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AEXC0720
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AEXC0720
PRODUCTION
SYSTEM
FOR DEALERS
MANUAL
VERSION 2.3
“CPS IS AT THE VERY HEART
OF OUR ENTERPRISE
STRATEGY — AND THAT’S
FOR A REASON. BY MAKING
CPS PART OF HOW WE
DO BUSINESS, WE CAN
DELIVER SUPERIOR VALUE
TO OUR CUSTOMERS,
SHAREHOLDERS AND
OUR PEOPLE.”
CPS FOR DEALERS MANUAL Version 2.3 Rev. 3/13 Caterpillar: Confidential Green
A MESSAGE FROM THE CHAIRMAN
We have big goals and unlimited opportunities waiting for us. We simply need to get the work
done in the best way possible. The great news is that we know what we need to do and how to
do it. CPS is at the very heart of our enterprise strategy — and that’s for a reason. By making
CPS part of how we do business, we can deliver superior value to our customers, shareholders
and our people.
I also want to mention the benefits of CPS to you, because it only works if you make it work.
It’s already helped us deliver big improvements in safety. It’s given us a simple and effective
process for collecting and acting on your ideas and feedback. It’s helped us improve efficiency.
And it’s helped improve our product quality and velocity.
These outcomes are just the beginning. As we further embed CPS into our business, the
positive results to us and to our customers will increase exponentially. I am absolutely
committed to CPS, and I need your commitment too. We are on the verge of getting CPS right
where we want it. Let’s work together and use this system to its fullest potential. We all want
to be part of a winning team and CPS will help us beat our competition and maintain our global
leadership position for years to come.
CPS FOR DEALERS MANUAL Version 2.3 Rev. 3/13 Caterpillar: Confidential Green 1
VISION 2020 AND CPS FOR DEALERS
OPERATING SYSTEM
Chase Waste......................................................................................................... 10
Pull......................................................................................................................... 12
Make Value Flow................................................................................................. 14
Drive Standard Work.......................................................................................... 16
Even the Load....................................................................................................... 18
Validate Our Processes...................................................................................... 20
CULTURAL SYSTEM
Put Safety First..................................................................................................... 24
Take the Customer’s View.................................................................................. 26
Go, See, Act.......................................................................................................... 28
Stop to Fix............................................................................................................. 30
Develop People.................................................................................................... 32
MANAGEMENT SYSTEM
Actively Listen..................................................................................................... 36
Make it Visual...................................................................................................... 38
Align the Targets.................................................................................................. 40
Act Decisively...................................................................................................... 42
APPENDIX
Acronyms.............................................................................................................. 45
Definition of Terms.............................................................................................. 47
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VISION 2020 AND
CPS FOR DEALERS
The Caterpillar Production System (CPS) is key to enabling our enterprise strategy to
achieve our Vision 2020 goals. By building on the foundation of Our Values in Action
through the power of 6 Sigma, CPS drives continuous improvement by producing
measurable results in PEOPLE, QUALITY, VELOCITY and COST (PQVC).
Through the deployment of CPS, safety is being embedded into our everyday processes —
every modification generated is evaluated for its impact on the safety of our people. CPS
is also driving Caterpillar to maintain a high standard of quality in our order-to-delivery
processes, ensuring everything is done in order — right part, right place, right time — every
time. It is driving us to operate in an environment with less waste and greater flexibility,
which allows Caterpillar to increase velocity and maintain a flexible cost structure during
cyclical downturns.
CPS FOR DEALERS MANUAL Version 2.3 Rev. 3/13 Caterpillar: Confidential Green 3
CPS FOR DEALERS
3 SUB-SYSTEMS AND
15 GUIDING PRINCIPLES
CPS drives excellence by uniting 3 Sub-systems essential to continuous improvement
– the operating, cultural and management systems. In the past, these sub-systems have
often functioned independently of each other. As we work smarter and eliminate waste,
the sub-systems will overlap, ultimately uniting in one sustainable system — CPS.
• The Operating System defines the physical layout of the facility, the movement
of materials within and between facilities, eliminating waste and other tangible
components of the value stream.
• The Cultural System is the human element of the value stream. The goal is to create
an environment in which people freely share ideas that enhance the overall process.
