020 CPS For Dealers Manual 9-16-08 Vs 1.1

CATERPILLAR
PRODUCTION
SYSTEM
MANUAL FOR DEALERS
VERSION 1.1
DISTRIBUTION
VISION
DISTRIBUTION STRATEGIC PROFILE
STRATEGIC GOALS
Market Customer Profitable
Leadership Loyalty Growth
CRITICAL SUCCESS FACTORS

DEALER / CAT GENERAL CONSTRUCTION INTEGRATED
PEOPLE
ALIGNMENT DISTRIBUTION SOLUTIONS
Operational Excellence
Opportunity-To-Cash
DISTRIBUTION
STRATEGIC AREAS Encoding 6 Sigma
OF IMPROVEMENT
Product Monitoring and Response
e Solutions
CAT / DEALER RELATIONSHIP: Our Values in Action

“WE WILL RADICALLY CHANGE OUR BUSINESS MODEL TO
IMPROVE OUR SAFETY, QUALITY, VELOCITY AND COST
PERFORMANCE SIGNIFICANTLY COMPARED TO ANY
COMPETITOR. THESE CHANGES WILL ESTABLISH CATERPILLAR
AND THE CATERPILLAR® DEALER ORGANIZATION AS THE
PREEMINENT GLOBAL LEADER AS DEFINED IN VISION 2020.”
VISION 2020
A MESSAGE FROM OUR CHAIRMAN
With Vision 2020, Caterpillar has provided clarity to the future state of our
business. It outlines that three of our top priorities as a company are Safety,
Quality, and Velocity. The Caterpillar Production System was created to
reinforce these priorities. It will help team Caterpillar set the “gold standard”
for our industry as we produce the highest quality products, as efficiently and
as safely as possible.
Achieving our strategic goal of market leadership — #1 for every product

group, on every continent — will require significant, sustainable changes in
our processes, management and our culture.
The Enterprise Strategy also defines Our Values in Action — the behaviors each of
us needs to display to collectively realize our vision and establish our future state
culture. The Caterpillar Production System has defined 15 Guiding Principles that
support Our Values in Action: Integrity, Excellence, Teamwork, Commitment.
I am absolutely committed to seeing the Caterpillar Production System fully

realized. Achieving these goals will require everyone’s commitment. Together, we
will “establish Caterpillar as the pre-eminent global manufacturer with top quality
products at the lowest cost while increasing our speed and safety performance.”
JIM OWENS
– Caterpillar Chairman and CEO
1
TABLE OF CONTENTS
OPERATING SYSTEM
10 CHASE WASTE
12 PULL
14 MAKE VALUE FLOW
16 DRIVE STANDARD WORK
18 EVEN THE LOAD
20 VALIDATE OUR PROCESSES
CULTURAL SYSTEM
24 PUT SAFETY FIRST

26 TAKE THE CUSTOMER’S VIEW
28 GO, SEE, ACT
30 STOP TO FIX
32 DEVELOP PEOPLE
MANAGEMENT SYSTEM
36 ACTIVELY LISTEN
38 MAKE IT VISUAL
40 ALIGN THE TARGETS
42 ACT DECISIVELY
44 CONTACTS
45 CATERPILLAR PRODUCTION SYSTEM FOR DEALERS GLOSSARY
2
CATERPILLAR PRODUCTION SYSTEM
FOR DEALERS AND VISION 2020
The Caterpillar Production System (CPS) for Dealers is the way
Caterpillar® Dealers unite the Operating, Cultural and Management
systems to pursue excellence.
CPS for Dealers enables the dealer and enterprise strategy built on the
foundation of Our Values in Action and 6 Sigma — the strategic area of
improvement (SAI): Opportunity-To-Cash and critical success factor (CSF):
Dealer / Cat Alignment.
DISTRIBUTION
VISION
DISTRIBUTION STRATEGIC PROFILE
STRATEGIC GOALS
Market Customer Profitable
Leadership Loyalty Growth

DEALER / CAT GENERAL CONSTRUCTION INTEGRATED
PEOPLE
ALIGNMENT DISTRIBUTION SOLUTIONS
Operational Excellence
Opportunity-To-Cash
DISTRIBUTION
STRATEGIC AREAS Encoding 6 Sigma
OF IMPROVEMENT
Product Monitoring and Response
e Solutions
CAT / DEALER RELATIONSHIP: Our Values in Action

CPS FOR DEALERS 8 WASTES
The Caterpillar / Dealer goal is to be
recognized as the industry’s “gold
standard” in Safety, Quality, Velocity
and Distribution. To reach that goal
and sustain our standing, we must
eliminate waste in our processes
from order to delivery.
Waste is any activity that consumes

resources but creates no value for
the customer. Accordingly, the
ultimate goal is the elimination of
eight types of waste.
THE RELENTLESS IDENTIFICATION AND ELIMINATION OF WASTE
USING VALUE STREAM TRANSFORMATION IS CRITICAL TO OUR
SUCCESS. THIS IS NOT A ONE-TIME EVENT, BUT A JOURNEY.
OUR CULTURE TRANSFORMS TO NEVER BE SATISFIED, BUT
CONTINUOUSLY IMPROVE OUR VALUE STREAM PROCESSES,
THUS ELIMINATING WASTE.
4
Unused
Creativity /
Capability Defects
Lost opportunities due Production or rework of out-

to poor safety and an of-specification parts; rework due
underutilized workforce to information errors or processes
not adhering to Standard Work
Over
Inventory Production
Excess raw material, Excess supply beyond

work-in-process or finished the requirements of
goods inventory the next process
Excess
Waiting Motion
Lost time due to poor Wasted movement

product and / or process made while working
flow — shortages, bottlenecks,
down machines and errors
Over
Transportation Processing
Excess and inefficient Work that adds no value

movement of work-in-process to the customer or business
Note: Text in BLUE is customized for Caterpillar® Dealers.

5
CPS FOR DEALERS 3 SUB-SYSTEMS
AND 15 GUIDING PRINCIPLES
The Caterpillar Production System The Operating System
is focused on waste elimination
for Dealers encompasses 3 Sub- Operating using 6 Sigma and 6 Sigma
systems essential to continuous System
lean tools
improvement.
In the past, these 3 Sub-systems Chase Waste: Drive for the

have often functioned independently continuous and relentless elimination
of each other. But as we work leaner of waste in all processes
and eliminate waste, the 3 Sub- Pull: Only order what is needed, when
systems will overlap, ultimately it is needed, in the amount it is needed
uniting in one sustainable system.
Make Value Flow: Increase
Within each sub-system, certain process efficiency to drive continuous
disciplines must be mastered to improvement in the customer experience
ensure ultimate sustainability. The Drive Standard Work: Standardize
Caterpillar Production System has tasks and utilize common processes
identified 15 Guiding Principles that as the foundation for Continuous
define how we approach our work. Improvement
Even the Load: Synchronize and
optimize inventory flow with customer
demand to manage variability
Validate Our Processes: Prove the
processes and technology work before
introducing them into production
6
The Cultural System The Management System
is focused on making change is focused on creating
Cultural possible and improving Management the measurements and
System System
the way we work management structure
to support Continuous
Improvement
Put Safety First: Place the highest Actively Listen: Conduct process
priority on eliminating safety-related improvement dialogues at all levels
waste of the organization
Take the Customer’s View: Make Make it Visual: Build the visual
decisions based on the customer’s workplace to make deviations visible
expectations at a glance
Go, See, Act: See it first-hand to Align the Targets: Align initiatives
ensure thorough understanding to achieve or exceed dealer business
Stop to Fix: Cease activity when a plan targets
problem occurs to correct it in process Act Decisively: Make decisions by
Develop People: Identify, attract consensus and implement with a sense
and develop people and teams of urgency
Note: Text in BLUE is customized for Caterpillar Dealers.

