Caterpillar Industrial Products now OEM Solutions Group: taking systems and services to other OEMs; following the Cat engine model

Diesel Progress North American Edition, March, 2004 by Mike Osenga

Reflecting Caterpillar Inc.'s growing interest in selling services and systems to other equipment manufacturers, Caterpillar Industrial Products inc. has been re named the OEM Solutions Group. OEM Solutions is part of the Component Products & Control Systems Division under Chris Schena, vice president of the division.

Caterpillar's official efforts to sell components outside the company began in 1965, when Caterpillar Component Sales was created. As part of the industrial engine division, Component Sales was responsible for the development and sales of parts, components and services to other manufacturers.

In 1976, Component Sales evolved into Caterpillar Industrial Products Inc. (CIPI), a wholly owned subsidiary responsible for the marketing of products and services from any Caterpillar facility to OEMs worldwide. As of Jan. 1, 2004, CIPI became the OEM Solutions Group.

In essence, OEM Solutions is the external sales and marketing arm for a variety of Caterpillar business units and as such can take just about anything manufactured or sourced by Caterpillar and sell it to other manufacturers, either as complete systems, individual components, or just about any combination in between.

"We're kind of a facilitator," said John H. Phipps, general manager, OEM Solutions Group. "In some cases there are customers we will sell directly to, in other cases we Will serve as a technology integration group for several of our divisions and especially for our engine division."

"Deep integration" is Caterpillar's term for at least part of the charter of the new Caterpillar OEM Solutions Group. Phipps said the mission of the new group is to develop long term relationships in key markets with equipment manufacturers that value deep integration with Caterpillar technologies.

"We're looking for companies that want to build a total product where they are willing to integrate our technology and want a strategic partnership with Caterpillar and also value the distribution we can bring to the relationship," Phipps said.

"The beauty of this division is that all of the resources already exist for our internal customers. Our job is to package that in a way that's beneficial to external customers that either can't afford those resources, or that can get to their solution far more cost effectively by leveraging off what we can offer versus dealing with a number of different independent companies."

In setting up the expanded and new OEM Solutions Group, Phipps said he had to look no further than Caterpillar's engine operations to establish a model.

"We have a great model in our engine division. All we have to do is follow their lead, developed there over 30 years, in developing sales, marketing and support infrastructure, as well as the relationship with dealers. We don't have to reinvent the wheel in terms of how we go to market."

Overall, the global on- and off-highway vehicle markets are the target for this new Caterpillar organization. More specifically within that, Phipps said OEM Solutions is focused on a number of business segments: agriculture; rail/ locomotive; oil and gas; mining and aggregates; material handling mid forestry equipment; and waste equipment.

The portfolio available to OEM Solutions is impressive and includes complete drivetrains (engines-transmissions-axles), drivetrain components, electronic controls, hydraulic and electrohydraulic components and systems, and cooling systems.

There are also the undercarriage track systems and partial machines that OEM Solutions' predecessor organizations had been well known for, as well as operator cabs, precision metal processes, custom gears and meted face seals.

"In the short term," Phipps said, "we're trying to leverage off of our existing product lines and existing volumes as the best way to work with an OEM. But longer term, we're saying why can't Caterpillar be truly an integrated supplier to OEMs serving these markets, because we've got all the pieces."

As always, when an equipment manufacturer goes to market with its components, the inevitable question is "who can they sell to and who can't they sell to?"

"We're looking for OEMs that would value a strategic relationship with Caterpillar. We look at what engine division has done and pick the markets, OEMs and customers that want Cat," Phipps said. "We want to get good at doing that and not arguing about whether we should or shouldn't have a relationship with a particular OEM.

"We are focusing on a smaller number of OEMs in industries that align in markets where the Cat brand is known," Phipps added. "At the end of the day, we may only end up with 15 or 20 major relationships"

It is from that point, Phipps said, that Caterpillar's global dealer network becomes part of the OEM Solutions program in dealing with equipment manufacturers with volumes requiring more local attention.

"Again," Phipps said, "it is the same logic as engine division, there are certain manufacturers that, in the end, are likely better served on a regional basis by the local Cat dealer.