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Chase Waste: Drive for the continuous and relentless
elimination of waste in all processes, with priority on
safety and quality-related wastes
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 as the foundation for continuous
The Operating System improvement
is focused on waste
elimination using 6 Sigma Even the Load: Synchronize and optimize inventory flow
and 6 Sigma lean tools with customer demand to manage variability
Validate Our Processes: Prove the process and technology
work before introducing them into production
The Cultural System is Develop People: Identify, attract and develop people and
focused on making change teams to build Caterpillar’s long-term capability
possible and improving the
way we work
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CPS FOR DEALERS
8 WASTES
The ultimate goal of CPS is the elimination of waste in our processes from order to
delivery. Caterpillar / Dealer goal is to be recognized as the industry’s “gold standard”
in Safety, Quality and Velocity and Distribution. To reach that goal and sustain our
standing, we must eliminate waste — any activity that consumes resources but creates
no value for the customer.
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Unused
Creativity /
Capability Defects
Lost opportunities due Production or rework of out-of-
to poor safety and an 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 the requirements of
finished goods inventory the next process
Excess
Waiting Motion
Lost time due to poor product Wasted movement
and / or process flow — made while working
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
CPS FOR DEALERS MANUAL Version 2.3 Rev. 3/13 Caterpillar: Confidential Green 7
OPERATING
SYSTEM
FOCUSED ON WASTE ELIMINATION USING
6 SIGMA AND 6 SIGMA LEAN TOOLS
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CHASE WASTE
Drive for the continuous and relentless improvement in the elimination of
waste in all processes.
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.
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CHASE WASTE
Drive for the continuous and relentless improvement in
the elimination of waste in all processes.
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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) identified from Value Stream Transformation
Projects 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.
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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.
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WE PULL WHEN:
• All inventory levels are targeted to meet customer’s needs and avoid aged inventory.
• The next downstream process is also a customer.
• We use just-in-time strategy for bringing material to the point of use.
• We align processes to satisfy customer needs.
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MAKE VALUE FLOW
Increase process efficiency to drive continuous
improvement in the customer experience.
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WE MAKE VALUE FLOW WHEN:
• 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.
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DRIVE STANDARD WORK
Standardize tasks and utilize common processes as the
foundation for continuous improvement.
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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.
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EVEN THE LOAD
Synchronize and optimize process flow with customer
demand to manage variability.
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WE EVEN THE LOAD WHEN:
• All process capabilities are optimized across dealer’s territory to meet
customer’s demand.
• We align our resources to meet customer demand.
• Significant changes in business will drive resource workload balance.
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VALIDATE
OUR PROCESSES
Prove the processes and technology work before
introducing them into standard work. Improving our
processes, risk is minimized.
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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.
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CULTURAL
SYSTEM
FOCUSED ON MAKING CHANGE POSSIBLE
AND IMPROVING THE WAY WE WORK
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PUT SAFETY FIRST
Build a safety-first culture by placing the highest priority on eliminating
safety-related waste.
STOP TO FIX
Cease activity when a problem occurs to correct it in process.
DEVELOP PEOPLE
Identify, attract and develop people and teams to build the Caterpillar and
Dealer long-term capability.
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PUT SAFETY FIRST
Build a safety-first culture by placing the highest
priority on eliminating safety-related waste.
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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.
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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.
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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.
• 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 strategies across all value streams.
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GO, SEE, ACT
See it first-hand to ensure thorough understanding.
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WE GO, SEE, ACT WHEN:
• 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 crossfunctional processes.
• Managers are change agents and have an active role in sustaining process improvements.
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STOP TO FIX
Cease activity when a problem occurs to correct
it in process.
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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.
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DEVELOP PEOPLE
Identify, attract and develop people and teams to build
the Caterpillar and Dealer long-term capability.
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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.
CPS FOR DEALERS MANUAL Version 2.3 Rev. 3/13 Caterpillar: Confidential Green 33
MANAGEMENT
SYSTEM
FOCUSED ON CREATING THE
MEASUREMENTS AND MANAGEMENT
STRUCTURE TO SUPPORT
CONTINUOUS IMPROVEMENT
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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.
MAKE IT VISUAL
Simple visual indicators of department, team performance, and targets are
positioned in plain view so deviations can be quickly diagnosed.
ACT DECISIVELY
Make decisions by consensus and implement with a sense of urgency after
thoroughly considering all options.
