Question

What were the most important differences between Navistar and Caterpillar's inventory systems and how were they managed differently?

Answer 1

Navistar and Caterpillar's inventory systems are created by these companies to manage inventory. Difference between them is –

Navistar use electronic tool to manage their huge inventory and control costs. They use following three methods to control their inventory–

• Ship to line sequence - This makes use of JIT methodology. This is used for their large and expensive stock.
• Ship to line set – This is like reorder point methodology. This is used for their smaller and inexpensive parts.
• Blanket Purchase orders – This involves entering into annual contracts or giving particular release dates.

These methods help the company to reduce their inventories which decreases their inventory holding costs.

Caterpillar uses system-wide inventory to manage their huge inventory along with fast delivery of items. They used 15 world-wide distribution centers that help in giving system-wide visibility on part availability. They ensured the delivery of items within the 48 hours otherwise they will give part for the free. This inventory system helps them in managing the inventory along with the faster delivery. This system does not make use of JIT or reorder point methods.

These inventory systems can be managed by reducing their costs associated with inventory like holding cost, ordering costs and still delivering fast as per the customer demands so that companies can have competitive advantage.