Cat Logistics Presentation 161111

Caterpillar Production System (CPS) deployment at Caterpillar LogisticsMiguel Mazarias, General Manager, Caterpillar Logistics

© 2010 Caterpillar Logistics Services, Inc.Caterpillar Confidential 2

It is always possible to improve !

VIDEO


Committed to Customer Success

How to continuously improve,

globally,

involving all units of a large organization ?

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• Company introduction

• Caterpillar Production System (CPS)– Link with Caterpillar Strategy– What is it about ?

• Results

• Success factors for deployment

• Future of CPS

Agenda


450 000

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Excellence in Aftermarket not only to Caterpillar…



Caterpillar Production System: kick off 2006

– IBM– Panasonic– Audi– Kohler– Anheuser Busch– International Paper

• How are other companies addressing the same types of questions?

– Toyota– Denso– GM– Ford– Emerson– Pella– Deere

• 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?

Questions:



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 toolsPractitioners (DCs, Master Black Belts, Black Belts, and Green Belts) with additional CPS trainingFull time job roles in defined salary grades (Black Belts, Master Black Belts, DC)Strategy integration process to align, prioritize, and select CPS projectsFinancial Principles to quantify CPS project benefitsGlobal deployment with clarity, consistency, and commitment



Caterpillar Production System (CPS)

Eliminate waste !(non value adding activities)

Lost opportunities due to poor safety and an underutilized workforce

Production or rework of out-of-specification parts

Excess raw material, work-in-process or finished goods

Excess supply beyond the requirements of the next process

Lost time due to poor product flow — shortages, bottlenecks, down machines

Wasted movement made while working

Excess movement of work-in-process

Work that adds no value to the customer or business

Unused Creativity / Capability Defects Inventory

Over Production

WaitingExcess Motion Transportation

Over Processing



Caterpillar Production System (CPS)

3 subsystems & 15 guiding principles:


Management System

Are we using the same metrics with the same definitions?

Are we aligning the Targets?

Are we driving accountability?

Are we hiding problems?

Are we implementing employee ideas?

Are we Planning, Acting, Doing and Checking?

Provide the structure to enable

and sustain Operational and Cultural change

“If you can not measure it, you can not improve it,nor manage it”


We measure same criteria everywhere.

QUALITYPEOPLE VELOCITY COST

• Shipped Within Standard • % of Receipts Posted in

Standard

• Facility Errors (Internal & External Claims)

• Bin Denials• Storage Location Accuracy• CPS Assessment Score

• RIF• Ideas per Employee• % Ideas Closed Within 30

Days • EOS Engagement

Outbound• Shipped Within Standard Inbound• % of Receipts Posted in

Standard

Outbound• Area Errors • Standard Work ConformanceInbound• Storage Location Accuracy• Standard Work Conformance

Outbound & Inbound • Days of Injury-Free Work• Ideas per Employee • % Ideas Closed Within 30

Days• 5S Score

Division (PQVC Executive Scorecard)

Facility Level (Service Parts)

Area Level(Service Parts)Inbound & Outbound

• Variable Margin (% of Plan)

• 6 Sigma Value Prop• OPACC (% of Plan)• ORONA (% of Plan)

• RIF• Ideas per Employee• % Ideas Closed Within 30

Days• Facility 5S Score

• Shipped Within Standard • % of Receipts Posted in

Standard

• Facility Errors (Internal & External Claims)

• Bin Denials• Storage Location Accuracy• Standard Work

Conformance• Inventory Record Accuracy

• Inbound LPH • Outbound LPH• Global LHP

Management System / Tools - Processes

Metrics

Casdade

Outbound• Oubound LPHInbound• Inbound LPH



Global reporting tool

28 PQVC metrics by:• Client• Facility• General Manager• Network• Region• Division




CPS BoardsPQVC Boards (Facility & Area)

Management System / Tools - ProcessesContinuous Improvement Board

FEEDBACK

Process Improvement Dialogues

Process Improvement Dialogues


PLAN

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

DO: Implement the plan and measure its performance

CHECK

CHECK: Assess the measurements and report the results

ACT

ACT: If you have not accomplished your objective, go through the cycle again, starting with the Plan step.

Management System / Tools - ProcessesPQVC Boards (Facility & Area)


•Logistics Center

Manager

•General Manager

•Operators

•Org

aniza

tiona

l Lev

el

•Frequency

•Supervisor/•Team Leader

Set Standard Dialogue Meetings•Process Improvement Dialogue - RCCA

•Weekly

•Weekly Team Meeting

•Monthly

•PQVC Facility Board

•Monthly•Daily

•Area Metric Board

•Shift kick- off meeting

•Monthly Team

Meeting

•Weekly Management Team Meeting

By Phone: PQVC Reporting Tool

Facility Monthly Performance

Review

Facility Portfolio Monthly

Performance Review

•VP



The Key to SustainabilitySystem Management System Metrics

Process Improvement Dialogue= +

Performance tracking systemRelevant cell or asset metricsClear targetsHour by hour chartingVisual 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 solvingEnsuring accountability for results“Day-In-The-Life”

CATERPILLAR PRODUCTION SYSTEM DIVISION

7

IT’S OUR TURN…

Caterpillar: Confidential Green

QUALITYPEOPLE VELOCITY

People

COST

Profitable Growth

• Committed Ship Date Performance

• Cat Inventory Turns• % Pull• Point of Use Material

Availability• Market Leading Product

Availability• VELOCITY Choice 1

• 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

• Days without Lost Time• RIF and LTCFR• Ideas per Employee and

Implementation Rate• Certified CPS MBB, BB, GB,

and YB• PEOPLE Choice 1 / 2

• Supply Chain Value Proposition

• Hours per Machine -or-Expenses per Hours Worked -or- Expenses per Machine Hours