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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.
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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.
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MAKE IT VISUAL
Simple visual indicators of department, team
performance, and targets are positioned in plain view
so deviations can be quickly diagnosed.
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WE MAKE IT VISUAL 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.
CPS FOR DEALERS MANUAL Version 2.3 Rev. 3/13 Caterpillar: Confidential Green 39
ALIGN THE TARGETS
Deploy cascaded metrics and targets across the value
chain aligned to the enterprise strategy supporting
People, Distribution, and Velocity.
We put Integrity
into action when
we are fair, open
and honest in our
communications.
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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.
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ACT DECISIVELY
Make decisions by consensus and implement with
a sense of urgency after thoroughly considering all
options.
We put Excellence
into action when we
focus on delivering the
highest value to our
customers, always with
a sense of urgency.
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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.
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APPENDIX
CPS FOR DEALERS ACRONYMS AND DEFINITION OF TERMS
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ACRONYMS
BB Black Belt OEE Overall Equipment Effectiveness
CBR Critical Business Requirement OEM Original Equipment Manufacturer
CCR Critical Customer Requirement OT Overtime
CE Cycle Efficiency PAD Profit After Direct
CI Continuous Improvement PCS Process Control System
CGCM Caterpillar Global Change Management PDA Pre-Delivery Audit
CPS Caterpillar Production System PDCA Plan, Do, Check, Act
CRC Component Rebuild Center PID Process Improvement Dialogue
CSA Customer Support Agreement PINS Percent of Industry Sales
CSF Critical Success Factor PM Preventive Maintenance
CT Cycle Time POPS-C Percent of Parts Sales Caterpillar
CVS Customer Value Survey POU Point Of Use
DBS Dealer Business System PPE Personal Protective Equipment
DC Deployment Champion PQVC People, Quality, Velocity, Cost
DCAL Dealer Customer Acceptance Level QCO Quick Change Over
DITL Day In The Life RCCA Root Cause Corrective Action
DMAIC Define, Measure, Analyze, Improve, Control RIW Rapid Improvement Workshop
DMEDI Define, Measure, Explore, Develop, Implement SAI Strategic Areas of Improvement
DMT During Machine Time SIMS Service Information Management System
DPM Defects Per Million SJP Safe Job Procedure
EBC Employee Balance Chart SME Subject Matter Expert
ECM Electronic Control Module SMED Single Minute Exchange of Dies
EHS Environment, Health, Safety S.O.S. Scheduled Oil Sampling
EOS Employee Opinion Survey S&OP Sales & Operations Planning
ES Executive Summary SPA Sustainable Product Availability
EPE Every Part Everyday SWE Simulated Work Environment
FIFO First In First Out SWES Standard Work Element Sheet
FMEA Failure Mode Effects Analysis SWIP Standard Work In Process
FREP Finance Representative SWS Standard Work Sheet
GB Green Belt TPM Total Productive Maintenance
GP Gross Profit VA Value Added
IPV In Process Validation VOB Voice Of the Business
KBA Key Business Activity VOC Voice Of the Customer
KN Knowledge Network VSM Value Stream Map
KPI Key Process Indicator VST Value Stream Transformation
LDLI Last Day Labor to Invoice WACT Weighted Average Cycle Time
MBB Master Black Belt WIP Work In Process
MGPP Multi-Generation Project/Process Plan WO Work Order
MRP Material Requirements Planning YB Yellow Belt
MSA Measurement System Analysis YTD Year-To-Date
NVA Non-Value Added
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DEFINITION OF TERMS
5S – Five related terms that all begin with the letter “S” (in English and Japanese) to describe
workplace practices conducive to visual control and workplace organization. The 5Ss are:
Sort, Set, Shine, Standardize and Sustain. 5S implementation is required in Value Stream
Transformation projects and Rapid Improvement Workshops.
8 Wastes – The major wastes typically found in all value streams. They are Unused Creativity
/ Capability, Defects, Inventory, Overproduction, Waiting, Excess Motion, Transportation and
Over Processing.
Andon – A visual management tool that highlights the status of operations in an area at a
glance. It signals whenever an abnormality occurs. A typical andon is a light or sign that
summons quick response from a designated individual.