7
CPS FOR DEALERS PROCESSES
CPS FOR DEALERS
CPS for Dealers is a defined
integral part of CPS — extending Dealership
integrated, common processes

of CPS from Caterpillar to the Cat Pull Through Marketing Dealer S&OP
Demand Management
dealer to enable end-to-end process S&OP
alignment acrossthe value chain. Capacity Plann
Core
Sales Admin. / Asset Mgmt.
CPS for Dealers is a key component
Sup
in the realization of the critical
Transpo
success factors (CSF): PEOPLE,
QUALITY, VELOCITY and
DISTRIBUTION.
CPS for Dealers enables the

Governing
Operational Excellence and
Opportunity-To-Cash strategic areas
of improvement (SAIs). Focusing
Vision 2020 on dealer alignment Enabling
with Caterpillar core processes —

Demand Management, Sales &
Operations Planning, Orders
Management, Transportation and
Finished Goods Distribution — will
transform our value stream so that
we meet and exceed our customer’s
expectations in a cost effective
manner. The mission is to provide
the best customer order to delivery
experience in our industry, with an
embedded culture of continuous
improvement.
8
CATERPILLAR PRODUCTION SYSTEM CPS FOR DEALERS
Caterpillar Facility
Facilit Dealership
ning Mfg. Engineering Mfg. Support
Mfg. Production Execution
Orders Management
Orders Management
pply Chain / Materials Management
ortation Transportation
Finished Goods Dist. Sales Admin. / Asset Mgmt.
Quality Management
Governance and Assessment
Environment, Health and Safety
Capability Building
Value Stream Transformation
Tools Development
Information Management
The graphic above illustrates the Caterpillar Production System (CPS) and CPS for Dealers.
The brick texture represents the area that CPS touches within the walls of Caterpillar while
the extended areas on each side show where CPS touches the dealership Sales & Marketing
processes. CPS for Dealers has three core processes in the order-to-delivery space, with one
governing process and four enabling processes. Each core process has an assigned owner and
a multi-generational process plan outlining the vision, key actions, principles enabled and goals.
9
OPERATING
SYSTEM
FOCUSED ON WASTE ELIMINATION USING
6 SIGMA AND 6 SIGMA LEAN TOOLS
10
CHASE WASTE
drive for the continuous and relentless elimination of waste in all processes
PULL
only order what is needed, when it is needed, in the amount it is needed
MAKE VALUE FLOW

increase process efficiency to drive continuous improvement in the customer experience
DRIVE STANDARD WORK

standardize tasks and utilize common processes
EVEN THE LOAD

synchronize and optimize inventory flow with customer demand to manage variability
VALIDATE OUR PROCESSES

prove the processes and technology work before introducing them into production
11
CHASE WASTE
Drive for the continuous and relentless
improvement in the elimination of waste in
all processes.
Waste – Any activity that consumes resources

but creates no value for the customer.
Most activities fail to create customer-perceived

value. Accordingly, the greatest improvements in
performance and customer service come from
eliminating the large number of wasteful activities
throughout the value chain.
EXCELLENCE We use 6 Sigma to eliminate eight types of waste

THE POWER OF found in our processes.
QUALITY
The worst waste, Unused Creativity / Capability,
We put Excellence is failing to use the full potential of the workforce.
into action when we The other types of waste are: Defects, Inventory,
accept nothing but Over Production, Waiting, Excess Motion,
the best quality in our Transportation and Over Processing.
products and services.
As organizations begin to accurately specify
value, employees realize that there is no end to
the process of continuously improving safety,
distribution, velocity and cost through the
elimination of the 8 Wastes.
12
CPS MANUAL FOR DEALERS
WE CHASE WASTE WHEN:
• We are trained to identify and eliminate the 8 Wastes for transactional as

well as operational processes.
• We use 6 Sigma tools to eliminate eight types of waste found in our
processes.
• We utilize employee creativity/capability to drive Continuous Improvement
in our processes.
• Value stream maps are created for processes and ownership is assigned.
• Management regularly participates in waste walks to continuously identify
and address waste.
• Rapid Improvement Workshops (RIWs) are conducted to quickly and
efficiently improve and deploy processes / solutions that eliminate waste.
• We use standard global assessments to identify improvement opportunities.
• We continuously use customer input to identify and remove non-value
added activities.
13
PULL
Use Pull replenishment to only order what is
needed, when it is needed, in the amount it is
needed. Properly executed, this eliminates excess
inventory.
Pull – A consumption-controlled material-

replenishment process. Pull replenishment strives
to eliminate excess inventory.
Pull aligns processes with customer requirements by

reducing excess inventory, one of the 8 Wastes. Pull
regulates inventory as we work to replenish only
what the customer actually consumes. In contrast,
TEAMWORK a push strategy promotes excess by building to a
THE POWER OF forecasted schedule, even if customers do not
WORKING TOGETHER require the products.
We put Teamwork
into action when we
view our suppliers
and dealers as our
business allies.
14
WE PULL WHEN:
• All inventory levels are targeted to meet customer's needs and avoid aged
inventory.
• We create and utilize configurations inventoried in product distribution
centers to improve availability and meet customer demand.
• We align processes to satisfy customer needs.
15
MAKE VALUE FLOW
Increase process efficiency to drive continuous
improvement in the customer experience.
Flow – The smooth uninterrupted transfer of products

and service information through the value chain.
Complex processes without standard work are

difficult to understand and improve. Processes
should be simplified to flow smoothly from one
station to the next. This makes it easier to identify
problems immediately and promotes continuous
improvement. With simplified processes, value is
created efficiently, one part at a time, at the pace
EXCELLENCE of customer demand. We must transform workflow,
THE POWER OF from processing to forecasting, to order and build
QUALITY what is needed, when it is needed, in the exact
quantity it is needed. We must drive toward
We put Excellence increased process efficiency, triggered by the
into action when we pull of orders directly tied to customer needs.
focus on delivering the
highest value to our cus-
tomers, always with a
sense of urgency.
16
WE MAKE VALUE FLOW WHEN:
• We approve forecast and inventory level changes through Sales &

Operations Planning (S&OP) process.
• Customer satisfaction is monitored to drive continuous improvement.
• We meet or exceed customer expectations for response time to inquiries
and product delivery.
• We eliminate work not viewed by customers as adding value.
17
DRIVE STANDARD WORK
Standardize tasks and utilize common processes
as the foundation for continuous improvement.
Standard Work – The identification and

documentation of the most efficient way of
performing a task, based on current tools,
processes and thinking.
Standard work is the organization of tasks into

the best-known sequence of procedures to make
the most efficient use of people, equipment and
resources. Documented, repeatable standard work
ensures performance consistency, contributes to
TEAMWORK continuous improvement and is critical to
THE POWER OF achieving high-quality products.
WORKING TOGETHER
We put Teamwork
into action when
we conduct business
worldwide with
consistent global
standard.
18
WE DRIVE STANDARD WORK WHEN:
• We standardize and document tasks and tools to drive consistent process

execution by all dealer personnel.
• We closely follow CPS and 6 Sigma methodologies when improving
processes.
• We leverage standard work across all locations to continuously improve
process efficiency.
19
EVEN THE LOAD
Synchronize and optimize inventory flow with
customer demand to manage variability.
Even the Load – The discipline of evenly

distributing tasks among team members.
To Even the Load, we must balance work between

steps in the process, and utilize the time advantage
of having differentiated availability to support.
When necessary, work is moved from one process
to another and / or the number of workforce
members is adjusted. Balanced workflow reduces
the impact on people.
EXCELLENCE
THE POWER OF
QUALITY
We put Excellence
into action when we
see risk as something
managed and as
potential opportunity.
20
WE EVEN THE LOAD WHEN:
• We align our territory coverage resources with sales opportunities.

