W/6_Sigma/Training/Project Charter Writing/Project Charter Lab.ppt www.forecastpro.com Case Study: Implementing Forecast Pro TRAC across Caterpillar America's Independent Dealer Network Patrick DeShon, Dealer Demand Senior Specialist Page 2 | CATERPILLAR CONFIDENTIAL: RED Enterprise Alignment Page 2 Cat® Americas – WORKING TOGETHER TO DELIVER RESULTS Pat DeShon Dealer Demand Senior Specialist, Caterpillar Inc. • Naval Architecture & Marine Engineering BSE, US Coast Guard Academy • Systems & Reliability ME, UMD • Process Improvement & Project Management • 6 Sigma / Lean Black Belt III, TQM, Baldritch, ISO • System Architecture & Design • Cognos, TM1, DB2, Oracle, SQL US Coast Guard Officer (10 Yrs) – Connecticut, Boston, Wash DC. Congressional Advisory Committee, United Nations International Maritime Organization (IMO), Society of Naval Architects &Marine Engineers (SNAME) Caterpillar Mgmt. ( 16 Yrs) – Large Mining & Off Highway Trucks Technical Development, Dealer Support, Service Support, BI Systems, Business Development, Sales & Operations Planning Page 3 | CATERPILLAR CONFIDENTIAL: RED Enterprise Alignment Page 3 Cat® Americas – WORKING TOGETHER TO DELIVER RESULTS Forward-Looking Statements Certain statements in this Release relate to future events and expectations and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “believe,” “estimate,” “will be,” “will,” “would,” “expect,” “anticipate,” “plan,” “project,” “intend,” “could,” “should” or other similar words or expressions often identify forward-looking statements. All statements other than statements of historical fact are forward-looking statements, including, without limitation, statements regarding our outlook, projections, forecasts or trend descriptions. These statements do not guarantee future performance, and we do not undertake to update our forward-looking statements. Caterpillar’s actual results may differ materially from those described or implied in our forward-looking statements based on a number of factors, including, but not limited to: (i) global economic conditions and economic conditions in the industries and markets we serve; (ii) government monetary or fiscal policies and infrastructure spending; (iii) commodity or component price increases, fluctuations in demand for our products, or limited availability of raw materials and component products, including steel; (iv) our and our customers’, dealers’ and suppliers’ ability to access and manage liquidity; (v) political and economic risks and instability, including national or international conflicts and civil unrest; (vi) our and Cat Financial’s ability to: maintain credit ratings, avoid material increases in borrowing costs, and access capital markets; (vii) the financial condition and credit worthiness of Cat Financial’s customers; (viii) changes in interest rates or market liquidity; (ix) changes in financial services regulation; (x) inability to realize expected benefits from acquisitions, including ERA Mining Machinery Limited, and divestitures, including the divestiture of the Bucyrus distribution business to our independent dealers; (xi) international trade and investment policies; (xii) market acceptance of our products and services; (xiii) changes in the competitive environment, including market share, pricing and geographic and product mix of sales; (xiv) successful implementation of capacity expansion projects, cost reduction initiatives and efficiency or productivity initiatives, including the Caterpillar Production System; (xv) inventory management decisions and sourcing practices of our dealers or original equipment manufacturers; (xvi) compliance with environmental laws and regulations; (xvii) alleged or actual violations of trade or anti-corruption laws and regulations; (xviii) additional tax expense or exposure; (xix) currency fluctuations; (xx) our or Cat Financial’s compliance with financial covenants; (xxi) increased pension plan funding obligations; (xxii) union disputes or other labor matters; (xxiii) significant legal proceedings, claims, lawsuits or investigations; (xxiv) compliance requirements imposed if carbon emissions legislation and/or regulations are adopted; (xxv) changes in accounting standards; (xxvi) failure or breach of information technology security; (xxvii) adverse effects of natural disasters; and (xxviii) other factors described in more detail under “Item 1A. Risk Factors” in our Form 10-K filed with the SEC on February 19, 2013 for the year ended December 31, 2012. This filing is available on our website at www.caterpillar.com/secfilings. Page 4 | CATERPILLAR CONFIDENTIAL: RED Enterprise Alignment Page 4 Cat® Americas – WORKING TOGETHER TO DELIVER RESULTS More than 3 million units around the world Data based on year-end 2014 Cat® equipment is at work for our customers on highways, rail lines, oceans and rivers, in forests, quarries and oil fields
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W/6_Sigma/Training/Project Charter Writing/Project Charter Lab.ppt
www.forecastpro.com
Case Study: Implementing Forecast Pro
TRAC across Caterpillar America's
Independent Dealer Network
Patrick DeShon,
Dealer Demand Senior Specialist
Page 2 | CATERPILLAR CONFIDENTIAL: RED
Enterprise Alignment
Page 2
Cat® Americas – WORKING TOGETHER TO DELIVER RESULTS
Pat DeShon
Dealer Demand Senior Specialist, Caterpillar Inc.