Business Process Lead Time – The time it takes from receiving a customer order/request until
the order or request is fulfilled. This includes all value added and non-valued added actions
taking place within the process.
Capacity Planning – The process of determining the amount of capacity required to produce to
anticipated goals in the future.
Change Target – An individual who will be impacted by a change in such a way that
communication will be required.
Caterpillar Global Change Management (CGCM) – Process used at Caterpillar and dealers to
mitigate risks involved when change is required. Through the CGCM process, communication,
learning and reinforcement plans are developed to address identified areas of resistance.
Caterpillar Production System (CPS) – Tools and methodology that enables transformation to
eliminate waste in values streams, continually improve processes and achieve People, Quality,
Velocity and Cost targets.
Change Readiness Assessment – A tool which incorporates key statements from the CPS
for Dealers Guiding Principles to review dealership readiness to lead the change required for
long-term sustainability of process improvements.
Chase Waste – Drive for continuous and relentless elimination of waste in all processes, giving
priority to safety and quality related wastes.
Continuous Flow – Producing and moving one item at a time, or a small consistent batch of
items, through a series of process steps. This should be done in a continuous manner with
each step producing only what is requested by the next step.
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Continuous Improvement Board – Applies the “Make It Visual” Guiding Principle to sustaining a
continuous improvement process by providing a visual way to track ideas and issues submitted
in a work area. It promotes timely action and visibly tracks the status of ideas and issues.
CPS for Dealers Black Belt – A CPS for Dealers Black Belt will be able to solve business
problems through leading and coaching Green Belts in CPS for Dealers projects utilizing:
• 6 Sigma methodology (must be a 6 Sigma Black Belt to become a CPS for Dealers Black Belt)
• Value Stream view/focus
• PQVC (People, Quality, Velocity, Cost) process measurements and prioritization
• A CPS for Dealers Black Belt must be:
• CPS for Dealers “one way” Champion – 15 Guiding Principles and system process
strategy (there is only “one way” to do CPS for Dealers)
• Effective Change Agent
• Proficient in CPS for Dealers tools
• Focused on identifying and eliminating waste
• Capable of teaching Green Belts and Yellow Belts
CPS for Dealers Master Black Belt – A CPS for Dealers Master Black Belt is the person
responsible for training CPS for Dealers Black Belts. They will also be coaching and guiding
the Black Belts through their Value Stream Transformation projects and the Rapid Improvement
Workshops. A CPS for Dealers Master Black Belt is also a 6 Sigma Master Black Belt.
CPS for Dealers Website – The CPS for Dealers safe source supporting the global Dealer
network by providing the tools and resources to implement and sustain a continuous
improvement culture across customer service, sales, used, and rental value streams. The CPS
for Dealers Website can be accessed at: https://dealer.cat.com/dealercps
CPS for Dealers Guiding Principles – The 15 Guiding Principles identify how we should approach
our work (“The What”) to integrate & sustain these 3 Sub-systems (see Sub-systems) to achieve
our customer’s expectations and meet our strategic business targets (“The How”). The Guiding
Principles are: Chase Waste; Pull; Make Value Flow; Drive Standard Work; Even the Load:
Validate Our Processes; Put Safety First; Take the Customer’s View; Go, See. Act; Stop to Fix;
Develop People; Actively Listen; Make it Visual; Align the Targets and Act Decisively.
Critical Path – The series of consecutive activities that represents the longest time path
through the process.
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Cultural System – One of the three sub-systems encompassed within CPS for Dealers that are
essential to continuous improvement (Operating, Cultural, Management). The Cultural System
is focused on making change possible and improving the way we work. Five of the 15 Guiding
Principles fall within the Cultural System: Put Safety First; Take the Customer’s View; Go, See,
Act; Stop to Fix; Develop People.
Cycle Time (CT) – The total time required to complete one complete cycle of a process.
Deployment Champion (DC) – The individual who is responsible for coordination of appropriate
resources and removing barriers to a project team’s progress. The DC is the overall champion
for CPS for Dealers within the dealership.
Drive Standard Work – The process to standardize tasks and utilize common processes as the
foundation for continuous improvement.
Efficiency – Meeting exact customer requirements with the minimum amount of resources.
Employee Balance Chart – A graph depicting how work is distributed across employees in
relation to Takt time. It shows each element of each individual’s task and includes all value
added work and all non-value added work. It is a simple tool for designing efficient employee
workload.
