Cat Logistics Presentation 161111

Caterpillar Production System (CPS)
deployment at Caterpillar Logistics

Miguel Mazarias, General Manager, Caterpillar Logistics
It is always possible to improve !
VIDEO
2010 Caterpillar Logistics Services, Inc.

Caterpillar Confidential
How to continuously improve,

globally,
involving all units of a large organization ?
Committed to Customer Success

Agenda
Company introduction
Link with Caterpillar Strategy
What is it about ?
Results
Success factors for deployment

Future of CPS
450 000

Excellence in Aftermarket not only to Caterpillar

Caterpillar Production System: kick off 2006

Questions:
Are we working on the most

important work?
Are we solving problems fast
enough?
Is involvement and engagement
inclusive?
Are we process-focused? Are we
functionally organized? Is every
employee focused on the
customer?
Have we fundamentally changed
the way we work, the way we
behave and the way we lead?
How are other companies

addressing the same types of
questions?
Toyota
Denso
GM
Ford
Emerson
Pella
Deere

IBM
Panasonic
Audi
Kohler
Anheuser Busch
International Paper
Caterpillar Production System: what is it about ?

The Caterpillar Production System is the common Order-to-Delivery
process being implemented enterprise-wide to achieve our People, Quality,
Velocity and Cost goals for 2010-2020.

KPI process

6 Sigma Foundation (Started at Caterpillar in 2000)

CPS is built on a strong 6 Sigma foundation.
CPS uses 6 Sigma:
Methodology (DMAIC, DMEDI and Process Management) supplemented with lean tools
Practitioners (DCs, Master Black Belts, Black Belts, and Green Belts) with additional CPS
training
Full time job roles in defined salary grades (Black Belts, Master Black Belts, DC)
Strategy integration process to align, prioritize, and select CPS projects
Financial Principles to quantify CPS project benefits
Global deployment with clarity, consistency, and commitment

10

Eliminate waste !
(non value adding activities)
Unused
Creativity /
Capability
Lost opportunities due
to poor safety and an
underutilized workforce
Waiting
Lost time due to
poor product flow
shortages, bottlenecks,
down machines
Defects
Over
Production
Inventory
Production or rework of
out-of-specification parts
Excess raw material,

work-in-process
or finished goods
Excess
Motion
Excess supply beyond

the requirements of
the next process
Over
Processing
Transportation
Wasted movement
made while working
Excess movement of
work-in-process
Work that adds no value

to the customer or business

11

3 subsystems & 15 guiding principles:

12
Management System
If you can not measure it, you can not

improve it,nor manage it
9 Are we using the same metrics with the

same definitions?
9Are we aligning the Targets?
Provide the
structure to enable
and sustain
Operational and
Cultural change
9 Are we driving accountability?

9 Are we hiding problems?
9 Are we implementing employee ideas?
9 Are we Planning, Acting, Doing and
Checking?

13
Management System / Tools - Processes

We measure same criteria everywhere.
QUALITY
PEOPLE
Division
Metrics
Casdade
(PQVC Executive
Scorecard)
Facility
Level
(Service Parts)
Area
Level
(Service Parts)
Inbound &
Outbound
VELOCITY
RIF
Ideas per Employee
% Ideas Closed Within 30
Days
EOS Engagement
Facility Errors (Internal &

External Claims)
Bin Denials
Storage Location Accuracy
CPS Assessment Score
RIF
Ideas per Employee
Days
Facility 5S Score
Facility Errors (Internal &

External Claims)
Bin Denials
Standard Work
Conformance
Inventory Record Accuracy
Shipped Within Standard

% of Receipts Posted in
Standard
Outbound & Inbound

Days of Injury-Free Work
Ideas per Employee
Days
5S Score
Outbound
Area Errors
Standard Work Conformance
Inbound
Standard Work Conformance
Outbound
Inbound
Standard
14

Standard
COST
Variable Margin (% of
Plan)
6 Sigma Value Prop
OPACC (% of Plan)
ORONA (% of Plan)
Inbound LPH
Outbound LPH
Global LHP
Outbound
Oubound LPH
Inbound
Inbound LPH

Global
reporting tool
28 PQVC metrics by:
Client
Facility
General Manager
Network
Region
Division

15

CPS Boards
Continuous Improvement Board
PQVC Boards (Facility & Area)
FEEDBACK
Process
ProcessImprovement
Improvement
Dialogues
Dialogues

16

PQVC Boards (Facility & Area)
PLAN
CHECK
DO
ACT
PLAN what we are going to do. In this step we assess where we are,
where we need to be, why this is important, and plan how to close the gap.
DO: Implement the plan and measure its performance
CHECK: Assess the measurements and report the results
ACT: If you have not accomplished your objective,
go through the cycle again, starting with the Plan step.

