Caterpillar Learns From the Past, Looks Ahead: Shoring Up For a Supply Shortage

If anyone saw Jason speak a few years back, he showed a picture of a giant CAT piece of mining equipment and the monster tires on it. Perhaps he'll be showing it again during his lectures if this story is any indication -- albeit on a more optimistic note.

A recent Reuters article points out something that I feel like isn't reported on often (especially right now). "The mining industry could face a serious shortage of tires by the end of the year and that could lead to delays at a time when demand for mining equipment is booming," the article says, quoting the head of Caterpillar's global mining division. The article continues, "The shortage could be similar to the mid-2000s, when the heavy equipment make was caught off guard as demand double for the giant tires used in mining trucks, increasing costs for miners and delaying production." Seems like a normal enough trend: company is caught off guard, company scrambles, company somehow pulls through and makes it work.

Back in 2005, Caterpillar scrambled. During the last shortage, "The extent of this challenge [included] larger and medium-size off-road tires and is a result of capacity-constraints within the tire-manufacturing industry and the surge in customer demand for machines that use these tires," spokesperson Jim Dugan reported. To confront the challenge, "Caterpillar [then focused] the expertise of 6 Sigma teams, our global dealer network and our global purchasing division to add new suppliers and work with current suppliers to increase capacity to support the sharp surge in demand for large and medium tires."

What's different about the scenario for Caterpillar this time around is that they've actually utilized the strategies put into place six years ago to create a viable risk mitigation plan at the first outset of a known risk. CAT's global mining president Chris Curfman is concerned about this tire shortage, but "he said the company has developed closer ties with its suppliers and is better prepared to deal with a crunch this time around."

Shortages and risk mitigation aside, I'm most impressed to see the media reporting about a company that's taking strides in preventing supply chain shutdowns rather than touting a past supply risk shortcomings -- which we're all much more used to. "We're taking a longer-term view of this growth cycle with our capacity," [Curfman] said. "We're expanding. We'll be able to meet the capacity requirements going forward." Kudos to both CAT and Reuters for calling out a best practice rather than reporting the usual supplier management doomsday scenario which is beginning to sound like a broken record in certain quarters.

- Sheena Moore

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