Ford, Caterpillar Ink Partnership Deal with SAP

Initiative aimed at developing service parts-management solution

Tempe, AZ  August 19, 2002  Ford Motor Co. and Caterpillar have formed a partnership with German enterprise application provider SAP to develop a service parts supply chain software solution.

The jointly-developed solution is intended to facilitate increased service levels of spare parts and reduced logistics costs, incorporating mySAP Supply Chain Management (mySAP SCM) and mySAP Customer Relationship Management (mySAP CRM) software.

The service and aftermarket parts is a $200 billion business in the auto industry, and late last year Caterpillar and Ford entered into a contractual software alliance to create a next-generation service parts-management software solution. According to technology consultancy AMR Research, the two companies initially sought to develop the solution using their existing information technology systems. "However, the 25-year-old systems used to manage the business were just not up to the task," AMR reported in a recent research alert on the alliance.

The partners then sought an outside application that could provide the necessary speed and information-handling capability required of the system. "SAP had some existing capability, but not near what the alliance required," AMR wrote. "For SAP, the keys to its win were its commitment to developing the software, its ability to scale, its modular deployment capability and its global reach."

The relationship between Caterpillar, Ford and SAP, financial details of which were not released, encompasses deployment of existing mySAP.com solutions, joint development of requirements unique to service parts logistics and the establishment of strategic product direction. The initiative will leverage Ford and Caterpillar's know-how and processes, gained from decades of managing large global parts networks.

"For the parties involved, the project and final product will be daunting to say the least because of its scale and multi-company direction," commented AMR. "Ford and Caterpillar are rolling the dice that SAP can deliver the capability to shore up their existing limitations through development based on customer relationship management and supply chain management."

Ford and Caterpillar will both use mySAP SCM and mySAP CRM as a foundation to deploy a logistics solution that will allow dealers to have real-time visibility to global service parts inventory and the status of customer orders. System capability also will include visibility from point of demand to the source of supply. Key aspects of the joint development effort are the enhancement of mySAP SCM to add the planning and global sourcing of service parts and a warehouse logistics management system optimized for high volumes and maximum efficiency.

In addition to further developing the capabilities of mySAP.com, objectives of the initiative include supporting the service parts logistics needs of global companies with diverse product lines, speeding service parts to market, increasing customer satisfaction and reducing logistics costs.

The partners said the initiative primarily will benefit Ford vehicle owners, Caterpillar's global distribution network and external clients served by Caterpillar Logistics Services, a wholly owned subsidiary of Caterpillar Inc.

But the big winner could be SAP, according to AMR. "This win positions SAP to take the lead in developing the leading applications required to handle the automotive services network," the consultancy wrote. "The development by SAP will step users up to modern and powerful technology capable of managing the demands of the competitive services business. The successful completion of the development also significantly beefs up the overall SAP package for its automotive installed base."

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