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Cat Logistics Retools its China Strategy to Support Caterpillar's Rapid Growth

Shanghai, China

November 19, 2008

By

Evan Armstrong

 

Key Personnel:

Paul Joseph -  President, Caterpillar Logistics Services, Inc., Asia Pacific Region

Steven Duan -  Manager, Lingang China Logistics Center, Caterpillar Logistics Services, Inc.

 

Overview

Caterpillar Logistics Services, Inc. (Cat Logistics) is a tier-one global supply chain manager. According to Armstrong & Associates estimates, its 2007 gross revenues were $3.15 billion and realized net revenues $2.12 billion. Cat Logistics has approximately 12,000 employees working on six continents, 23 countries, and in 110 facilities. Its warehousing footprint is over 27 million square feet and it fulfills approximately 160 million orders per year. In addition, Cat Logistics manages over $1.6 billion in purchased transportation per year.

 

Cat Logistics has core capabilities in value-added warehousing and distribution. These include: manufacturing support, vendor managed inventory (VMI), kitting, sequencing, light assembly, packaging, labeling and spare/service parts distribution. It couples these with international and domestic transportation management operations to provide an integrated end-to-end supply chain management offering. The majority of its customer relationships are in the Automotive and Industrial manufacturing industry verticals; however, Cat Logistics has also been diversifying into Mining, Oil & Gas, Aerospace & Defense, Technological, and Consumer Durables industries. Key logistics customers include: its parent Caterpillar, Bombardier, Daimler, Eaton, Emerson, Ford Motor Company, Harley Davidson, Kia, Land Rover, Mazda, Mosaic, Newmont, Toshiba, and Volvo. 

 

To support operations, Cat Logistics primarily uses SAP’s enterprise resource planning (ERP) system when needed and either SAP’s warehouse management system, or Cat Logistics proprietary WMS. In many operations, the systems have been integrated to either Cat Logistics core transportation management system (TMS) from i2 Technologies, or Cat Logistics legacy TMS. Most of its warehousing operations utilize radio frequency (RF) devices integrated with WMS for paperless putaway and picking and overall inventory management.

 

Cat Logistics – Asia and China

In a recent visit to Shanghai, China, we had the opportunity to spend some time with Paul Joseph, Caterpillar Logistics Services, Inc. president of Asia Pacific operations. According to Joseph, Cat Logistics has three main business focuses within Asia:

1.   Build distribution network to support its parent Caterpillar and develop 3PL business.

 

2.   Help Caterpillar factories with manufacturing logistics and supply chain management.

 

3.   Provide network transportation management services to Caterpillar on a global basis.

To meet Caterpillar's rapid growth in Asia, Cat Logistics has doubled its Australian warehouse capacity and its Singapore and Lingang/Shanghai warehousing operations are running at near full capacity. The business strategy has been to address service parts logistics needs for Caterpillar and to focus on organic growth with existing 3PL customers.

 

Cat Logistics operations supporting Caterpillar's manufacturing operations are adding people for inbound supply chain management, sequencing, and manufacturing support. According to Joseph, Cat Logistics currently supports 30 Caterpillar manufacturing operations.

 

Cat Logistics has been operating in China since 2003 when it set up a joint venture with Lei Shing Hong Limited. Headquartered in Shanghai, it currently has 60 employees which primarily are based at its distribution center in Lingang New City, Shanghai, China.

 

Cat Logistics Lingang Logistics Center

In January 2005, Cat Logistics began construction of its warehousing and distribution operation in Lingang. The 21,000 square meter facility was completed in February 2006 and began operations in March 2006. It has both bonded and non-bonded storage and initial operations include service parts distribution for four large Caterpillar distributors in China.

 

Figure 1 - Cat Logistics Lingang Logistics Center Location