17

Frequency
Daily
Weekly
Monthly
Monthly
Organizational Level
VP
Set Standard Dialogue Meetings

Process Improvement Dialogue - RCCA
General
Manager
Logistics
Center
Manager
Supervisor/
Team Leader Shift kickoff meeting
Facility Monthly
Performance
Review
Weekly
Management
Team Meeting
Monthly
Team
Meeting
Weekly Team
Meeting
Operators
PQVC Facility
Board
Area Metric
Board

Facility Portfolio
Monthly
Performance Review
18
By Phone: PQVC
Reporting Tool

The Key to Sustainability
System Management
System Metrics
Process Improvement
Dialogue
CATERPILLAR PRODUCTION SYSTEM DIVISION
Cascaded metrics are

aligned to strategy
ITS OUR TURN
Metrics Cascade
People
Performance in Product and Process

Profitable Growth
PEOPLE
QUALITY
VELOCITY
Days without Lost Time

Ideas per Employee and
Implementation Rate
Skills and Capability Matrix
PEOPLE Choice 1 / 2 / 3
DRF1 -or- VEHR -or- PPM

1st Pass Yield -or- Scrap
and Rework
Rework % -or- Rework
Expense
QUALITY Choice 1 / 2 / 3
Shipping Performance -orMaster Production Schedule

Total Cycle Time
% Pull
Takt Time / Cycle Bar Chart
% of Cells at Takt without
Overtime
VELOCITY Choice 1
Area /
Section Level

Implementation Rate
1st Pass Yield

CPK -or- DPM
Point of Use Material

Availability
Shipping Performance
Cell Level
Hour By Hour Chart

Open area for operators to chart real time data associated with People, Quality,Velocity, or Cost
Value
Stream
Level
DRF1 -or- VEHR -or- PPM

1st Pass Yield -or- Scrap
Rework -or- DPM
Certification
Standard Work
Inventory Accuracy
Bill of Material Accuracy
Routing Accuracy
QUALITY Choice 1 / 2
Committed Ship Date

Performance
Cat Inventory Turns
% Pull
Point of Use Material
Availability
Market Leading Product
Availability
VELOCITY Choice 1

RIF and LTCFR
Implementation Rate
Certified CPS MBB, BB, GB,
and YB
PEOPLE Choice 1 / 2
Facility /
Business
Unit Level
COST
Supply Chain Value
Proposition
Hours per Machine -orExpenses per Hours
Worked -or- Expenses per
Machine Hours
COST Choice 1 / 2 / 3 / 4
OEE at Constraint
Hours per Machine -orExpenses per Hours
Worked -or- Expenses
per Machine Hours
COST Choice 1 / 2 / 3 / 4
OEE and Trend

Hours / Machine -or- Expenses
/ Hrs Worked -or- Expenses /
Machine Hrs
Caterpillar: Confidential Green
Performance tracking system

Relevant cell or asset metrics
Clear targets
Hour by hour charting
Visual Boards

Managers need to drive corrective actions

Giving feedback as a demanding partner
Use of data as a lens (not a weapon) to focus root-cause
problem solving
Ensuring accountability for results
Day-In-The-Life
19

CPS Boards

20

Continuous Improvement in Action
Engage minds throughout the team

Utilize ideas from those closest to the work
Feedback loop is critical
Operator
Team Leader
Supervisor
Manager
People metric:
Supportive
Number of ideas per employee per year
Number of ideas closed within 30 days

21
VP

CPS Assessment
Measure CPS implementation and progress
(via a scoring on the assessment questions)
CPS Assessment for Manufacturing contains 110 statements
CPS Assessment for Service Parts contains 62 statements
Statements are aligned with the CPS 15 Guiding Principles
Simplify and integrate multiple certifications internally used at
Caterpillar

22
Operating System / Tools - Processes

9 Are we chasing Waste?
9 Are we using 6Sigma to drive improvements?
The Operating System
eliminates waste
using 6 Sigma and
lean tools
9 Do we understand our Value Stream?

9 Do we continuously try to reduce lead times to
reduce inventory levels?
9 Do we have the parts in their optimal location?
9 Do we follow Standard Work?
9 Is our Manpower Planning effective?

23

Prework
Four weeks prior
to the RIW
Quantitative safety
risk assessment
(FMEA)
Determine scope and
enter charter into
eTracker
Identify sponsor
Select team
Pre-workshop
communication
Complete RIW
Prework Checklist
RIW Core Training (if
practical)
Quality/CAV data
collection
DM
Rapid Improvement Workshop
Follow-Up
DM
RIW Methodology Core training (if not completed in Prework)
Day 1 Determine Current Standard Work
CPS Tools & Techniques (Spaghetti Mapping, 5S, Hour-by-Hour Charting)
Project Specific Training
Day 2 Measure & Analyze Current Work Process (Current State)
Formulate Process Improvements (Future State)
Refine Future State
Day 3 Simulate Future State
Hands-on Shop-Floor Improvements
Evaluate, Verify, and Refine New Current State
Day 4 Finalize New Standard Process
Establish New Standard Work
Implement 5 Safety and 5 Quality Improvement ideas
MA
AI
IC
Day 5 Executive Summary Report (ESR)