• Marketing and Sales share accountability for lead generation to support
business plan.
• Differentiated orders and Distribution Lane Strategy are used to optimize
inventory in the supply chain.
• Product support capabilities are optimized across dealer's territory to meet
customer's demand.
• Significant changes in business will drive resource workload balance.
21
VALIDATE OUR PROCESSES
Prove the processes and technology work before
introducing them into standard work. Improving
our processes, risk is minimized.
Validation – Processes must be proven effective

when measured against our distribution, velocity
and cost objectives.
Because new technology and processes are often

unreliable and difficult to standardize, we increase
risk to our customers. To reduce that risk, we
implement processes only after they are thoroughly
considered and validated. Due to the complexity of
EXCELLENCE dealer processes, we use 6 Sigma consistently for
THE POWER OF future processes.
QUALITY
We put Excellence
into action when we
accept nothing but
the best quality in our
22
WE VALIDATE OUR PROCESSES WHEN:
• We test process changes using simulation methods, a sample set of

customers, or employees, prior to implementing them into standard work.
• We utilize CPS metrics to ensure improvement targets are realized.
• We use a feedback system including customer satisfaction results to
develop and improve successful practices.
• Formal processes exist and are followed for review and approval of
proposed process changes.
23
CULTURAL
SYSTEM
FOCUSED ON MAKING CHANGE POSSIBLE
AND IMPROVING THE WAY WE WORK
24
PUT SAFETY FIRST
place the highest priority on eliminating safety-related waste
TAKE THE CUSTOMER’S VIEW

make decisions based on the customer’s expectations
GO, SEE, ACT

see it first hand to ensure thorough understanding
STOP TO FIX
cease activity when a problem occurs to correct it in process
DEVELOP PEOPLE
identify, attract and develop people and teams
25
PUT SAFETY FIRST
Build a safety first culture by placing the highest
priority on eliminating safety-related waste.
Our Caterpillar Dealer Safety Commitment states:

“We believe all accidents and injuries are
preventable; therefore, our goal for these is zero.
The safety of our people is primary in everything
we do, and we believe that continually improving
our safety practices, processes and performance
supports the business excellence for which
Caterpillar people worldwide are known.”
Across the enterprise, the Caterpillar Dealer Safety

COMMITMENT Commitment is for dealers to embed safety best
THE POWER OF practices in everyday business processes. Every
RESPONSIBILITY modification generated in CPS for Dealers is
evaluated for its impact on the safety of our people.
We put Commitment
into action when
we protect the health “SAFETY IS THE VERY FIRST THING WE’RE
and safety of others
and ourselves. GOING TO WORRY ABOUT. YOUR HEALTH
AND WELL BEING COME FIRST – PERIOD.
NONE OF THE GOALS MATTER IF, IN THE
PROCESS OF ACHIEVING THEM, PEOPLE
ARE INJURED.”
JIM OWENS
– Caterpillar Chairman and CEO
26
WE PUT SAFETY FIRST WHEN:
• Health, safety and ergonomic risk assessments are completed for new and
existing operations. Risks are prioritized and controls implemented.
• Accidents and near misses are investigated to determine root causes and
corrective actions taken to eliminate health and safety risks.
• Safety audits are consistently performed to verify compliance with local,
state and country regulations, and corrective actions are taken when
necessary.
• Leadership teams perform safety walks regularly to inspect all work areas.
• Safety metrics are posted on visual metric boards.
• Safety action items are tracked and completed with a sense of urgency.
• All areas have documented and enforce safety practices including expected
outcomes.
27
TAKE THE
CUSTOMER’S VIEW
Make decisions based on the customer’s view
and the long-term Dealer strategy, even at the
expense of near-term goals.
To Take the Customer’s View, we must first

understand the customer’s expectations and then
communicate and align our response to those
expectations in a common language across the
entire value chain.
The long-term strategy of Caterpillar is directly

linked to customer satisfaction and loyalty toward
our products and services. We earn customer
EXCELLENCE satisfaction and loyalty through an enterprise
THE POWER OF commitment to excellence and the personal pride
QUALITY we take in creating and delivering high-quality
machines, engines and components. As all levels
We put Excellence of the organization Take the Customer’s View, we
into action when must also pay attention to the well being of the
we take an Enterprise workforce in order to ensure long-term success.
point of view.
Our customers expect the highest-quality product,
delivered to the right place, at the right time, in the
right quantity and at the right cost. When we fail to
deliver on these expectations, we damage the
integrity and reputation of our company.
Therefore, we must take the customer’s view to
filter and eliminate all non-value-added activity.
28
WE TAKE THE CUSTOMER’S VIEW WHEN:
• We are committed to excellence and take personal pride in creating and

delivering high-quality products and services.
• The Sales & Operations Planning (S&OP) process is being followed to
ensure we have a robust plan to meet customer demand. Conformance is
measured and reported.
• We gather Voice of the Customer to identify critical needs and wants,
which are translated into improvement opportunities.
• Metrics and processes are in place to drive customer satisfaction.
• Customer feedback and satisfaction data are made available to the general
employee population.
• Customer information including equipment population is maintained.
• Developing Standard Work for product and service delivery.
• We utilize customer segmentation to develop targeted sales strategies.
29
GO, SEE, ACT
See it first-hand to ensure thorough
understanding.
Caterpillar Dealers are committed to continuous

improvement through root-cause problem solving
and teamwork before corrective action is taken.
Observing issues first-hand is expected at all levels
of the organization to ensure a full understanding
of current issues.
The future-state of a dealer culture is centered on

supportive leadership. Leaders are expected to visit
the customer workplace regularly, providing
COMMITMENT machine and service support. Leaders will seek
THE POWER OF first to understand current issues and make
RESPONSIBILITY informed decisions based on the expertise of those
closest to the problem. Together, leaders and team
We put Commitment members will work to create, verify and deliver
into action when robust solutions. It is through this personal
we take personal interaction that we will recognize and utilize the
responsibility. full potential of all members of the workforce to
ensure sustainable results.
30
WE GO, SEE, ACT WHEN:
• Sales Management regularly participates in sales rep customer visits to

have a first hand understanding of customer needs.
• Management is visible daily working with employees to achieve goals.
• For each problem, there is an assigned owner and data is used when
performing root-cause analysis.
• Our employees collaborate to ensure mutual understanding of cross-
functional processes.
• Managers are change agents and have an active role in sustaining process
improvements.
31
STOP TO FIX
Cease activity when a problem occurs
to correct it in process.
Stop – The workforce is empowered to stop an

activity if an operation does not meet the quality
criteria.
Fix – The root cause is identified and permanent

corrective actions are taken. Safety and quality
fixes are always first .
Caterpillar Dealers are committed to delivering

quality products and services. We must always
EXCELLENCE Stop to Fix problems when and where they occur,
THE POWER OF to ensure customer satisfaction at all times. When a
QUALITY process does not yield the expected result, we focus
on identifying and solving the root cause problem;
We put Excellence quick fixes and workarounds are unacceptable.
into action when we
accept nothing but
the best quality in our
32
WE STOP TO FIX WHEN:
• Defects are corrected before reaching customers. Employees are

empowered to stop-to-fix all processes.
• Root-cause problem solving is utilized to identify Stop to Fix issues and
implement necessary corrective actions with a sense of urgency.
• Response time is measured and documented when a Stop to Fix issue is
identified and resolved.
• Focus is on eliminating the defects, not just finding them.
• Employees are recognized for the prevention and correction of problems.
33
DEVELOP PEOPLE
Identify, attract and develop people and teams
to build the Caterpillar and Dealer long-term
capability.
Team Caterpillar’s long-term success depends

on our ability to continually improve the way we
satisfy our customer’s needs. To accomplish this in
the dynamic environment we work in, we need to
further invest in building the skills and capabilities
of current and future members of Team Caterpillar.
Accordingly, we have developed a Capability

Building process in conjunction with 6 Sigma that
EXCELLENCE will enable our current and future employees to
THE POWER OF excel in the CPS for Dealers environment.
QUALITY
As part of our assessment and recognition process,
We put Excellence dealers will monitor progress toward their goals
into action when we: by creating dealer excellence through the
• Provide employees certification of CPS green belts, black belts
with opportunities and master black belts.
to develop.
• Select, place and
evaluate employees
based on their
qualifications
and performance.
34
WE DEVELOP PEOPLE WHEN:
• Employees are trained in all skills necessary to be effective.

