Executing Our Strategy
It’s Bigger Than
Remanufacturing might just be one of the most important seeds Caterpillar planted 46 years ago. What began as a narrowly focused effort to remanufacture a single series engine has grown exponentially. Today, the value proposition that remanufactured parts and components offer our customers and the contribution they make to Caterpillar’s profitability are more than significant.
In its simplest form, Cat® Reman facilitates an exchange business where customers trade a used part for a remanufactured one at a fraction of the price of a new part. Caterpillar then takes the traded-in (core) part, strips it down to the lowest-level component, and puts it through our remanufacturing process — during which it is turned into a component with a new serial number. It can then be sold as a remanufactured part or become a component of a remanufactured sub-assembly or engine.
Reducing, reusing and recycling materials once destined for landfills benefits customers, the environment and our company. After all, remanufactured parts offer the same quality, warranty, performance and reliability at a fraction of the cost of a new part, while reducing the need for raw materials and conserving energy during the manufacturing process. And since remanufactured parts often include critical engineering upgrades, the remanufactured part can be better than when it was new.
Supports our strategy
At Caterpillar, everything starts with the customer. Our goal is to make our customers more successful with our products and services than our competitors’. When it comes to ensuring customer success, remanufacturing couldn’t be a better fit, allowing customers to purchase like-new parts for a fraction of the cost of buying new, while keeping resources in circulation. The end result is that remanufactured parts help lower total owning and operating costs for customers, creating a compelling selling point for new machines and engines.
Analytics drive operational excellence
The fundamental remanufacturing concept is a great example of operational excellence in that it conserves resources, requires fewer raw materials and reduces the time it takes to manufacture parts and components. Beyond that, Cat Reman’s use of analytics to reduce process variability, increase productivity and conserve resources in manufacturing is world-class. The analytics team transforms data into actionable information they use to guide decisions and improve processes.
The group takes a broad view of how analytics can be utilized. “When we look at analytics, we are looking at the entire Cat Reman business,” says Principal Analytics Manager Doug Hampton. “Our goal is to improve operations on both the cost side of the business and the sales side. The cost side of the business is concerned with material costs and warranty costs, whereas sales projects are focused on increasing both sales of existing products and designing products we don’t offer today.”
Sorting it out
One project the Cat Reman analytics team ran this year was focused on improving yield of the core material (customer returned parts) brought into the Mississippi Reman facility in Corinth, Mississippi. Core material must be cleaned and inspected to determine whether it can be reused or must be scrapped. It’s important that the decision to reuse materials be determined accurately.
Engineer Project Team Leader Sri Thangaswamy explains, “If you incorrectly identify a good part as bad, you’re going to throw it away. When you throw it away, you must purchase a brand-new part to replace it, and you end up purchasing more new components than planned. That’s expensive and drives costs. Even though discarded core is sold for scrap, it isn’t worth as much, and the end result is increased cost to the business.”
Before the analytics project, even after rigorous training, there was marked variability in how two people would judge the quality of core material. Today, as a result of the project, there are standards in place to guide the quality and quantity of inspection work at the facility and dashboards to monitor it. In addition, to help leaders react quickly to changes in yield, the team developed an algorithm that automatically detects substantial variability and sends alerts to supervisors and team leads, allowing quick feedback to generate a root-cause investigation.
The result? In the six months following the project’s completion, core yield in the facility had improved by just under a quarter-million pounds of additional remanufactured material. To put the savings in perspective, our largest mining truck, a Cat® 797, weighs 1.4 million pounds.
But that’s only the beginning. The Mississippi Reman facility project has been so successful that the team plans to launch a replication project in the Nuevo Laredo Reman facility this spring — extending the potential savings to other facilities and multiplying the impact on enterprise profitability.
Mississippi Reman Facility Operations Manager Jeff Belcher explains how the project has improved the way we do business, “Core yield has always been a strong focus for us because it has such a trickle-down effect on our business. Getting the maximum yield from salvaged parts means fewer new parts purchased — that lowers cost and drives profitability. In the past, we tracked core yield by facility, but we now have the tools to review core yield daily by shift, by operator, by station. More importantly, we can manage it. And that’s where the real magic happens.”
Future of remanufacturing
In a crowded world where there’s too much waste slated for landfills, and too few natural resources to go around — remanufacturing is a smart answer to a perplexing problem. Not only does remanufacturing lower costs for customers by providing like-new components at a fraction of the cost of new, but it also cares for our planet by reducing the consumption of raw materials and conserves energy during the process. Combine those advantages with the strong support of our enterprise strategy, and remanufacturing at Caterpillar is a win-win that’s here to stay.