How should the new bhl product line be configured
Course:- Supply Chain Management
Reference No.:- EM13880157

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The pre-released case study examination is designed to assess your ability to apply the relevant theories, principles and techniques associated with the unit content to a realistic business situation.

This is a case study that will be answered in an exam as open exam and questions will be available during the exam. please make relevant questions and answers that can be possible ones

You will be expected to demonstrate your knowledge and understanding of relevant theoretical principles, concepts and techniques; to apply these appropriately to the particular situation described in the case study and; above all, to make sound decisions. You will not gain marks by writing a general essay on the topic. Prepared notes may not be included as part of the answer.


Caterpillar is a manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. The company is also a service provider through Caterpillar Financial Services, Caterpillar Remanufacturing Services and Progress Rail Services. Caterpillar operates in North America, Asia Pacific, Europe, Africa, the Middle East, the Commonwealth of Independent States (CIS), and Latin America.

Caterpillar's BCP division saw great potential for a rationalisation of its BHL product line. But there were three crucial questions that needed to be answered before such a new strategy could be devised and implemented:

1. How would customers react to a product line reduction? Answering this question required an understanding of how customers value different machines.

2. How much could be saved by rationalising the BHL product lines? Answering this question required an understanding of the cost of complexity.

The answers to these two questions could help Caterpillar answer the ultimate question:

3. How should the new BHL product line be configured? Specifically, which machines should be offered and at what prices?

Ultimately, logistics questions within the supply chain centred on which of the following two alternatives would prove to be less costly:

1. North American production: Incur the higher costs associated with shipping finished exoloaders to customers/dealers in the emerging Asian and South American markets and reduce the costs associated with acquiring and coordinating the raw materials and component parts used in production; or

2. Asian production: Incur the higher costs associated with acquiring and coordinating the raw materials and component parts used in production and reduce the costs associated with shipping finished exoloaders.


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It has been identified in the case study that the focus of Caterpillar to configure supply chain was encouraged as a result of certain concerns. The international attribute of the P2000 supply chain, in combination with the heavy weight of equipment, resulted in creating huge potential with increased shipping costs and lead times. Caterpillar ended up making a conscious decision for not competing over price, instead, to keep up with the core service, quality and philosophy had been identified as areas within which the organization will have to consider distinguishing the products(West &Waymire, 2013). Thus, long lead times had been a specific concern. The surveys conducted with dealers resulted in reinforcement of this concern, by the implication that the future products of Caterpillar will be extremely substitutable with the ones in the competitive environment. Thus, Caterpillar considered it crucial for capturing an extremely high share of demand over customers for products of Caterpillar as soon as there was materialization, and not forcing the potential customers to wait before receiving the delivery(Sokol, 2006).

Caterpillar had also been furnishing logistical data and cost data that include handling costs, rates of holding cost across different areas, order with minimum sizes, capacities of source, costs of source, along with the rates and times of shipping for various combinations of modes of transportation. The nodes across the network of distribution had been specified completely for the machines. A combination of potential locations for trans- shipment had been determined for the tools of work. While analysing initially, it had been stated by Caterpillar that machines and work tools would not be sharing the nodes of trans- shipment(Elmarakbi, 2013). There had been a considerable relaxation of this requirement later on, when shipment of work tools and machines could be done either together or separately, at different rates and capacities.

Supply chain configuration is referred to as a system for efficient adaptation of the environment, being offered as issues of demand and supply for the manufacturing of product. The sole purpose of such configuration was management of logistics in a system of configuration(Elmarakbi, 2013). The reason for this is that the adopted policies for resource components, process and product over a system of configuration are to be integrated along with both, outbound and inbound decisions of logistics for realization of benefits over strategies with major flexibility.

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