• COST Choice 1 / 2 / 3 / 4

• DRF1 -or- VEHR -or- PPM• 1st Pass Yield -or- Scrap

and Rework• Rework % -or- Rework

Expense• QUALITY Choice 1 / 2 / 3

• Days without Lost Time• Ideas per Employee and

Implementation Rate• Skills and Capability Matrix• PEOPLE Choice 1 / 2 / 3

• Shipping Performance -or-Master Production Schedule

• Total Cycle Time• % Pull• Takt Time / Cycle Bar Chart• % of Cells at Takt without

Overtime• VELOCITY Choice 1• Point of Use Material

Availability• Shipping Performance

• 1st Pass Yield • CPK -or- DPM

• Days without Lost Time• Ideas per Employee and

Implementation Rate

• OEE and Trend• Hours / Machine -or- Expenses

/ Hrs Worked -or- Expenses / Machine Hrs

Performance in Product and Process

Facility / Business Unit Level

ValueStream Level

Area / Section Level

Metrics CascadeCascaded metrics are

aligned to strategy

• OEE at Constraint• Hours per Machine -or-

Expenses per Hours Worked -or- Expenses per Machine Hours

• COST Choice 1 / 2 / 3 / 4

Cell Level • Hour By Hour Chart• Open area for operators to chart real time data associated with People, Quality,Velocity, or Cost




CPS BoardsManagement System / Tools - Processes



Continuous Improvement in Action• Engage minds throughout the team

• Utilize ideas from those closest to the work

• Feedback loop is critical

People metric: • Number of ideas per employee per year• Number of ideas closed within 30 days

Team Leader

VP

Manager

Supervisor

Operator

Supportive




CPS AssessmentMeasure CPS implementation and progress

(via a scoring on the assessment questions)

CPS Assessment for Manufacturing contains 110 statementsCPS Assessment for Service Parts contains 62 statementsStatements are aligned with the CPS 15 Guiding Principles

Simplify and integrate multiple certifications internally used at Caterpillar



Are we chasing Waste?

Are we using 6Sigma to drive improvements?

Do we understand our Value Stream?

Do we continuously try to reduce lead times to reduce inventory levels?

Do we have the parts in their optimal location?

Do we follow Standard Work?

Is our Manpower Planning effective?

Operating System / Tools - Processes

The Operating System eliminates waste

using 6 Sigma and lean tools



Executive Summary Report (ESR)Report-out

RIW Methodology Core training (if not completed in Prework)Determine Current Standard WorkCPS Tools & Techniques (Spaghetti Mapping, 5S, Hour-by-Hour Charting)

PreworkFour weeks prior

to the RIW

Project Specific TrainingMeasure & Analyze Current Work Process (Current State)Formulate Process Improvements (Future State)

Refine Future StateSimulate Future StateHands-on Shop-Floor ImprovementsEvaluate, Verify, and Refine New Current StateFinalize New Standard ProcessEstablish New Standard WorkImplement 5 Safety and 5 Quality Improvement ideas

Rapid Improvement Workshop Follow-UpFour weeks

after the RIWQuantitative safety risk assessment (FMEA)Determine scope and enter charter into eTrackerIdentify sponsorSelect teamPre-workshop communicationComplete RIW Prework ChecklistRIW Core Training (if practical)Quality/CAV data collection

Day 1

Day 2

Day 3

Day 4

Day 5

DM

MA

AI

IC

CDM

Finalize ESR and forward to DCComplete RIW Newspaper itemsLessons learnedPost-workshop communicationAttach ESR to charter in eTrackerTransition project in eTracker

C

Operating System / Tools - Processes


Drive Standard Work -- Standardize tasks and utilize common processes as the foundation for Continuous Improvement

Operating System / Tools - ProcessesStandard Work / Standard Work Audits

Standard WorkAudits


Cultural System

Are we being proactive in Safety?

Do we use Customer Feedback for improvement?

Do Leaders visit the workplace?

Do employees stop and act when they find a problem?

Do people take accountability?

Do we develop our people?

The Cultural System makes change possible and

improves the way we work


CPS Skill Training Matrix

Cultural System / Tools - Processes


Cultural System / Tools - Processes

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



Some results

7% points improvement in Engagement index

Safety metrics improved 37%

Errors per 10.000 order lines improved 38%

Productivity improved 18%

Financial returns improved 8%

Cat Logistics worldwide PQVC scorecard results (2010 vs 2007):



Key Lessons Learned from the CPS deployment


Don’t DoLet each individual

facility/factory roll out CPS on their own

Global roll out with top level engagement

Copy and paste manufacturing program to other business units

Let it be a stand alone program

Replicate and use existing program, but adapt it to your own business needs

Link it to the Corporate Strategy and the strategy of your business (unit)





Don’t DoTry to tackle everything at once Know what your roadmap to success

looks like Neglect feedback from the line

organization

Underestimate communication and change management efforts

Prepare forever

Adapt the program whenever it makes sense

Have a SMALL support team (regional) and be prepared for the roll out

Know there is an amount that needs to be learned by doing





Don’t DoLet the support team alone

be accountable for the CPS roll out

Let the support team and the line organisation be accountable for the roll out

Let each facility/factory control metrics definition and calculation

Forget that positive stories have a snowball effect

Centralize metrics definition and calculation and use metrics to drive accountability

Celebrate success


Future …Continue our roadmap - Sustain our success - Improve CPS further

CPS: The Transformation Journey


Miguel Mazarias

General Manager

Caterpillar Logistics Services, Inc

Supply Chain Solutions - EAME Region

Questions ?

Cat Logistics Presentation 161111

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