Caterpillar Innovates in Lean Times

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Product Developments

Caterpillar, the US bell weather manufacturer, has made sure it had if not a good recession then at least a productive one. An article in Mineweb detailing an interview with Al Frese, Solutions and Product Support Manager of Caterpillar’s Global Mining Division explains how the firm has continued with a high level of research and product development while at the same time achieving dramatic improvements in productivity, reliability and efficiency in both manufacturing and products. One division was quoted as having achieved a $20 million reduction in inventory, a 90% improvement in delivery times, a 75% reduction in work in process inventory and a 24% improvement in early operating hours (new machines) reliability. Part of this would eventually come from a downturn anyway; inventory would be run down, work in progress would be reduced and lead-times would decrease as order books shrink. But what is impressive is how quickly Caterpillar adjusted to the downturn and improvements in reliability which shows real commitment to product development.

Interestingly Caterpillar sees the growth in mining activity to start in 2010 and believes at current prices conditions are favorable for mine investment. Frese observes that mine fleets were not adequately updated during the last boom and the average fleet age is high creating a greater dynamic for early investment in equipment. Caterpillar is expecting demand growth to resume next year although no breakdown was given of where the firm sees it coming from. Caterpillar reacted quickly and decisively to the downturn even as it was happening last autumn and has clearly come out a leaner and fitter company as a result. It’s many suppliers will be looking forward to a return to growth next year.

Of course a more favorable copper price has certainly helped the situation as well.

–Stuart Burns

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