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Fortune: How Caterpillar should adapt to the recession

Fortune goes grasping for good news in Caterpillar’s turn of bad fortune.

This is just the time for Caterpillar to fine tune its production system, which it borrowed from Toyota, to get it operating at peak efficiency.

A breather is surely needed. Like auto manufacturers, Caterpillar sells its heavy equipment through independent dealers. But unlike auto companies, Caterpillar does not disclose its monthly production, sales or inventory levels.

Still, it isn’t too difficult to imagine the consternation at those dealers today. With economic activity at a standstill, they have lots filled with acres of unsold yellow equipment that they are being forced to finance month to month. And were Caterpillar’s factories still running at full strength, the company would be pushing more and more inventory on them.

Unlike cars, a backhoe or motor grader can’t be sold with an advertising campaign or higher marketing incentives. It takes more than a push from the manufacturer to move a project along from the planning and financing stage, to make it “shovel ready” for new Caterpillar gear. The dealers were pretty much dependent on the overall level of business activity.

But if Caterpillar can successfully adapt lean production to its distribution system the way that Toyota did for its own system, then the dealers’ inventory problems should be significantly alleviated.

Frankly this story is pretty superficial but if you hear your boss talking about it, you’ll know where he got the idea.

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Tom Mangan posted at 6:46 am February 2nd, 2009 |

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