Caterpillar Drives Growth Through Integration and Digitalization

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Caterpillar, the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives, is driving growth through integration and digitalization. With applications for power generation, marine and rail, it’s one of the largest multinationals in its field.

A bellwether of American industrial might and health, Caterpillar’s most recent challenge is President Trump’s trade war. With 98,400 employees, Caterpillar’s stock suffered when the US and China began imposing tariffs on each other’s goods and services, as the company gets more than half its sales outside the US. The trade war “could have an impact on the strong cycle Caterpillar has seen in their end-markets generally,” said Larry De Maria, an analyst at William Blair & Co.

Despite the tariff challenge, continued improvement in residential and nonresidential construction and revival in infrastructure demand portend additional revenues for the company aided by Trump’s plans to spend more domestically.

Caterpillar continues to focus on the future by investing in digital capabilities, and recently hired Ogi Redzic, a former executive in charge of connected vehicles and mobility services at Renault Nissan Alliance, to augment the company’s digital expertise.

As vice president, digital solutions division, Redzic will oversee Caterpillar’s data analytics group, enterprise data hub, equipment management tools, Cat Connect technologies and customer experience portals.

Additionally, his division is responsible for delivering on the Caterpillar e-commerce strategy, which includes B2B and retail, according to a company spokesperson. Redzic “manages key components of the company’s digital strategy including digital marketing, e-commerce, the Internet of Things and enterprise data platforms.”

Jon Jackson, product director of Caterpillar Marines, said of the company’s challenges, “I would say number one is integration. The second is a bit more of a pure engine play relating to power density, and the third aspect we are working on is what I call digitalization, but it has to do with making sure we’re connecting assets, or at least making that option available to customers.”

The integration of engine, transmission and propulsion systems is paramount, says Jackson. “We’ve got a great dealer network, you can get a Caterpillar serviced anywhere, we are a very reliable brand.”

It is all part of what Jackson calls the division between “do-it-for-me,” “do-it-with-me” and “I’ll-do-it-myself” approaches, all of which Caterpillar is focused on with digitalization.

Caterpillar’s machinery sales continued to rise across global markets. The company delivered better-than-expected results in 2018 due in large part to stringent cost control and robust order rates.

When Jim Umpleby became CEO last year, Barron’s called him “the new sheriff in town.” “We had a great start to the year, but higher sales volumes wasn’t the only contributor to this record first quarter results,” Umpleby said. “Operational excellence, which includes safety, quality, lean principles and our commitment to control structural costs, is one of the three key components of our enterprise strategy.”

Caterpillar’s understanding of where it has a competitive advantage is “key to generating high returns,” the company wrote. “As a result, we allocate resources to those areas of our business that create or have the potential to create the most growth or improvement. This allows us to make swift, strategic choices so that we prioritize business opportunities with the greatest value.”

 

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