The Importance of Innovation in Supply Chains

Barbara (Hodel) Schwarzentraub, Director of Parts Distribution, Caterpillar [NYSE :CAT]

IoT’s Contribution

To succeed in any market, the customers that supply chains serve must make more money or receive more value from the products and services that the supply chains are serving them.

At Caterpillar, this means that our supply chain in the aftermarket must deliver solutions that meet a mission critical need for the customer. It is the part for a landscaper’s skid steer or a large mining truck–both are delivering results to meet both existing and emerging customer needs with the dirt they are moving. Our customers expect to make money because Cat® products and Caterpillar supply chains perform. The performance of our supply chain is mission critical to their performance.

All of you reading this may not deem your supply chain “mission critical” for your customers, but all of our supply chains serve customer needs and desires regardless of industry. The performance of our supply chains must represent the lowest total costs to maximize value for our customers. But how we have performed in the past, is not the performance in the future that will set your supply chain apart from the rest. Lean supply chains, which maximize flow, are foundational in what we do but not enough.

As an industry, we must harness the internet of things and the possibilities. Our ability to combine information from seemingly unrelated events to make predictive moves for our supply chains is the way for the future. These combined analytics offer up greater availability to add value for our customers with higher availability of the right products, improved stocking decisions at all points our customers touch within our supply chains, lower transportation costs and the resulting CO2 for sustainability and minimized variability in the demand and supply signals by being proactive. We must all know our customers’ existing and emerging needs better than they do by utilizing predictive and analytic supply chains.

  ​Supply chains are all about maximizing the use of technology to drive the lowest operating costs to achieve customer needs  

This translates into better global resource utilization with customers achieving their desired results better than they ever imagined.

Lending a Helping Hand

Harnessing technology enables supply chains to be viewed as adding value to both the bottom line and our customers versus solely a cost to be managed, and this enables the supply chain to be managed as an asset for competitive advantage.

Technology also applies to the warehouse with self-guided robots and automation to modeling to maximize pick paths moving quickly throughout the warehouse. In addition, this automation provides a safer work environment for the employees, which is critical to any operations director.

“Big data” within the analytics and predictive capabilities assure whether the customer requirements are achieved or not and maximize the experience that customers have as a result of the chain. This improves top line growth with availability of the right product at the right time, even anticipating the needs and requirements of our customers.

Supply chains are all about maximizing the use of technology to drive the lowest operating costs to achieve customer needs. Caterpillar leverages the supply chains of the network of suppliers, manufacturing, distribution, dealers and customers to deliver value each day. Engineering these chains with technology and modeling delivers results with improved margins and achieving customer requirements.

Integrating Big Data

In the aftermarket, Caterpillar has leveraged a global set of data to serve the aftermarket for years. It provided a distinct competitive advantage in the industries in which we serve. However, it had challenges and limitations as the data was between the OEM and the dealer network, and the actual customer data was distributed through the dealer network. Decisions made at different points in the chain would disrupt a smooth flow of aftermarket product to the customers with the lowest operating costs.

We are currently in the process of deploying Parts Inventory Collaboration (PIC), which is gathering the point of sale data directly with customers to analyze and predict the supply chain required. Through modeling and predictive data analytics, the initial results are positive with improved carrying costs and operating costs throughout the network, as well as improved velocity and breadth of availability, which is all intended to improve the customer experience for the lowest owning and operating costs in the industries served.

Was this a challenge to deploy? With initial views looking at global opportunity, multiple different ERPs between OEM and dealers and the breadth of network, it was viewed as complex and cost prohibitive. But with a focus on specific customer issues to be solved, improvements in data architecture and more open platforms to access and assimilate data, the challenges have been overcome and we are midway through deployment.

My advice–focus on the customer requirements and value while solving these business issues one innovative step at a time. These successive steps lead to enhanced value and improved costs through close partnership between the CIO and business leaders in the OEM and dealerships.

Importance of Passion

Having a passion for the people and the business is the best lesson I can give to anyone. By having a passion for the people, you are open enough to say, “I don’t know, but why don’t you tell me more about your idea,” to the new analyst on the team. This idea and inclusive behavior will harness the power of everyone to deliver each and every day. Being the leader doesn’t mean you have all the answers, it means you have the courage to listen and to empower others.

This has served me well as I have been involved in successful deployments of multiple sites throughout the globe and in failed startups, which lead to sleepless nights by many. In both cases, the willingness to listen and act decisively while partnering with the team assured the outcomes were ultimately more successful.

However, the passion for the business and how our customers define success is critical to all of us. The decisions you drive as a tech leader are more impactful to the business as you keenly listen to the business issues and provide solutions addressing those issues. Large scale IT deployments are a thing of the distant past. The ability to listen, collaborate and drive solutions is what the business needs. I’ve seen this in my work with Ford Motor Company and SAP in the next generation of aftermarket solutions to the results achieved over the past several years leading the aftermarket supply chain for Caterpillar. A passion for the business and driving bottom line results assures the technology (or any solution) is achieving what is needed.

Finally, many ask what it is like to be a woman in leadership at a company like Caterpillar. This year we have visibly launched the Women in Leadership (WIL) initiative, which is the intentional, focused step on a continuous journey toward a global, universal challenge. Inclusion by all drives business results. When we all focus on having the most capable talent that includes a gender-balanced workforce, everyone benefits. We know we have room to grow to improve the diversity of our employee landscape. In this, the passion for the business, leadership, developing others and driving results has served me well.

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