• Employees are recognized and rewarded for achieving goals and
certifications.
• Individual training plans are in place to build long-term core competencies.
• Ongoing training programs are in place for new employees.
• Our training clearly defines skills needed for each job and enables
behavioral change.
• We provide a process for acquiring the required skills and hold leadership
accountable for administering it.
• Performance evaluations of leaders and the workforce are tied to successful
on-the job application of the knowledge gained in CPS for Dealers learning
and training sessions.
35
MANAGEMENT
SYSTEM
FOCUSED ON CREATING THE
MEASUREMENTS AND MANAGEMENT
STRUCTURE TO SUPPORT
CONTINUOUS IMPROVEMENT
36
ACTIVELY LISTEN
conduct process improvement dialogues at all levels of the organization
MAKE IT VISUAL
build the visual workplace to make deviations visible at a glance
ALIGN THE TARGETS

all initiatives are aligned with achieving or exceeding dealer business plan targets
ACT DECISIVELY
make decisions by consensus and implement with a sense of urgency
37
ACTIVELY LISTEN
Dealer management actively conduct process
improvement dialogues at all levels of the dealer
organization. Ideas from these two-way
discussions are documented and researched
for potential implementation.
Process Improvement Dialogues – Regularly

scheduled two-way discussions between leaders
and their organizations. Focused on continuous
improvement, discussions are supportive, open
and honest.
When we Actively Listen, we work together to

TEAMWORK identify issues, solve root cause problems and
THE POWER OF implement corrective actions. Ideas initiated in
WORKING TOGETHER process improvement dialogues are quickly
assessed, verified, implemented and documented.
We put Teamwork Additional support or capability building is
into action when we provided when necessary.
foster an inclusive
environment.
38
WE ACTIVELY LISTEN WHEN:
• Meetings are held regularly in all areas to review objectives and problem
resolution status.
• A Continuous Improvement process is in place for management to review
innovative ideas from all sources.
• Customer value survey results are obtained and action plans are established
to drive customer loyalty improvements.
• Common standard metrics are utilized in process improvement dialogues.
• There is an established communication plan to ensure thorough
understanding of strategy and alignment of goals.
39
MAKE IT VISUAL
Simple visual indicators of department, team
performance, and targets are positioned in plain
view so deviations can be quickly diagnosed.
Visual Workplace – Positioning of all tools,

components, charts and indicators to make
production status visible at a glance. Making
all standards and targets highly visible in the
workplace enables quick assessment and
understanding of the actual conditions versus
requirements.
When processes are visual, problems and wastes

INTEGRITY become clear to all employees. We must strive
THE POWER OF to make the entire workplace visual to enable the
HONESTY rapid identification and resolution of any condition
that is abnormal. Problems and issues that are
We put Integrity visible to all get resolved!
into action when
we are honest and Simple visual indicators of performance and
act with integrity. targets are positioned in plain view so process
deviations can be quickly diagnosed. Identified
wastes are given the highest visibility and generate
opportunities for continuous improvement through
process improvement dialogues.
40
WE MAKE IT VISABLE WHEN:
• Standard metric boards are in place with focused on People, Quality,

Velocity and Cost (PQVC) metrics and posted for all employees to view
current conditions.
• 5S are part of daily activities and audits are regularly performed to ensure
standards are maintained. Examples of areas impacted are literature
displays in dealer lobby and parts counters, rental service store, service
bays, and/or any other areas customers will visit.
• All equipment delivered to a customer is clean and presentable.
41
ALIGN THE TARGETS
Deploy cascaded metrics and targets across the
value chain aligned to the enterprise strategy
supporting People, Distribution, and Velocity.
Metrics and targets translate into numbers. Aligned

and cascaded metrics focus attention on achieving
/ exceeding targets and help in setting clear
priorities. In effect, Dealer employees quickly
understand how they can make a difference and
contribute to Dealer business plan targets through
day-to-day decisions. Promoting collaboration and
teamwork between departments to achieve aligned
goals.
INTEGRITY
THE POWER OF
HONESTY
We put Integrity
into action when
we are fair, open
and honest in our
communications.
42
WE ALIGN THE TARGETS WHEN:
• Our standard metrics are directly linked to the long-term strategy.

• Metrics are available and timely to effectively manage the business.
• Dealer PQVC goals are communicated, understood and aligned with
Caterpillar.
43
ACT DECISIVELY
Make decisions by consensus and implement with
a sense of urgency after thoroughly considering
all options.
When we Act Decisively, we make decisions by

consensus using 6 Sigma methodology. We discuss
problems in the current state, identify and validate
root cause, and implement the best solutions
quickly, with the full support of everyone involved.
EXCELLENCE
THE POWER OF
QUALITY
We put Excellence
into action when we
focus on delivering the
highest value to our
customers, always with
a sense of urgency.
44
WE ACT DECISIVELY WHEN:
• Continuous Improvement projects are prioritized and implemented with a

sense of urgency.
• We evaluate, prioritize and assign Continuous Improvement issues and
ideas.
• Successful practices are shared with Cat and other dealers for replication.
• Employees are empowered to take action and supported by their
management team.
45
NOTES PAGE
46
CATERPILLAR
PRODUCTION
SYSTEM FOR
DEALERS
GLOSSARY
THE CPS FOR DEALERS GLOSSARY WAS
CREATED TO HELP YOU WITH DEFINITIONS AS
YOU START TO WORK WITH ALL THE VALUE
STREAM PROCESSES
47
GLOSSARY INDEX
Account, Contact, Asset & Demand Management
Opportunity Mgmt Process Demand Planning
Advanced Product Quality Demand Shaping
Planning Deployment Champion (DC)
Aligned Metrics Differentiated Orders
Andon Distribution Lane Strategy
Approximate Ready To Ship Distribution Project
Date Management
Assessment Drive Standard Work
Balance Chart Efficiency
Best Practice 8 Wastes
Business Information Center Enterprise Resource Planning
Capability Planning Error-Proofing
Cat University Even the Load
Caterpillar Global Exits
Change Management Financial Reporting System
Caterpillar Production System 5S
Caterpillar Distribution Five Why’s
System Forecast Accuracy
Chase Waste Forecast Bias
Collaborative Teamwork Forecasted Dealer Inventory
Configuration Rationalization Turns
Contact Center Forecasting
Continuous Flow GPQ
Continuous Improvement Global Process Development
Environment Center
Coverage Study Process Guiding Principles
Critical Path High Level Value Stream
Customer Analysis Integrated Solutions
Cycle Efficiency Inventory
Cycle Time Inventory Turns
Dashboard ISO 9001:2000
Dealer Inventory Match Index
Dealer Learning Management Kanban
System (DLMS) Kanban Post
Dealer Velocity Solution Lead Generation
Demand Lead Time
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(6 Sigma) Lean Rolling Business Management

