forecast

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

S&OP
110

MTS vs. MTO mix is discussed for each of 19 Product

Families

Forecast

110

Our Challenge.

How
Howare
arewe
we
doing?
doing?

Create a Supply Chain that

External

Internal

1). Meets Dealer / Customer availability expectations

2). Meets Dealer / Customer price & quality expectations
3). Meets increasing expectations of inventory turnover
4). Meets our financial expectationsmargin & profit

Key Elements of an effective Supply Chain

Understanding the playing field
What makes the customer tick?
What Products, What Lead Times, What Price
What is the competition offering?
Sales & Operations Planning Process
Drives Capacity Planning
Facilities, People, Supplier Commitments
Essential for achieving
Acceptable Lead Times
Acceptable Levels of Inventory