Good Practice Example Caterpillar Works with Delco to Achieve Mutually Beneficia

Question

Good Practice Example Caterpillar Works with Delco to Achieve Mutually Beneficial Outcomes Over the last decade, Caterpillar Inc. has worked closely with Delco Electronics (now known as Delphi) to create a highly integrated relationship. It first approached Delco Electronics in 1997 with the opportunity to compete for the strategic position as its electronics supplier. Two factors were driving this opportunity. The first was that Caterpillar was dissatisfied with its current supplier. The second was that it wanted to reduce its in-house electronics capability to allow it to focus more on its core business. In the case of Caterpillar, the buyer has had two distinct roles. As a participant in the strategic supplier selection, the buyer was involved in an extensive process to evaluate suppliers and ultimately recommend to senior management a supplier to

Explanation / Answer

Q1) Caterpillar's process for early supplier involvement included -

1. Developing a good working relationship between Caterpillar and Delco with weekly cadence meetings, deliverable discussion, resolving the issues together etc.

2. Ensuring Delco gets continuous support in executing the strategy by the buyer to ensure it transforms to be a strategic supplier to Caterpillar.

3. Initial requirement of supplying products based on Build-to-print basis and slowly transforming to design-and-build basis.

The success factors of the relationship include -

1. Mutual trust

2. Status meetings

3. Working together for resolution of issues

4. Evolving in a discilplined manner.

Q2) Below is the importance of the role of specific individuals in the discussion -

1. Buyer - The most important role in selecting supplier to be the strategic supplier and executing the strategy to implement the process.

2. Supplier - Work with Caterpillar and buyer extensively towards becoming the sole/100 % supplier of the electronic products.

Trust is critical to foster and sustain relationships and develop businesses from both supplier and buyer standpoint. It creates a win-win situation for both in developing their businesses.

Q3) Risks can be minimized by -

1. Working together where the involvement of Caterpillar in resolving any issues that Delco face is much higher ensuring the issues are resolved in time.

2. Effective communication between supplier and Caterpillar.

3. Mitigation strategies to be employed.

The benefits in this case outweighed the potential risks as the supplier is capable enough to manage 100% supply and both the firms have a deep relationship beyond business.

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