(6 Sigma) Lean Transactional ROI
Leveling the Load Sales Administration / Asset
Material Flow Management Process
Material Handling Sales Execution
Marketing Resource Management Sales Funnel Management
Multi-Generation Project Planning Sales Funnel Stages
Navigator+Program SFM-Opportunity Management
Navigator+Tool Sales & Operations Plan
Non Value-Added Activity (NVA) Sales & Operations Planning
Optimum In Process Level Process
One-Piece Flow Score Card
Order Types Setup Reduction
Pacemaker Process Setup Time
Participation and Close Rate Signal Kanban
Performance Targets Spaghetti Chart
Percent of Industry Sales Standard Deviation
(PINS) Standardized Work
Plan, Do, Check, Act Sub-systems
Plan for Every Part Sustain It
Planned Inventory Targets
Point-of-Use Storage Train the Trainer
Prework Value
Price Realization Value-Added Activity
Process Improvement Value-Added Time
Dialogues Value-Added Time Critical Path
Process Maps Value Stream
Process Owner Value Stream Mapping
Product Development Centers Visual Workplace
Product Distribution Centers VST Find It
Product Family VST Fix It
Product Level Value Stream Waste
Pull Withdrawal Kanban
Pull Through Marketing Work In Process
Process
Retention
Rapid Improvement Workshop
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FOR DEALERS GLOSSARY
Account, Contact, Asset & Opportunity Management Process – Account,
contact, and asset information clearly profiles each customer and identifies its
value to the dealership. Marketing prospect information is continuously
captured, reviewed, and added to the system. A coverage strategy exists to
ensure that accounts, contacts, and prospects are assigned to appropriate sales
and support channels.
Advanced Product Quality Planning (APQP) – A structured method of

defining and establishing the steps necessary to assure that a product satisfies
the customer. The APQP process mitigates and reduces risk.
Aligned Metrics – Establishing a set of performance measures designed to

maximize results.
Andon – A visual management tool that highlights the status of operations in an

area at a single glance and signals whenever an abnormality occurs. An Andon
can indicate process status or an abnormality and needed actions, such as
change over. A typical Andon is a light or a sign, which summons quick
response from the team leader.
Approximate Ready To Ship Date – Estimated date the product will be ready to
ship from production facility.
Assessment – It is a process of gathering and documenting information about

the achievement, skills, and abilities variables used to accomplish a range of
objectives including learning more about the competencies and deficiencies,
identifying specific problem areas and/or needs, evaluating performance in
relation to other areas, evaluating process performance in relation to a set of
standards or common goals, and it provides users with feedback on project
effectiveness, evaluating the impact to predict future capabilities.
Balance Chart – A bar chart illustrating work content. Balance charts are used
to balance operations flow. Process balance charts are used to balance
processes for flow.
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Best Practice – A best practice is a technique that has proven to generate

desired results in supporting business activities. These are strategically
important in the conduct of an effective process. A commitment to using a best
practice is a commitment to using all the knowledge and technology at the
dealership depending on their business structure, customer base and
characteristics of markets served.
Business Information Center (BIC) – The Business Information Center (BIC),

a Caterpillar web site, that offers an easy way to analyze the machine and work
tool marketing data stored in the Marketing Data Warehouse (MDW). Subject
areas include activities such as machine orders, shipments to dealers, dealer
inventory, sales to end users, industry shipments and sales, and PINS. You
can easily view commonly used reports for each subject area or explore the
databases themselves using “point and click” or “drag and drop” navigation.
Capacity Planning – It is the foundation to move Caterpillar from a push to a

pull environment, paving the way to vision 2020 by supporting the velocity
CSFs and the Order-to-delivery SAI.
Cat U – Caterpillar University is comprised of 5 colleges and a Strategic

Learning division. Each college manages development of enterprise learning
initiatives and curriculum for its area. They provide consulting and technical
support for the enterprise in the Caterpillar Learning Management System
(CLMS), Knowledge Network (KN), strategic learning, supplier chain,
change management and common global solutions.
Caterpillar Global Change Management (CGCM) – Process used at Caterpillar and

dealers to mitigate the risks involved when changes are introduced within
processes and organizations. Through the CGCM process, communication,
learning and reinforcement plans are developed to address identified areas of
resistance.
Caterpillar Production System (CPS) – Integrates the Caterpillar Management,

Cultural and Operating systems. Provides standards and methodology for
deployment and sustaining excellence in our journey to a world-class
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company.
Caterpillar Production System (CPS) For Dealers – CPS for Dealers is a defined
integral part of Caterpillar Production System (CPS). CPS for Dealers extends the
integrated / common processes of CPS from Caterpillar to the Caterpillar®
Dealers to enable end to end process alignment across the value chain. CPS for
Dealers unites the Operating, Cultural, and Management sub-systems, utilizing
the same foundational 15 Guiding Principles and chasing the same 8 Wastes. CPS
for Dealers is an enabler to the dealer and enterprise strategy. The enterprise
strategy defines Our Values in Action (Integrity, Excellence, Teamwork, and
Commitment), or the behaviors each of us needs to display to realize our vision
and establish our future state culture. The CPS for Dealers vision is to
standardize, integrate and continuously improve processes that will drive dealer
inventory velocity. The mission is to provide the best customer order to delivery
experience in our industry.
Chase Waste – Drive for the continuous and relentless elimination of waste
in all processes, with priority on safety and quality-related wastes.
Collaborative Teamwork Environment – Working effectively across functional

areas as a team to enable new business processes.
Configuration Rationalization – In order to reduce configuration complexity,

groups of configurations are combined to form one combination (or MA) to
satisfy the requirements of all.
Contact Center – It is the inbound (customer support) and outbound (call

center) interactions that a dealer has with end-customers and prospects over
the telephone or some integrated combination of the telephone and other
communication mediums (e.g., web, email, fax etc.). Contact Center supports
sales, marketing, and service related activities across customer touch points.
Continuous Flow – Producing and moving one item at a time (or a small and
consistent batch of items) through a series of processing steps as continuously
as possible, with each step making just what is requested by the next step.
Continuous Improvement (CI) – Continuous improvement of an entire value

stream or an individual process to create more value with less waste. Value
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stream mapping is an excellent tool for determining where 6 Sigma Rapid

Improvement Workshops and 6 Sigma projects are appropriate.
Coverage Study Process – Is designed to evaluate dealer sales force size,

structure, and efficiency to enhance sales coverage and optimize territory
performance.
Critical Path – The series of consecutive activities that represents the longest
time path through the process.
Customer Analysis – Account, contact, and asset information clearly profiles

each customer and identifies its value to the dealership.
Cycle Efficiency (CE) – A measure of relative efficiency in a production

system. Represents the percentage of value-added time (changing form, fit,
function) of a product through the critical path versus total cycle time (TCT).
Cycle Time (CT) – How often a part or product is completed by a process, as

timed by observation. This time includes operating time plus the time
required to prepare, load and unload. Different cycle times can include
machine cycle time, operator cycle time, order-to-cash time, processing time
and production lead time.
Dashboard – Based on the metaphor of the instrument panel in a car, the

computer, or “digital” version of a dashboard provides a business manager
with the input necessary to “drive” the business. Devices such as
red/green/yellow lights, alerts, drill-downs, summaries, graphics such as bar
charts, pie charts, bullet graphs, sparklines and gauges are usually set in a
portal-like environment that is often role-driven and customizable
Dealer Inventory Match (DIM) – The DIM is a tool that provides a dealer
with the capability to enter a machine search request on-line in order to
quickly locate a “similar” machine that is either built or scheduled but not
sold. Dealers also can then choose the stock order or storage machine they
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wish to reserve and place on hold for a specified period of time.
Dealer Learning Management System (DLMS) – Cat University for dealers.
Dealer Readiness Assessment – In order to ensure that the dealership has a

solid business case for a their process initiative you will need to, conduct a
readiness assessment before beginning the implementation of any process. It
is important to gain an understanding from all dealership executive members.
To ensure effective communication among dealership departments, conduct a
series of interviews with sales executives and managers to determine
common goals for the initiative. This readiness assessment must be
completed before starting the implementation process.
Dealer and District Velocity Solution (DDVS) – It is a SAP software tool used
to manage the S+OP process which is integrated to marketing / sales funnel
and generates output that is foundational to asset management / inventory
replenishment / product orders.
Demand – Products ordered by or for the customer. Includes an understanding

of the customer’s requirements for configuration, lead time and price.
Demand Planning – Demand Planning can be used to create a forecast of

market demand for the company’s products. It is possible to take into
consideration the many different factors that affect demand, statistical
modeling and judgmental input. The result of Demand Planning is an agreed
upon final number that is released to the supply planning or execution
system.
Demand Management – Provides statistically based, unbiased forecasts of

future demand executable supply plans to respond to actual demand.
Demand Shaping -It is working via marketing and the direct sales force
contacts to shape customer expectations of configuration, price, and
availability.
Deployment Champion (DC) – An individual at the business-unit level who is

responsible for coordination of appropriate resources, removing barriers to
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the team’s progress and championing overall CPS for Dealers deployment
within the dealership.
Differentiated Orders – This program has been designed to provide dealers

with stable, sustainable delivery times dependent on the type of order placed.
(See Order Ttypes.)
Distribution Lane Strategy – The primary goal of having a Distribution

