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Caterpillar’s Building Construction Products Division Improves and Stabilizes Product Availability

Author

Listed:
  • Susan Keene

    (Caterpillar, 954 Highway 42 East, PO Box 999, Clayton, North Carolina 27520)

  • David Alberti

    (Caterpillar, 954 Highway 42 East, PO Box 999, Clayton, North Carolina 27520)

  • Gary Henby

    (Caterpillar, Technical Center, Building K, PO Box 1875, Peoria, Illinois 61656)

  • A. J. Brohinsky

    (SmartOps, One North Shore Center, Suite 400, Pittsburgh, Pennsylvania 15212)

  • Sridhar Tayur

    (SmartOps, One North Shore Center, Suite 400, Pittsburgh, Pennsylvania 15212)

Abstract

In 2001, Caterpillar’s Building Construction Products Division (BCPD) began a project to reduce and stabilize order-to-delivery times (termed product availability within Caterpillar) while reducing cost and inventory. Using a six-sigma method and a multiechelon inventory optimization model, BCPD sets dynamic inventory policies for assembled machines stocked at the assembly plant and for subassemblies and components stocked at the assembly plant and at supplier locations. The project has improved product availability, reducing the mean time for orders with identified customers by 20 percent and reducing the standard deviation of product availability for all orders by 50 percent. BCPD’s initial implementation and resulting improved product availability enabled BCPD to win more orders (a two percent increase in revenues) and reduce total chain inventory by 16 percent, and it has motivated other Caterpillar manufacturing and assembly facilities to replicate this project across their supply chains.

Suggested Citation

  • Susan Keene & David Alberti & Gary Henby & A. J. Brohinsky & Sridhar Tayur, 2006. "Caterpillar’s Building Construction Products Division Improves and Stabilizes Product Availability," Interfaces, INFORMS, vol. 36(4), pages 283-295, August.
    • Handle: RePEc:inm:orinte:v:36:y:2006:i:4:p:283-295
    DOI: 10.1287/inte.1060.0208
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    References listed on IDEAS

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    1. Loren Troyer & James Smith & Sean Marshall & Elan Yaniv & Sridhar Tayur & Martin Barkman & Alev Kaya & Yong Liu, 2005. "Improving Asset Management and Order Fulfillment at Deere & Company's C&CE Division," Interfaces, INFORMS, vol. 35(1), pages 76-87, February.
    2. Uday Rao & Alan Scheller-Wolf & Sridhar Tayur, 2000. "Development of a Rapid-Response Supply Chain at Caterpillar," Operations Research, INFORMS, vol. 48(2), pages 189-204, April.
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    Cited by:

    1. Peter C. Bell & Jing Chen, 2017. "Close integration of pricing and supply chain decisions has strategic as well as operations level benefits," Annals of Operations Research, Springer, vol. 257(1), pages 77-93, October.

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