Report-out

24
Four weeks
after the RIW
Finalize ESR and

forward to DC
Complete RIW
Newspaper items
Lessons learned
Post-workshop
communication
Attach ESR to
charter in eTracker
Transition project in
eTracker

Standard Work / Standard Work Audits
Standard Work
Audits
Drive Standard Work -- Standardize tasks and utilize common

processes as the foundation for Continuous Improvement
25
Cultural System
9 Are we being proactive in Safety?
9 Do we use Customer Feedback for
improvement?
The Cultural System
makes change
possible and
improves the way we
work
9 Do Leaders visit the workplace?

9 Do employees stop and act when they find a
problem?
9 Do people take accountability?
9 Do we develop our people?

26
Cultural System / Tools - Processes

CPS Skill Training Matrix

27
Cultural System / Tools - Processes

Exception Cards / Stop To Fix
Exception cards recorded in the CPS Tracker, results are analyzed in a timely manner and
RCCAs generated based on the results.

28
Some results
Cat Logistics worldwide PQVC scorecard results (2010 vs 2007):
9 7% points improvement in Engagement index

9 Safety metrics improved 37%
9 Errors per 10.000 order lines improved 38%
9 Productivity improved 18%
9 Financial returns improved 8%

29
Key Lessons Learned from the CPS deployment

Dont
Do
9 Let each individual

facility/factory roll out CPS on
their own
9 Global roll out with top level

engagement
9 Copy and paste manufacturing

program to other business units
9 Replicate and use existing

program, but adapt it to your own
business needs
9 Let it be a stand alone program
9 Link it to the Corporate

Strategy and the strategy of your
business (unit)

30

Dont
Do
9 Try to tackle everything at once
9 Know what your roadmap to success

looks like
9 Neglect feedback from the line

organization
9 Adapt the program whenever it

makes sense
9 Underestimate communication
and change management efforts
9 Have a SMALL support team

(regional) and be prepared for the roll
out
9 Prepare forever
9 Know there is an amount that needs

to be learned by doing

31

Dont
Do
9 Let the support team alone

be accountable for the CPS roll
out
9 Let the support team and the line

organisation be accountable for the
roll out
9 Let each facility/factory control

metrics definition and calculation
9 Centralize metrics definition and

calculation and use metrics to drive
accountability
9 Forget that positive stories

have a snowball effect
9 Celebrate success

32
Future CPS: The Transformation Journey

Continue our roadmap - Sustain our success - Improve CPS further

33
Questions ?
Miguel Mazarias
General Manager
Caterpillar Logistics Services, Inc
Supply Chain Solutions - EAME Region
34

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Caterpillar Production System (CPS)

deployment at Caterpillar Logistics

It is always possible to improve !

2010 Caterpillar Logistics Services, Inc.

How to continuously improve,

Committed to Customer Success

Success factors for deployment

2010 Caterpillar Logistics Services, Inc.

Excellence in Aftermarket not only to Caterpillar

2010 Caterpillar Logistics Services, Inc.

Caterpillar Production System: kick off 2006

Are we working on the most

How are other companies

Committed to Customer Success

Caterpillar Production System: what is it about ?

Committed to Customer Success

Committed to Customer Success

6 Sigma Foundation (Started at Caterpillar in 2000)

Committed to Customer Success

Caterpillar Production System (CPS)

Excess raw material,

Excess supply beyond

Work that adds no value

Committed to Customer Success

Caterpillar Production System (CPS)

Committed to Customer Success

If you can not measure it, you can not

9 Are we using the same metrics with the

9 Are we driving accountability?

2010 Caterpillar Logistics Services, Inc.

Management System / Tools - Processes

Facility Errors (Internal &

Facility Errors (Internal &

Shipped Within Standard

Outbound & Inbound

Shipped Within Standard

Management System / Tools - Processes

Committed to Customer Success

Management System / Tools - Processes

Continuous Improvement Board

PQVC Boards (Facility & Area)

Committed to Customer Success

Management System / Tools - Processes

2010 Caterpillar Logistics Services, Inc.

Management System / Tools - Processes

Set Standard Dialogue Meetings

2010 Caterpillar Logistics Services, Inc.

Management System / Tools - Processes

CATERPILLAR PRODUCTION SYSTEM DIVISION

Cascaded metrics are

ITS OUR TURN

Performance in Product and Process

Days without Lost Time

DRF1 -or- VEHR -or- PPM

Shipping Performance -orMaster Production Schedule

Days without Lost Time

1st Pass Yield

Point of Use Material

Hour By Hour Chart

DRF1 -or- VEHR -or- PPM

Committed Ship Date

Days without Lost Time

OEE and Trend

Caterpillar: Confidential Green