Caterpillar Inc.: Aftermarket Parts Freight Optimization
(5 pages of text)
Case (Pub Mat)
A key contributor to the business reputation and success of Caterpillar Inc. (Caterpillar) was the company’s reliable aftermarket service. Caterpillar’s Asia Distribution Centre in Singapore processed urgent spare parts orders received from dealers located in 10 Southeast Asian countries. In 2017, the operations team was working to develop a rigorous analytical method for making daily decisions about how to ship the spare parts. Shipments were consolidated by country destination and needed to optimize the interests of three stakeholders: (1) Caterpillar, which wanted to minimize freight costs; (2) dealers, who wanted to receive the spare parts in the shortest time possible; and (3) freight forwarders, who wanted to be rewarded for their on-time delivery performance.
The case is suitable for undergraduate and graduate courses in analytics, operations, management science, finance, and accounting. The case gives students the opportunity to propose alternative approaches to tackle an operations and analytics problem related to shipping. With the boom in e-commerce, many students will be familiar with the relevant aspects of parcel deliveries. The challenge is to uncover a pragmatic solution that satisfies all three stakeholders. Whatever approach students adopt, they will learn to do the following:
- Develop an optimization template and apply a software program like Microsoft Excel Solver to determine possible shipping strategies.
- Compare and contrast different solutions and recommend the most pragmatic method.
Agriculture, Forestry, Fishing and Hunting
South East Asia, Large, 2017
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