Error Proofing – Methods that help employees avoid mistakes. Commonly referred to as Poka-
yoke (POH-kah YOH-kay)
Even the Load – To synchronize and optimize inventory flow with customer demand to manage
variability.
Five Whys – A tool used for finding the root cause of a problem. Why is asked a minimum of
five times to flow through the symptoms of a problem to arrive at the actual root cause.
Inventory – Material or information present along a value stream between or in process steps.
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Inventory Turns – A ratio showing how many times a company’s inventory is sold and replaced
over a period of time. Generally calculated by dividing sales by inventory, it can also be
calculated by dividing cost of goods sold by average inventory.
Lead Time – The amount of value-added time and non-value-added time for a product to move
through the entire value chain.
Lean – A business system for organizing and managing product development, operations,
suppliers and customers relations that requires less human effort, less space, less capital,
less material and less time. The outcomes have fewer defects compared to what the customer
requires than previous systems used for production.
Level – A steady quantity and mix of work moving through a process. Leveling enables faster
response to varied customer requirements. It helps to determine personnel, equipment and
material needs. Leveling enables production to efficiently meet customer demands while
avoiding batching.
Material Flow – Movement of physical items through the entire value stream.
Metrics Board – Provides a method to visually display the current status on PQVC (People,
Quality, Velocity, Cost) metrics being monitored within a group or area. Aligns with the Make it
Visual Guiding Principle.
Metrics Cascade – Drives toward continuous improvement by using metrics that align with
the defined strategy for an organization. Starting at the highest levels in an organization
then “cascading” down through to the lower levels. A metrics cascade encourages a more
educated workforce, gives a clear indicator of the status of the chosen metrics, encourages
root cause problem solving and ensures short term gains do not compromise long term goals.
Management System – One of the three sub-systems encompassed within CPS for Dealers
that are essential to continuous improvement (Operating, Cultural, Management). The
Management System is focused on creating the measurements and management structure to
support Continuous Improvement. Four of the 15 Guiding Principles fall within the Management
System: Actively Listen; Make it Visual; Align the Targets; Act Decisively.
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Multi-Generation Product / Process Plan (MGPP) – A tool used to visually depict and
communicate a long-term direction by describing interim versions (generations) of a product
or process. It includes the vision, the product or process generation and the platforms and/
or technology required to deliver the vision. It is the action plan for achieving a defined future
state with goals set on a four month and 12 month timeline.
Non-Value-Added Activity – An activity that takes time, resources or space but does not add
value to a product or service. The activity may be necessary, but does not add value from the
customer’s perspective.
Operating System – One of the three sub-systems encompassed within CPS for Dealers that
are essential to continuous improvement (Operating, Cultural, Management). The Operating
System is focused on waste elimination using 6 Sigma and 6 Sigma lean tools. Six of the 15
Guiding Principles fall within the Operating System: Chase Waste; Pull; Make Value Flow; Drive
Standard Work; Even the Load; Validate Our Processes.
Overall Equipment Effectiveness (OEE) – The Total Productive Maintenance (TPM) measure
of how effectively equipment is being used. The objectives of OEE are to monitor and improve
performance of critical equipment, guide and monitor TPM implementation and to better
analyze capital needs.
Quick Changeover (QCO) – To shorten the time required to changeover a piece of equipment
from the last piece of a production lot to the first good piece of the next
production lot.
Pacemaker – The point in a value stream that initiates continuous flow. It is the start of the
communication flow. It sets the parameters of how the supply chain will flow and from it
downstream processes should flow to meet customer demand. It is the only point that is
scheduled in the value stream and is where material from upstream processes is pulled.
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.
Planned Inventory – Amount of inventory needed before each step in a process to keep the
process moving smoothly.
Process Improvement Dialogues (PID) – Regularly scheduled open and honest two-way
dialogues between leaders and their organizations focused on Continuous Improvement. They
are fact-based discussions on People, Quality, Velocity and Cost issues with a emphasis on
root cause problem solving.
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Process Maps – This is a diagram or flow chart that includes shapes and arrows, which depict
the process from beginning to end. Each shape represents an action within a process. These
maps demonstrate how the process will enable the dealer to improve performance relative to
best practices.
