Caterpillar’s Win-Win Cooperation with Chinese Suppliers

Having been in the Chinese market for nearly 40 years, Caterpillar views China as a key player in the global market and an important part of the company’s strategy.

 “We have always viewed China as one of our local markets,” says Caterpillar CEO and Chairman Doug Oberhelman in an industry interview. “As a result, we make long-term investments in China as part of our commitment to Chinese customers and our business developments in China.” Caterpillar is also focused on fostering its relationships with Chinese suppliers and customers, which is one of the important commitments it has made in the Chinese market.

Since the 1990s Caterpillar has included China as part of its network of suppliers, what the company calls its “extended enterprise,” as it has carried out an array of work, such as integrating local resources and strengthening cooperation and collaboration with Chinese suppliers. In 1995, Caterpillar began to source locally. Over a decade later, the number of Chinese suppliers that provide goods to Caterpillar has grown exponentially. Through this strategy, Caterpillar enjoys a competitive network of suppliers in China that has increased the company’s competitiveness of its global supply network.

“We have high expectations of all of our suppliers in terms of quality and performance,” says Frank Crespo, vice president and chief procurement officer. “But we are committed to a long term, collaborative relationship with our suppliers in China on their journey to achieve world class capabilities and become globally competitive.” 

Being a Caterpillar supplier provides opportunities for business training, technical exchanges, joint research and development, and corporate culture development. The suppliers who have leveraged these opportunities have improved their product quality, technical capabilities, manufacturing capacity and operational management, and the Chinese engineering machinery industry as a whole. As more Chinese suppliers have become business allies with Caterpillar, the focus on continuous improvement has intensified through the introduction of production systems and advanced management philosophies like 6 Sigma. These initiatives have also resulted in a number of companies emerging as leaders in local industries. Some have gone on to expand their business beyond China, constructing facilities abroad and supplying Caterpillar globally using the skills they obtained from Caterpillar.  This could result in more Chinese suppliers working with Caterpillar to achieve faster and more efficient development.

As Caterpillar Group President Ed Rapp said, “We can only achieve our success when our customers achieve theirs. At that time, our suppliers will succeed too.”

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