• Naval Architecture & Marine Engineering BSE, US Coast
Guard Academy
• Systems & Reliability ME, UMD
• Process Improvement & Project Management
• 6 Sigma / Lean Black Belt III, TQM, Baldritch, ISO
Committee, United Nations International Maritime Organization (IMO), Society of Naval
Architects &Marine Engineers (SNAME)
Caterpillar Mgmt. ( 16 Yrs) – Large Mining & Off Highway Trucks Technical Development,
Dealer Support, Service Support, BI Systems, Business Development, Sales & Operations Planning
Page 3 | CATERPILLAR CONFIDENTIAL: RED
Enterprise Alignment
Page 3
Cat® Americas – WORKING TOGETHER TO DELIVER RESULTS
Forward-Looking Statements
Certain statements in this Release relate to future events and expectations and are forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Words such as “believe,” “estimate,” “will be,” “will,” “would,” “expect,”
“anticipate,” “plan,” “project,” “intend,” “could,” “should” or other similar words or expressions often identify forward-looking statements. All statements other than statements of historical fact are forward-looking statements, including, without limitation,
statements regarding our outlook, projections, forecasts or trend descriptions. These statements do not guarantee future
performance, and we do not undertake to update our forward-looking statements.
Caterpillar’s actual results may differ materially from those described or implied in our forward-looking statements based on a
number of factors, including, but not limited to: (i) global economic conditions and economic conditions in the industries and
markets we serve; (ii) government monetary or fiscal policies and infrastructure spending; (iii) commodity or component price
increases, fluctuations in demand for our products, or limited availability of raw materials and component products, including steel;
(iv) our and our customers’, dealers’ and suppliers’ ability to access and manage liquidity; (v) political and economic risks and
instability, including national or international conflicts and civil unrest; (vi) our and Cat Financial’s ability to: maintain credit ratings, avoid material increases in borrowing costs, and access capital markets; (vii) the financial condition and credit worthiness of Cat
Financial’s customers; (viii) changes in interest rates or market liquidity; (ix) changes in financial services regulation; (x) inability to
realize expected benefits from acquisitions, including ERA Mining Machinery Limited, and divestitures, including the divestiture of
the Bucyrus distribution business to our independent dealers; (xi) international trade and investment policies; (xii) market
acceptance of our products and services; (xiii) changes in the competitive environment, including market share, pricing and
geographic and product mix of sales; (xiv) successful implementation of capacity expansion projects, cost reduction initiatives and
efficiency or productivity initiatives, including the Caterpillar Production System; (xv) inventory management decisions and sourcing
practices of our dealers or original equipment manufacturers; (xvi) compliance with environmental laws and regulations; (xvii)
alleged or actual violations of trade or anti-corruption laws and regulations; (xviii) additional tax expense or exposure; (xix) currency
fluctuations; (xx) our or Cat Financial’s compliance with financial covenants; (xxi) increased pension plan funding obligations; (xxii) union disputes or other labor matters; (xxiii) significant legal proceedings, claims, lawsuits or investigations; (xxiv) compliance
requirements imposed if carbon emissions legislation and/or regulations are adopted; (xxv) changes in accounting standards; (xxvi)
failure or breach of information technology security; (xxvii) adverse effects of natural disasters; and (xxviii) other factors described
in more detail under “Item 1A. Risk Factors” in our Form 10-K filed with the SEC on February 19, 2013 for the year ended
December 31, 2012. This filing is available on our website at www.caterpillar.com/secfilings.
Page 4 | CATERPILLAR CONFIDENTIAL: RED
Enterprise Alignment
Page 4
Cat® Americas – WORKING TOGETHER TO DELIVER RESULTS
More than 3 million units around the world
Data based on year-end 2014
Cat® equipment is at work for our customers on highways, rail lines, oceans and rivers, in forests, quarries and oil fields
W/6_Sigma/Training/Project Charter Writing/Project Charter Lab.ppt
www.forecastpro.com
Page 6 | CATERPILLAR CONFIDENTIAL: RED
Enterprise Alignment
Page 6
Cat® Americas – WORKING TOGETHER TO DELIVER RESULTS
Our Industries
Construction Industries -Helping our customers build what the world needs
Energy & Power Systems - Focused on meeting the world’s increased energy needs through a variety of solutions and applications across multiple industries
Resource Industries - Making it possible for customers to mine and harvest resources, such as coal, iron ore and lumber, in a profitable and sustainable way
Page 7 | CATERPILLAR CONFIDENTIAL: RED
Enterprise Alignment
Page 7
Cat® Americas – WORKING TOGETHER TO DELIVER RESULTSData based on year-end 2012
Our Dealers– Primary distribution through 177
independent dealers– Cat® branded parts and customer
service– Dealers develop and support lifelong
relationships with customers
Our Supply Chain: – More than 28,000 Suppliers
– Located in 182 Countries
Our Team
Page 8
For more Caterpillar information, visit
www.caterpillar.com
W/6_Sigma/Training/Project Charter Writing/Project Charter Lab.ppt
www.forecastpro.com
Page 9
83 Dealers40 Countries16 Million Square Miles
Cat® Americas
We are…
One team.