Process Owner – Person who has the ultimate responsibility for the performance of a process
in realizing its objectives measured by key process indicators, and has the authority and ability
to make necessary changes. They receive the solutions created by an improvement team (VST,
RIW, 6 Sigma), and are responsible for managing the improved process.
Production Kanban – A signal that specifies the kind and quantity of product an upstream
process may produce.
Scorecard – A graphical representation of the progress over time of some entity, such as the
dealership, a branch, functional area or work area toward some specified goal or goals.
Setup Time – The time required to changeover a piece of equipment from the last part of the
previous product to the first good part for the next product. Also referred to as “changeover time.”
Signal Kanban – An instruction to get, move, produce, order, or take some other activity with
production materials”.
Spaghetti Map – A tool used to document the movement of an employee while performing a
job. In an area that is improperly laid out the resulting drawing often ends up looking like a
“plate of spaghetti”. This involves either obtaining or sketching the layout of a work area and
mapping the employee movements in the area. This simple technique can also be used to
document the movement of material or information in a dealership.
Standard Work – The identification and documentation of the most efficient way of performing
a task using current tools, processes and thinking. It allows for the reduction of variation in
processes enabling the achievement of consistent safety, quality, velocity and cost.
Takt Time – Is the time allocated to produce, repair or recondition one part, product or unit of
service, based on the rate of sales, to meet customer requirements. Takt Time is calculated by
dividing the available timer per shift (hours, minutes or seconds) by the customer demand per
shift (in units).
Total Productive Maintenance (TPM) – This is a set of techniques to ensure every machine in a
production or service process is always able to perform its required tasks. It requires a defined
maintenance program for the entire life of equipment, standard procedures and checklists and
trained operators and maintenance personnel.
Validate Our Processes – Prove that processes and technology work before implementing them.
Value – The inherent worth of a product or service as judged by the customer and reflected in
its selling price and market demand.
Value-Added Activity – An activity that takes time, resources or space and adds value to a
product or service. The activity adds value from the customer’s perspective.
Value-Added Time – The time spent in value-added activity to produce a unit. Time spent for
those work elements that transform the product or deliver the service in a way for which the
customer is willing to pay.
Value Stream – All of the actions, value-added and non-value-added, required to bring a
product or service from order to delivery (starts with the customer, ends with the customer).
This includes actions to process information from the customer and actions to transform the
product or complete the service on its way to the customer.
Value Stream Map (VSM) – A simple diagram of every step involved in the material and
information flows needed to bring a product or service from order to delivery. A current state
VSM follows a product or service path from order to delivery to determine current conditions.
A future state VSM is a visual depiction of the target state and highlights opportunities for
improvement to achieve a higher level of PQVC performance at a specified future date.
Value Stream Transformation (VST) – An enabling process within the Caterpillar Production
System for Dealers. VST enables the 3 Sub-systems and the 15 Guiding Principles to deliver
sustainable improvements in People, Quality, Velocity and Cost performance.
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Value Stream Transformation (VST) Lifecycle – There are four stages to a VST Lifecycle.
Stabilize, Flow, Pull and Level. Stabilize implies general predictability and consistent
availability in terms of manpower, machine, material and method. Flow is the connecting
of independent capable and stable processes. Pull is where production is based on goods
consumed by customer processes. Level is achieved when production is carefully balanced for
mix and volume of the products being produced.
Visual Workplace – The placement of all tools, parts, production activities and indicators of
production system performance so anyone can see the status of the system at a glance. The
practice of making all standards, targets and actual conditions highly visible in the workplace
so that actual conditions versus requirements are visible to all involved.
Waste – Any activity that consumes resources but creates no value for the customer.
Waste Walk – A team activity that requires walking through a designated area with the
purpose of identifying and then eliminating waste in the area. Team members should all have
been trained on the 8 Wastes prior to the activity. Waste walks occur at the beginning of a
Value Stream Transformation, a Rapid Improvement Workshop and at regularly scheduled
intervals after the completion of the projects.
Withdrawal Kanban – A signal that specifies the kind and quantity of product that the
downstream process may withdraw.
Work In Process – Any material in various stages of completion throughout the facility. This
includes all material from raw material that has been released for initial processing up to
completely processed material waiting final acceptance as finished goods inventory.
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