Center is to improve product availability for targeted products without
increasing value chain costs. Value added benefits:
• Lower dealer inventory and thus improved cash flow
• Financial opportunity created by transfer of inventory risk
• Increase PINS through reduced lost sales
• Improve dealer price realization due to improved availability
• Machine and work tool consolidation
• Direct shipment to customers or local branch lowering transport cost
• Reduce dealer machine handling process costs/ warranty/insurance claims.
Distribution Project Management – Is aligning the organization’s projects

with its strategy and a common set of processes and procedures to ensure a
holistic approach to meeting business objectives.
Drive Standard Work – Standardize tasks and utilize common processes as

the foundation for continuous improvement
Efficiency – Meeting exact customer requirements with the minimum amount

of resources.
8 Wastes – The major wastes typically found in mass production: untapped

creativity, overproduction, waiting, motion, processing, inventory,
transportation and rework.
Enterprise Resource Planning (ERP) – Business management system that

integrates all facets of the business, including planning, sales, and marketing. As
ERP methodology has become more popular, software applications have
emerged to help business managers implement ERP in business activities such
as inventory control, order tracking, customer service, finance and human
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resources.
Error-Proofing – Methods that help operators avoid mistakes such as choosing

the wrong part, leaving out a part or installing a part backwards. Commonly
referred to as poka-yoke.
Even the Load – Balance the workload and reduce process variability.
Exits – The amount of work completed over a given period of time (weekly,
daily). Can be expressed in dollars or units.
Financial Reporting System (FRS) – Computer system introduced with 6

Sigma deployment to track and record financial benefits associated with
completion and control of 6 Sigma projects.
5S – Five related terms, beginning with an S sound, describing workplace

practices conducive to visual control and lean production. The five S’s are:
sort, set, shine, standardize and sustain.
Five Whys – The so-called Five W’s and One H (who, what, where, when,
why and how) as used in problem solving. “Why?” is asked a minimum of
five times when trying to find the root cause of a problem.
Forecast Accuracy – It represents how close the forecast of demand for

future period was to the actual demand that occurred.
Forecast Bias –Is being consistently either pessimistic or optimistic in

predicting market demand.
Forecasted Dealer Inventory Turns – It is the number of times dealers sell and
replenish new machine inventory based on future sales. It is calculated each
month using the final monthly forecast benchmark from the Sales &
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Operations Planning (S&OP) process.
Forecasting – To calculate or predict future product sales.
GPQ – Global Product Quoter (GPQ) is a new sales tool developed jointly by
Caterpillar and Caterpillar® dealers for simplifying the machine sales quoting
process. It will enhance the efficiency and effectiveness of dealers’ sales
processes.
Global Process Development Center (GPDC) – Support the Marketing Profit

Centers, Product Groups, Business Units and Dealers. GPDCs are being
created to ensure dealer operational processes are developed and/or enhanced
concurrent with key system initiatives and to support the MPC dealer
operational excellence goals. The goal has been to create a leaner, more
focused global Cat team, whose role is to develop common global processes
where appropriate and to share best practices with MPCs to support
deployment to their dealers.
Guiding Principles – 15 Principles to help define how we approach our work,

divided by 3 sub-systems essential to continuous improvement. (See Sub-
systems.)
High-Level Value Stream – A visual representation of aggregated material and

information flows within a company or business unit.
Integrated Solution – An Integrated Solution is a combination of Caterpillar,

dealer, and third-party products and services, packaged and sold as an answer
to a customer’s business challenge. Extends our quality advantage and may
be applied in virtually any aspect of a customer’s business. It can be as
simple as a maintenance plan for a machine or engine or as complex as a
multi-year agreement to plan and manage an entire jobsite. In every case,
integrated solutions make customers more successful and create additional
opportunities for us to serve them.
Inventory – Materials (and information) present along a Value Stream

between processing steps. Examples include raw materials, Work in Process
(WIP) and finished goods.
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Inventory Turns – How quickly materials move through a facility or an entire
value stream, calculated by dividing a measure of cost of goods by the
amount of inventory on hand.
ISO 9001: 2000 – A collection of formal international standards, technical

specifications, technical reports, handbooks and web-based documents on
quality management and quality assurance. There are approximately 25
documents in the collection, with new or revised documents developed on an
ongoing basis.
Kanban – Signaling device that gives authorization and instructions for a

process or withdrawal (conveyance) of items in a pull system. The term is
Japanese for “sign” or “signboard.” Kanban cards are the best-known and
most common example of these signals.
Kanban Post – A storage container for Kanban cards.
Lead Generation – Enables the dealership to generate sales leads by

developing and utilizing telephone script geared to identifying if the prospect
is in or out of market and forwarding leads to a sales department for follow
through.
Immediate Need – Refers to a lead that is planning to buy or rent

immediately or within the next week. The call agent would communicate this
lead to the appropriate sales contact.
Warm Lead – Refers to a lead that has no plans to buy or rent in the near
future but is interested in talking to someone in the appropriate division of
the dealership.
Hot Lead – Refers to a lead that is planning to buy or rent in the near future
and would like to talk to the appropriate sales contact.
Lead Time (LT) – Total time from the beginning of the supply chain to the
time something needs to ship. The amount of value-added time and non-
value-added time for a product to move through the entire value chain.
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6 Sigma Lean – Business system for organizing and managing product

development, operations, suppliers and customer relations that requires less
human effort, less space, less capital, less material and less time to make
products with fewer defects to precise customer desires when compared with
the previous system of mass production.
6 Sigma Lean Transactional – Application of lean production to non-

production business processes such as information technology, accounting,
human resources and administration.
Leveling the Load – Equalizing the type and quantity of a process over a
fixed period of time. Enables processes to efficiently meet the customer
demands while avoiding batching and results in minimum inventories, capital
costs, manpower and process lead-time through the entire value stream.
Material Flow – Movement of physical items through the entire value stream.
Material Handling – Moving necessary materials through a process within a

dealership.
Marketing Resource Management (MRM) – MRM is a process to develop

and manage dealers marketing and promotion planning, new product
introduction (NPI) communication planning, NPI marketing pack
distribution, Caterpillar support approval & allocation process, online storage
of marketing collateral’s, best practices sharing among the dealers
community, creation of reports marketing performance measure and
optimization.
Multi-Generation Project Planning (MGPP) – This is a step that is done

during the define stage of a 6 Sigma project where the team develops the ‘to
be’ project management plan critical points. The project management plan
includes change management, communications, and risk assessment.
Navigator+ Program – An initiative redefining the way that Caterpillar

forecasts demand and manages supply by synchronizing and integrating
common processes and technology across the entire value chain. Through the
implementation of three interdependent projects which involve Caterpillar
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plants, marketing companies, and dealers, this program will help Caterpillar
improve the order-to-delivery process and deliver products and services to
customers faster than any competitor.
Navigator+ Tool – The Navigator +Forecasting process and system is for

