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Cost reduction and JIT delivery.

Caterpillar is the world's leading manufacturer of construction and mining equipment with facilities across the globe.

The relationship between Castech and Caterpillar began more than 8 years ago in Burnie, Tasmania, where CAT has an assembly line for underground hard rock mining loaders and trucks. 

Cat needed to reduce the costs for:
  • Simple fabricated components that could be substituted by castings
  • Difficult casting parts for which continuous quality problems were causing high costs in rework and production line downtime.
To achieve this two objectives CAT needed suppliers that could deliver small simple castings in small quantities at a very competitive cost and/or supply complex parts ensuring consistent quality. Moreover, the fact that CAT used a JIT production strategy required a supplier that ensured quick response to changes in their production plan.

Castech was chosen as a supplier that offered solutions for both problems. Moreover, as a local supplier, communication was continuous and fluid.

For each part manufactured for CAT, Castech's team studied CAT specifications and developed a very detailed Product Datasheet. It specifies all the process and inspection requirements that ensure a clear understanding of CAT's requirement and the production of a compliant part.

Image 1. General view and machining detail of a gear housing supplied to CAT. 220 kg. Ductile Iron. Sand Casting.

Castech's CAT PM maintained continuous communication with the procurement department and product team at CAT. The fluent interaction ensured a comprehensive understanding of CAT's processes and how they affected their supply-chain needs. After analyzing CAT's needs, Castech proposed changes in batch quantities that have help CAT to further reduce its costs.

CAT uses an EDI platform to communicate its JIT requirements to suppliers. Castech adopted this platform and is using it as a part of it's workflow in all the projects with CAT, helping reduce operational costs for both companies.

At present, Castech Solutions in supplying a portfolio of 105 different parts; see Table 1 for details. Ranging from 0.1kg to 3.5MT.

Table 1. Summary of families of castings supplied to CAT in 2013.
 Part Type Grades   Processes
 Clamps Carbon Steel  Investment casting
 Bosses Carbon Steel
NiCrMo Steel
Carbon Mn Steel
Investment casting
Sand casting
 Body frames Carbon Steel  Sand casting
 Gear housings Ductile Iron  Sand casting
 Axle housings Carbon Steel  Sand Casting
 Wear parts Carbon Steel
Q & T Steel 
Investment casting
Sand casting 

These parts are manufactured by 8 different partners and have lead times from 2 to 15 weeks plus delivery.

Regarding quality metrics, CAT has a goal of 500 ppm in defects for supplied parts. When measuring delivery performance, CAT requires a 95% of orders to be delivered according to agreed dates. Image 2 shows the results on supplier performance for Castech from October 2013.

Image 2. Supplier performance results for Castech Solutions from October 2013.

As a result of the good service and competitive prices offered, the business relationship has extended in the last 3 years to CAT facilities in Wuxi (China), Rayong (Thailand) and Morton (USA).

The success of the relationship between Castech and CAT shows that:
  • Significant cost benefits can be achieved from small fabricated parts if casting is considered as an alternative manufacturing process.
  • Complex castings can be supplied from low-cost countries with consistent quality if the manufacturing process is closely monitored by a company with extensive experience.