Page 10 | CATERPILLAR CONFIDENTIAL: RED
Enterprise Alignment
Page 10
Cat® Americas – WORKING TOGETHER TO DELIVER RESULTS
Forecasting Myths
“I need a statistician to use statistical forecasting”
“Dealers can’t forecast beyond 3 months”
“I just need to know my leading indicators”
“Small Dealers can’t forecast”
“It’s just another tool from Corporate”
“Caterpillar should do it for me”
Cat® Americas
Page 11
Extend the Planning Horizon
1
1 to 3
Month
4 to 6
Month
7 to 12 Month 13 to 18 Month
Availability
Window
Touch + Statistics + Econ Outlook Statistics + Econ
Outlook
Line of Sight
(Touch)
• Improved Demand Signal
for Supply Planning
• Better Signal to CAT
Cat® Americas
Page 12
Business Impact
1
Benefits determined using
standard DuPont Chart
planning model0.1 Turns improvement equates to approximately a 6% Accuracy improvement(% improvements in Accuracy have roughly
2:1 linear correlation ratio with Turns)
Remove Bias
Example Benefit
W/6_Sigma/Training/Project Charter Writing/Project Charter Lab.ppt
www.forecastpro.com
Page 13 | CATERPILLAR CONFIDENTIAL: RED
Enterprise Alignment
Page 13
Cat® Americas – WORKING TOGETHER TO DELIVER RESULTS
Executive
Board S&OP
Supply
Review
Performance
Measurement
Pre
S&OP
Demand
Review
1
2
4
SAP
Unconstrained
Forecast
SAP Constrained
Sales Plan
3
Dealer Sales & Operations Planning (S&OP) Process
– Forecast InformationSAP is not a SFM or a Statistical
Forecasting tool.
Each Dealer may acquire and/or
develop their own tools and
processes in order to generate the
Forecasting information that will be
loaded to SAP.
SFM and Statistical Forecast
information should be
collected/generated during the
S&OP Process and before the SAP
inputs (Unconstrained Demand
Forecast and Constrained Sales
Plan)
Dealers are currently using different
solutions to implement SFM and
Statistical Forecasting tools, varying
from simple Excel spreadsheets to
sophisticated and expensive solutions.
Forecast Accuracy
Order Accuracy
Page 14 | CATERPILLAR CONFIDENTIAL: RED
Enterprise Alignment
Page 14
Cat® Americas – WORKING TOGETHER TO DELIVER RESULTS
Challenges
• Low-volume and high-dollar Products
• Independent Dealer network
• Inconsistent expertise
• Lack of leading economic indicators
• Short Customer planning horizon
• Complex New Product Introduction (NPI)
• “Group of experts”
• Spreadsheets
• High Variation
• Measurement not improvement
• Need to align bottom-up dealer-generated forecasts with corporate forecasts
• Existing forecast “process” focused on collecting data rather than helping to create
the actual forecast
Page 15 | CATERPILLAR CONFIDENTIAL: RED
Enterprise Alignment
Page 15
Cat® Americas – WORKING TOGETHER TO DELIVER RESULTS
“Our focus during these challenging
times is on operational execution and
customer success, while also investing
in tomorrow through new technologies,
innovation and data analytics.”
Doug Oberhelman, Chairman and CEO
Cat® Americas
Page 16
FPro Demand Management Process Overview
1
$
Closed
Proposal
Development
Qual ification
Identification
$$
ClosedClosed
ProposalProposal
DevelopmentDevelopment
Qual ificationQual ification
IdentificationIdentification
Cognos Data SAPSTU Monthly Frcst / PINS Projection
Touch / Judgment
10,000 Planning Points
per Dealer
each month
STU
SAP Const
ADN $
.csvIND Item
Report
• STU• IND• SAP Const• ADN$
Cognos
(Data Update)
• IND FPro Project• STU FPro Project• Econometrics• Sales Funnel