machinery MPC’s, Prime Product & Attachment process, and system, and for
plants forecasting and inventory process and system for dealers.
Non Value-Added Activity (NVA) – An activity that takes time, resources or

space but does not add value to the product itself. The activity may be
necessary under current conditions, but does not add value from the customer’s
perspective.
Optimum In-process Level (OIL) – Previously known as Optimal Dealer

inventory. OIL will generate an automatic “pull” replenishment product order
(where applicable) after an inventory or rental machine or engine is sold.
Execution signals would be based on true market demand. This capability
would maintain a more statistically based inventory planning and
management level at the dealership, would enable the creation of
differentiated order, and the ability to manage the consumption of the supply
plan.
One-Piece Flow – Making and moving one piece at a time.
Order Types – When a dealer submits an order he must include an order type.
• C Orders: Customer Orders that are sold or placed as rental units to a
specific customer (customer can be a dealer rental fleet).
• I Orders: Inventory orders that are for anticipated sales or rental demand
without a specified customer.
• R Orders: Replacement orders for rental fleet replacement.
Pacemaker Process – Any process along a value stream that sets the pace for
the entire stream. Usually near the customer end of the value stream, often
the final assembly cell. Not to be confused with bottleneck process, which
necessarily constrains downstream processes because of a lack of capacity.
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Participation and Close Rate –

• Participation Rate: Percent of All opportunities that a dealer is actively
participating in that are closed to a won or lost status.
Participation Rate = Closed Won Units + Closed Lost Units

Total Industry Units
• Close Rate: Percentage of opportunities that a dealer actively participated in and

won, versus all opportunities participated in and closed to a won or lost status.
Close Rate = Closed Won Units

Closed Won Units + Closed Lost Units
Performance Targets – The NPI strategy team is responsible for setting the
targets for product performance and features. These targets are established by
monitoring current customer satisfaction, which indicates the areas where
customer needs are not being satisfied, and by monitoring the competition, in
order to determine if anything that will drive future customer needs is being
produced. Technology makes these targets attainable and differentiates
Caterpillar from its competition.
Percent of Industry Sales (PINS) – Cat units sold divided by total industry
units sold.
Plan, Do, Check, Act (PDCA) – Improvement cycle based on the scientific
method of proposing a change in a process, implementing the change,
measuring the results and taking the appropriate action.
Plan for Every Part (PFEP) – Detailed plan for each part used in a process,
showing everything relevant to managing the process with no errors or waste.
Planned Inventory – Amount of inventory needed before each step in a

process to keep processing moving smoothly.
Prework – The first phase of the value stream transformation process, which
61
usually lasts six to eight weeks. Charters the transformation and lays the
groundwork to enable it.
Price Realization – Price will be measured as the change in sales driven by

the impact of enterprise net/net price changes to dealers and/or external
customers. “Net/net” is defined as the calculation of published prices and
sales variance changes between two defined periods (y/y, q/q, m/m)
excluding warranty and currency and adjusted for the impact of geographic
mix. This measure will be indexed to 100 and will be expressed in percent.
Process Improvement Dialogues – Regularly scheduled two-way discussions

between leaders and their organizations. Focused on continuous
improvement, discussions are supportive, open and honest.
Process Maps – A tool to identify high level gaps between the dealer’s process
and the common process. These maps demonstrate how the processes will
enable the dealer to improve its performance relative to best practices, giving
the dealer a vision of the work that will be required to implement the processes
and help the dealer champion identify potential process owners and key team
members.
Process Owner – The person responsible for the process methodology along
with the related tools, processes, assessment and certification criteria.
Product Development Centers – Their responsibility will be to develop

industry specific strategies and related core processes required to serve
product and sub-segment opportunities profitably.
Product Distribution Centers (PDC) – See Distribution Lane Strategy.
Product Family – A product and its variants that pass through similar
processing steps and common equipment just prior to shipment to the
customer. A product family is the unit of analysis for VSMs, which are
defined from the most downstream step just before the customer.
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Product Level Value Stream – A visual representation of material and

information flow within a well-defined product.
Pull – Only order what is needed when it is needed in the amount that is
needed.
Pull Through Marketing Process – A focused marketing plan accountable for

generating qualified sales opportunities required to meet or exceed the
business plan, and include metrics for each targeted campaign to show value.
Retention – Retention involves a combination of activities that are initiated

with managing projects/orders, delivering the purchased solution, assessing
the customers’ level of satisfaction, proactively resolving problems, assessing
the customer’s retention value and initiating targeted relationship building
activities to assure customer loyalty and repeat purchases.
6 Sigma Rapid Improvement Workshop (RIW) – A group activity built around

the 6 Sigma DMAIC process — commonly lasting five days — in which a
team identifies and implements a significant improvement in a process.
Workshops aim for the quick, focused discovery of root causes and quick,
focused implementation of solutions.
Rolling Business Management (RBM) – Caterpillar’s monthly forecasting

process. Primarily operational in nature, RBM focuses on the upcoming six
quarters with primary emphasis on the near quarter. RBM information is
consolidated at the corporate level and reviewed by the Executive Office.
ROI – The return on investment spreadsheet measures all expenses

comparatively to dealership revenue that was generated from leads. Reviewing
and updating the ROI worksheet is on-going and should be reviewed yearly or
63
as needed.
Sales Administration / Asset Management Process – An efficient and

accurate process to configure, quote, order and track a Caterpillar product
while providing the best customer order to delivery experience in our
industry.
Sales Execution – The act of developing relationships with a customer

through the management and execution of sales transactions. Sales execution
includes the process of managing Opportunities from initial identification to
closure. It includes converting specific proposed solutions into deliverable
orders for products or services and effectively recording all activities. Key
activities include primary and alternative solution development, delivery of
information and alternative proposals to the customer, identification of sales
obstacles, developing contracts, and obtaining authorized customer orders.
Sales execution is the essence of making “smart calls”, packaging, presenting
and closing transactions, and launching “clean orders”.
Sales Funnel Management (SFM) – SFM is a disciplined methodology designed

to increase sales and lower its associated costs. It is the process of meeting or
exceeding the business plan by establishing accountability for both the sales
process and the opportunities required from marketing needed to achieve the
business plan. This accountability extends to the entire dealer sales and
marketing departments as well as the Caterpillar district. SFM is reinforced by
the sales manager by weekly collaborations with the sales rep, bi-monthly
meetings between the sales manager, marketing manager and sales
administrator/product manager and monthly with the Caterpillar district/area
Office. The end result is increased profits with improved forecasting. It is a
structured process available to all dealers which enables them to identify on a
weekly basis needed interventions to meet monthly business plans, manage the
number of opportunities each sales representative needs to meet business
plan,identify and manage specific interventions to increase participation rate,
improve PINs, manage and execute the sales funnel with sales managers and
sales representatives interaction, and forecast more accurately throughout the
enterprise.
Sales Funnel Stages – There are five funnel stages: identify, qualify, develop,
propose, and close the sale.
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Opportunity Management. (OM) – OM is the process a sales rep follows when

recording/updating an opportunity. This process starts when a sales rep is
first exposed to a money-making opportunity for the dealer and ends when
the opportunity reaches a closed stage in the Sales Funnel.
Sales & Operations Planning Process (S&OP) – An extended enterprise-wide

common process that enables business decisions to balance customer demand
and dealer capacity to supply. The process is led by senior management to
evaluate projections for demand and supply and the resulting financials in a
monthly basis. The results are aligned and synchronized sales, marketing, and
operation plans.
Score Card – A report or indication of the status, condition, or success of an

initiative.
Setup Reduction – The process of reducing the time required to changeover a

process from the last part of the previous product to the first good part for the
next product.
Setup Time – The time required to changeover a process from the last part of
the previous product to the first good part for the next product.
Signal Kanban – A signal that triggers an upstream process to produce when

a minimum quantity is reached at the downstream process.
Spaghetti Chart – Diagram of the path taken by a product as it travels

