Country head & MD at Caterpillar India, Vivekanand V, is banking on its well-knit processes to scale greater heights
by Jayashree mendes
There are few companies in the world that serve as a bellwether for global economic activity and a barometer for global economic growth. One such company is Caterpillar Inc. In 2015 alone, the company clocked sales and revenues of $47 billion through three product segments: Construction industries, Resource industries and Energy & Transportation, besides providing financing and related services through its Financial Products segment.
With growth regions constantly changing, Caterpillar India continues to focus on expanding its manufacturing, dealership footprint and increase R&D activities to tap into the growth opportunities in the country. Vivekanand Vanmeeganathan (Vivek), country head & MD, Caterpillar India, says, “We have a significant footprint in the country. Though the market has not been kind to companies depending on construction and infrastructure business in India, on our part we are not stymied. There has been a slowing of demand, especially for mining products, leading to capacity consolidation. But India is now bucking the trend just as we are pinning our hopes on the growth story.”
In the current off-take of demand, Caterpillar has been making better utilisation of its capacity immaterial when sustained demand will decide to present itself.
A machine running smoothly
Caterpillar India reaffirmed its faith in the Indian market when it set up its fifth manufacturing plant. Now the firm has five plants (Thiruvallur and Hosur in Tamil Nadu, and the recently-commissioned Aurangabad plant), and distributes products through two dealers. They serve customers with eight territorial dealerships and over 160 service and sales branches, including dealer employees, besides the 10,000-plus people who work in support of Caterpillar India. With an overall investment of more than $400 million (almost Rs 2,400 crore) in manufacturing plants alone, Vivek says Caterpillar Inc. is banking on the resources and infrastructure sector related equipment doubling to over $4 billion over the next three years, from $2 billion now. While the mining and construction sector has many players, the energy and transportation sector, is dominated by Caterpillar.
The production process for Caterpillar begins with sourcing. The company maintains two kinds of suppliers — domestic suppliers located within India, overseas suppliers in various parts of the world and the Global Supply Network Division of Caterpillar Inc. that manages all external suppliers. It has more than 500-plus suppliers. “We are probably the only company who manufacture all the critical systems for our products. For instance, we make the engines (Hosur), the transmission, the power train and hydraulic components through our in-house plants. About 60% of components are sourced from within the country and components of a proprietary nature are sourced globally,” says Sekar Murugesan, GM, operations.
The capability to build heavy machinery comes from the our penchant for technology that we deploy not only to the product but also to the processes that build the product, says Vivek. “To that extent, we deploy significant automation at most of our plants while maintaining manual operations too. If you do a comparison within the industry, the technology in manufacturing is unique to us and world class besides differentiating us in terms of quality,” he adds.
Catalyst of growth
Caterpillar India employs a production system that is unique to it, the Caterpillar Production System (CPS), launched in 2005. CPS is the common order-to-delivery process that was implemented enterprise-wide to achieve people, quality, velocity and cost goals. CPS embraces lean manufacturing concepts such as reducing waste, Poka Yoke, standard work, visual factory, continuous improvement, quick change over, pull, among others. The company not only implemented this in the factory operations but also in other functions such as product design, purchasing, supply chain and quality.
Murugesan says, “At the shop floor, our manufacturing activities are segregated in three major groups: Machining, fabrication and assembly. The machine shop has a range of CNC machine tools that are completely automated and produce quality parts. We have multiple robotic welding, which are large in size, because of the nature of the equipment what we make. The robots can handle jobs of 5-6m long. The Tiruvallur plant has two major assembly lines, and here Caterpillar India prefers to go with not a continuous moving line due to size and volume, but a synchronised moving line controlled by computers.”
Throughout the company, Lean, CPS — along with Six Sigma — is improving manufacturing efficiencies in its global operations. While CPS focuses on eliminating waste in processes. Lean focuses on improving quality through built in quality, delivering defect-free products and services to customers. The key operations processes of the firm, powered by Lean & CPS include product design, demand management, quality management, process planning, supply chain/materials management, and capability building /training.
Caterpillar has fully embraced 6 Sigma. Black Belts are dedicated to process improvements and are responsible for leading the team of Green Belts in completing the projects. Murugesan says, “All our employees undergo 6 Sigma training and are certified with a certain level depending on the training.”
Inside the factory, the company follows metrics under four major categories, formally referred as PQVC where “P” stands for People and the primary focus is Safety (Recordable Injury Frequency), “Q” for quality and primary focuses are Built in Quality (Stop capability) & outgoing quality (Defects Per Unit), “V” stands for velocity and primary focus is Customer delivery commitment (Order Promise Date) and “C” stands for Cost and the primary focus is Efficiency (productivity). Along with these key metrics, there are few other associated metrics being tracked and reviewed daily at middle management level and also formally reviewed every month by top management.
Just-in-time sourcing
Caterpillar India follows four different material replenishment strategies depending upon supplier location and capability which includes OSS (Order Specific Sequence), Kanban, 2-Bin and MRP push. Suppliers located within 400km circle are being pulled through either one of the pull stagey and others will be through MRP push. The supply chain is managed through a highly vibrant Sales and Operations planning (S&OP) process. The company gauges the demand that comes from its dealers and marketing team and a forecast of rolling demand is prepared for 24 months. This is then narrowed down to a month based on realistic demand, so that those machines can go on the assembly line for production.
Made to measure
From using multiple systems, Caterpillar India has moved to a single system called CBS (Common Business System) which is based on SAP ERP. Murugesan says, “CBS is our single system that oversees the entire chain of material planning to production and dispatch. The SAP Production Execution process contains five important steps: Converting independent demand to planned, and planned orders to production order, releasing the production order, goods issue for production order, confirmation of production order, and goods receipt against production order.
Suppliers are connected through a system called MRC, which help to collaborate on real time basis.
Quality controls
Quality is measured based on three major factors: Incoming quality, manufacturing quality, and outgoing quality. Caterpillar vets its suppliers through a stringent process and its global supply network division who take the responsibility of quality assurance through standards like ISO, AQP (advanced quality planning) and PPAP (Production Part Approval Process). Vivek says, “Every single part that comes to our facility passes through a PPAP to meet the pre-decided criteria. We have a state-of-the-art lab that tests the quality of raw material also. The sampling at our facility is primarily on the material integrity point of view. We want to be sure about the material coming inside to adhere to Caterpillar specifications.
For Caterpillar India, safety is the number one priority and they strongly believe that quality can come in when safety is assured. Continuous improvement is another important aspect of employee engagement. Shop supervisors and section managers discuss safety and process improvement on daily basis with the operators which helps to improve the engagement. With the combination of Safety, Process controls and continuous improvement, the product quality is being assured every day at shop floor.
Customer centric
The length to which a company stretches itself for customers is visible in its after-sales service. Vivek says that being customer-centric is their commitment and brand promise. “We are committed to help our customers make more money using our products. Cat 360 Advantage is a lifecycle solution we offer by which we ensure that our customers get an endless solution right from the time they think of acquiring our product to the time to the end of its lifecycle,” says Vivek.
Based on research with equipment customers from around the world, Caterpillar identified the most preferred types of services, which include: Equipment management services, preventive maintenance parts and services, extended warranties, and financial offers.
“The bright side in the entire economy is that growth can only come from India and the reason why Caterpillar believes it is a great market to be in. We build machines that help to build the infrastructure and the country needs infrastructure as a part of growth. I think we have most of the equipment the country needs and we would definitely want to be a part of the success story of the country. It’s also the reason we are extremely optimistic when it comes to ramping up in India,” says Vivek signing off.