Complete your final project, the location justification report.

Caterpillar Inc

Darlene Ames

Southern New Hampshire University

July 9, 2017

Caterpillar Inc

Organizational Analysis

Caterpillar Inc is an international company with headquarters in Peoria, Illinois. The company specializes in the manufacturer of heavy earthmoving automobiles. They sell manufacturing, mining, construction, and farm equipment. In addition, the company runs a subsidiary firm known as the caterpillar financial services that offer its customers financial services and earns the company approximately 7% of its revenues. Currently, Caterpillar Inc. is a profitable and successful global company as per the quarterly reports. As such, the company is looking forward to expanding its operations overseas and it has chosen to start its operations in South Korea. Therefore, it has to establish the location of setting up its facility; as such, the company has to consider a number of factors such as government regulations and closeness to the target customer. Another thing that the CAT Inc. has to consider is the nearness to the dry port and sea fronts.

The Caterpillar Inc has a logistic system known as Material Requirement Planning System that it uses in bringing its costs down. The CAT Logistics has offered it an excellent supply chain solution for more than eighty years. Over the past few years, the CAT Logistics has also extended the same courtesy to the external companies in the industrial, automotive, defense, aerospace and technology sectors. CAT Inc recognizes that fewer factors can have a profound effect on its performance than an effective supply chain. The supply chain is equally important as the product itself. Therefore, the company has this in mind when locating its facility in South Korea (Enterprise Ireland, 2014).

CAT Logistics has leveraged on eighty years’ experience to come up with supply chain strategies that are linked to the overall goal of CAT Inc. The logistic company has pooled together its technological tools and years of experience to turn the supply chain strategies into workable solutions. It uses network modeling, asset planning, modeling and design, inventory stimulation, transport simulation and business process engineering to come up with a cost-effective operating environment. Supply chain is becoming technology intensive; CAT Logistic has taken the technology and designed it a notch higher to executable levels leading to optimization of CAT Inc operations.

Forecasting, Capacity Planning, and Scheduling

Forecasting is a very important business function especially in the financial and manufacturing sectors. In a familiar form that is understandable to the customers and the public, it comes in the form of economic and market forecast that is developed through research and development by a team of experts. However, the type of forecasting done by CAT Inc is not visible to the outsider because it is more internally geared to the firms. For instance, Caterpillar Inc reported that in the first quarter of 2017, its earnings and revenue would smash the expectations of the Wall Street and this helped to raise the price of its shares. Caterpillar Inc uses forecasting to determine its revenue and EPS (Sun, 2012). For example, the company estimated that its Earning per share (EPS) would be $1.28 versus 62 cents, the revenue was expected to be $9.822 compared to $9.271 expected by the Wall Street (Sun, 2012).

Capacity Planning

Capacity planning is the process of determining the production level that an organization needs to do in order to meet the changing demands of its products. In this regard, “design capacity” is the maximum work that an organization is capable of doing in given period. On the other hand, the “effective capacity” refers to the maximum work that an organization can accomplish in a given period factoring in constraints such as delays, quality problem, and materials handling among others. Initially, the Caterpillar Inc used to do their capacity planning using excels. Although it used to accomplish the tasks, the results that it posted were not satisfactory. The method did not provide a user-friendly interface as they had to hand put the fabrication data on their own without assistance. However, the company currently has integrated software that and gives out real-time results. The CAT Inc uses these results in planning for their production capacity and effective production including the amount of production work that they can accomplish given the prevailing constraints. This function will come in handy in its new location in South Korea. CAT expects that there will be some constraints to overcome before production work begins since it is a new location.

Facility Location

The best place to locate the new Caterpillar Inc facility is in Seocho-gu, Seoul. A number of factors makes this place an ideal location for locating its new facility in South Korea. The Korean authority is reorganizing its industries into a high-value structure such as nano-technologies and information to create a sustainable growth where the markets and environments are integrated while the current industries are being transformed into environmentally conscious structures (Sun, 2012). Hence, this is the best time for CAT Inc that has a passion for the environment to start investing in South Korea.

Important Factors

Seoul has a good transport system that has a well-developed road, rail network and air links. Locating a facility in this city is a major boost to CAT Inc since it has access to international destinations. The city hosts one of the largest airports in Asia, which will give the company a gateway to the Asian markets. In addition, the city has a well-established subway system; hence, workers will not have a difficult time to and from their workplace.

Locating its facility in Seocho-gu, Seoul would give CAT access to other companies that are in the automotive industry. This will provide it with ready customers for its products. Since the company is well known globally for its superior products, others might outsource it services to do the fabrication work for them. For instance, the Hyundai Motors, the makers of KIA Motors have a facility in this location.

Skilled labor is also a factor to consider when choosing this location since there are many automotive industries and CAT Inc will benefit from a pool of much skilled labor in the regions. Therefore, it will help CAT Inc. to address on the cost of training new employees.

Distance to the Target Customers is one of the biggest challenges that manufacturers face is the transportation cost of the product to the final customer. In most cases, higher the transportation costs results from the distance from the facility. Seoul is a good location because it has a system of networks that can be used by CAT to ferry its heavy products like rail network.

The cost of land: Land in Seoul is not that expensive as the government offers foreign companies subsidies in their bid to attract Foreign Direct Investments. Ranking

Factor Rating Method: after computing for these values, it became clear that Seoul is the perfect location because of its developed network systems.

Enterprise Ireland . (2014). Access to South Korea . Dublin : Enterprise Ireland .

Sun, W. (2012). Capacity planning tool for CAT suppliers . New York, NY: Wiley & Sons .

Caterpillar, http://www.caterpillar.com/

Korean International Logistic Council, http://kilc.kita.org/kilc_org/main.jsp