through the value stream. In a mass-production organization, the product’s
route often looks like a plate of spaghetti.
Standard Deviation – Statistical indices of variability that describe the

dispersion of data in a population.
Standard Work – Establishing precise procedures for each operator’s work in

a production process, based on three elements: Takt time, work sequence and
standard inventory. This is foundational to CPS, it enables all team members
to identify problems. The best current method for doing a job is written
down; this is called standardized work.
Sub-systems – The three Sub-systems are foundational to CPS, they include65

the Operating System, Cultural System and Management System overlapping
and ultimately uniting in one sustainable system, CPS for internal Caterpillar
and CPS for Dealers.
Sustain It – The fourth, final and ongoing phase of value stream

transformation. Maintains an environment that encourages ongoing
improvement.
Targets – Someone to be affected by an action or development who need to

be communicated to.
Train the Trainer – A leaders as teacher training program created to cascade

valuable knowledge and information throughout team Caterpillar.
Validate Our Processes – Prove the process and technology work before
introducing them into production.
Value – The inherent worth of a product as judged by the customer and

reflected in its selling price and market demand.
Value-Added Activity (VA) – Any activity that transforms or shapes material

or information or improves quality to meet customer requirements.
Value-Added Time – The time expended in value-added activity to produce a

unit. Time for those work elements that transform the product in a way for
which the customer is willing to pay.
Value-Added Time Critical Path – The time spent in changing the form, fit
and function of a unit of production through the series of consecutive
activities that represent the longest time path through the process.
Value Stream – All of the actions, including value-adding and non-value-

adding actions, required to bring a product from concept to launch and from
order to delivery. These include actions to process information from the
customer and actions to transform the product on its way to the customer.
Value Stream Mapping (VSM) – A simple diagram of every step involved in

the material and information flows needed to bring a product from order to
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delivery. A current-state VSM follows a product’s path from order to delivery

to determine current conditions. A future-state VSM deploys opportunities for
improvement identified in the current-state map to achieve a higher level of
performance at some future point. (Phase 1)
Visual Workplace – The placement in plain view of all tools, parts,

production activities and indicators of production system performance so the
status of the system can be understood at a glance by everyone involved. The
practice of making all standards, targets and actual conditions highly visible
in the workplace, so that everyone can see and understand the actual
conditions versus the requirements.
VST Find It – The second phase of the value stream transformation process,
which usually lasts approximately four weeks. The purpose is to document
the current state, identify PQVC opportunities and plot the course for
correction.
VST Fix It – The third phase of the value stream transformation, which
usually lasts about 12 weeks. The purpose is to make the corrections to
achieve desired results in PQVC metrics.
Waste – Any activity that consumes resources but creates no value for the
customer. Most value-stream activities that actually create value as perceived
by the customer are a tiny fraction of the total activities. Eliminating the
large number of wasteful activities is the greatest potential source of
improvement in corporate performance and customer service.
Withdrawal Kanban – A signal that specifies the kind and quantity of product
that the downstream process (customer) may withdraw.
Work In Process (WIP) – Any inventory between raw material and finished
goods.
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“CATERPILLAR IS DEPLOYING THE CATERPILLAR PRODUCTION
SYSTEM (CPS) GLOBALLY IN EVERY FACILITY AND IN OUR
SUPPLY BASE. WHEN SUCCESSFULLY DEPLOYED, THIS WILL
ALLOW OUR COMPANY TO ACHIEVE WORLD-CLASS SAFETY,
QUALITY, VELOCITY AND COST. BUT THE FULL BENEFITS OF
CPS WON’T BE REALIZED WITHOUT A COMMENSURATE
CHANGE ON THE FRONT END OF OUR VALUE CHAIN. CPS FOR
DEALERS, IS THE FRONT END OF CPS AND APPLIES THE SAME
PRINCIPLES OF ONE PIECE FLOW, PULL REPLENISHMENT,
STANDARD WORK, CHASE WASTE AND SIMPLIFICATION TO
THE WAY WE FORECAST, CONFIGURE, ORDER, INVENTORY
AND DISTRIBUTE OUR PRODUCTS. CPS FOR DEALERS IS A KEY
INITIATIVE, INTEGRAL TO THE SUCCESS OF CPS, THE
CATERPILLAR DEALER® ORGANIZATION AND VISION 2020.”
STU LEVENICK
– Caterpillar Group President
68
© 2008 Caterpillar All Rights Reserved Printed in USA
CAT, CATERPILLAR, their respective logos as well as
corporate identity used herein, are trademarks of Caterpillar
and may not be used without permission.
AEXC0720

020 CPS For Dealers Manual 9-16-08 Vs 1.1

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020 CPS For Dealers Manual 9-16-08 Vs 1.1

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CATERPILLAR

DISTRIBUTION STRATEGIC PROFILE

CRITICAL SUCCESS FACTORS

CAT / DEALER RELATIONSHIP: Our Values in Action

IMPROVE OUR SAFETY, QUALITY, VELOCITY AND COST

PERFORMANCE SIGNIFICANTLY COMPARED TO ANY

COMPETITOR. THESE CHANGES WILL ESTABLISH CATERPILLAR

AND THE CATERPILLAR® DEALER ORGANIZATION AS THE

PREEMINENT GLOBAL LEADER AS DEFINED IN VISION 2020.”

Achieving our strategic goal of market leadership — #1 for every product

I am absolutely committed to seeing the Caterpillar Production System fully

24 PUT SAFETY FIRST

45 CATERPILLAR PRODUCTION SYSTEM FOR DEALERS GLOSSARY

DISTRIBUTION STRATEGIC PROFILE

CRITICAL SUCCESS FACTORS

CAT / DEALER RELATIONSHIP: Our Values in Action

Waste is any activity that consumes

THE RELENTLESS IDENTIFICATION AND ELIMINATION OF WASTE

USING VALUE STREAM TRANSFORMATION IS CRITICAL TO OUR

SUCCESS. THIS IS NOT A ONE-TIME EVENT, BUT A JOURNEY.

OUR CULTURE TRANSFORMS TO NEVER BE SATISFIED, BUT

CONTINUOUSLY IMPROVE OUR VALUE STREAM PROCESSES,

THUS ELIMINATING WASTE.

Lost opportunities due Production or rework of out-

Excess raw material, Excess supply beyond

Lost time due to poor Wasted movement

Excess and inefficient Work that adds no value

Note: Text in BLUE is customized for Caterpillar® Dealers.

In the past, these 3 Sub-systems Chase Waste: Drive for the

Note: Text in BLUE is customized for Caterpillar Dealers.

integrated, common processes

dealer to enable end-to-end process S&OP

alignment acrossthe value chain. Capacity Plann

CPS for Dealers enables the

with Caterpillar core processes —

ning Mfg. Engineering Mfg. Support

Mfg. Production Execution

pply Chain / Materials Management

Finished Goods Dist. Sales Admin. / Asset Mgmt.

Governance and Assessment

Environment, Health and Safety

Value Stream Transformation

MAKE VALUE FLOW

DRIVE STANDARD WORK

EVEN THE LOAD

VALIDATE OUR PROCESSES

Waste – Any activity that consumes resources

Most activities fail to create customer-perceived

EXCELLENCE We use 6 Sigma to eliminate eight types of waste

WE CHASE WASTE WHEN:

• We are trained to identify and eliminate the 8 Wastes for transactional as

Pull – A consumption-controlled material-

Pull aligns processes with customer requirements by

Flow – The smooth uninterrupted transfer of products

Complex processes without standard work are

WE MAKE VALUE FLOW WHEN:

• We approve forecast and inventory level changes through Sales &

Standard Work – The identification and

Standard work is the organization of tasks into

WE DRIVE STANDARD WORK WHEN:

• We standardize and document tasks and tools to drive consistent process

Even the Load – The discipline of evenly

To Even the Load, we must balance work between