But it is a great pleasure to introduce
to you tonight the caterpillar team and.

In my first semester as a visiting
assistant professor and

I asked by I am delighted
to have the supports unity.

So I would like to say if you
were the eyes of a Great for

hard work that they did
throughout the semester.

So when the project started your theory
that the problem was to reduce the calls

for Caterpillar because all they knew
that what place they took the team took

sort of a nonstandard approach to this and
study Torah law because of the volatility

and I should mention that come natural
options is not something that is typically

standards really taught in our
classes at the undergraduate level.

So they actually had to read papers
they did have to do research which was

impressive in my opinion and
the project also

was pretty challenging because it didn't
involve just engineering skills but

also involved skills they actually
showed a great level of effort in

reaching out to the suppliers understand
their packaging material needs and

also had the merest calls to
the vendors to understand their product

offerings as well as collecting the bits
when they were executing the auction.

So that's again something I don't think
we see in our school projects because.

They really have to experience that
real life I've heard of going through

the suppliers and the vendors It was truly
a consulting experience and on top of that

building get all using their engineering
skills building an optimization solution

to help Caterpillar to select a winning
vent Wenders and their clients Caterpillar

is also pretty happy about their results
and they are having to turn the things

currently to how to proceed in proceeding
will be limitation and I should like not.

They had great support from
their clients in particular

who was actually a former finalist.

So they were well trained.

And so last but not least I should say
that they were all extremely pleasant

to work with and
they had outstanding work.

So which made my life very
enjoyable further and

I will let the present
to their work too so

that you can share their excitement
to think we were kind of mustard

to consolidate packaging material vendors
in order to reduce supply chain costs

and I'll be presenting
a lot with the other son.

And we're also joined by
the rest of our young men and

Bragg as well as our counsel
her contact from Group

an opportunity to thank you for
all of their help.

Throughout the semester.

Here's a quick look at
what's a come first.

We will introduce you to
Caterpillar as a company and

the vendor consolidation problem that
they are facing a common option.

As well as an energy programming model
to solve this problem methodology.

We have developed and

then the consolidation tool as well
as a vendor which is available for

counselor to use in the future through
the use of these tools have arrived and

expected annual savings of seven hundred
thousand to one million dollars.

With Caterpillar and

they are the world's largest manufacturer
of construction and mining equipment.

Currently holds the spot on
the Fortune five hundred and

as you can see from the map.

They have products in over five
hundred different locations.

Here's a quick look out Caterpillar
supplier vendor network Caterpillar

has over one thousand suppliers from which
they were finished packaged goods and

each supplier is responsible for
selecting his own vendor

packaging materials that will protect
the products as they are shipped

the cost of the packaging materials
are passed from vendor to supplier and

ultimately incurred by Caterpillar
our vendor consolidation tool and

then we will consolidate the vendor
base in order to reduce costs for

Caterpillar because
Caterpillar is currently say

spending one point seven million
dollars annually in the Midwest region.

The scope of our project was in
the Midwest region packaging division

Caterpillar headquarters which is located
in Peoria Illinois as well as nine

suppliers which are shown by the colored
circles and thirty three vendors which

are shown by the stars we collected data
on over one hundred eighty four products

from these suppliers and then there's
a lot as there are first methodology.

So when we first approached this problem
we discovered that there are several

different ways that we could
go about solving the problem.

This inner protest that we first
considered was just a simple cost

minimisation model in which we would
collect on different products and

then how our model tell
us which way we chose to

go with a comment because with the current
Oreo auction vendors are able to provide

proper price discounts on products as well
as their bids on individual products.

So the first data.

So we were fires to collect
all of this data and

see what types of materials
purchasing in the past.

When aggregated the supplier demand.

And use these products to
create bundles of products so

that the vendors can bid on
that in the comments or option.

We use these bundles in our vendor
bidding tool which are created

which is a user friendly interface for
vendors to submit their bids and

then these bids are then
are corporate IT into our model and

then that tells us which
vendors will be selected.

So let's say we've got three products
just as a simple approach to an option.

So I just a regular option vendors would
be submitting bids on each individual item

by themselves.

So either on products or cities only
three bands would be able to visit.

However in Europe on the tour option
design then this number of beds increases.

So while on the tour our options have
been shown to increase cost savings.

It also increases the number
of bits that can be collected.

So as you can see from this formula you
can see that the number of this they

can be placed on three products is seven.

However in our product or

project we had one hundred eighty
four different project products.

So this is expanded as you can see in the
number of possible bit that we did receive

on packaging materials is
increased drastically so

we had to find a way to reduce the number
of it so the first step in doing so

was to organize our products we organize
products and if I mean pins which you can

see at the top of the slide these brands
are core products generic pallet V.C.

I would stands for vapor corrosive
inhibitors which are industry term and

supplemental materials these bins were
then further divided into bins for

further classification and
to help us in the bundling process.

There was no global identification system
that was currently in place in order to

identify all these different products so
we created product ID numbers for

each line item so that we could refer
to them throughout the project.

These are been three years along
with volume statuses organized

products into different groups at the top
of the five you can see the five bins and

their respective sub bins and the number
of products that are contained within

it was determined whether or
not a product was high or

low volume status based on whether
the demand of that individual.

It was greater than or less than
the average demand of the resided.

So the bottom line here you
can see the vines are tracks.

So each product was placed
into one of these four groups.

So for example we had a product
that was high volume status and

was in one of a particular bed.

It would residing Group H. one.

So let's take a look at the Corrugated
example which has two sub ins of box and

at the table of the top of the slide
you can see the different products that

are contained within each cell then
a number of those products that are in

high or low volumes that

these four groups are combined to
satisfy a supplier demanding bundles and

bundles at a bundle consists of at least
one group of products in the first

bundles that example you can see that
each group is treated as its own bundle.

So each of these groups is
that on individual a so

high walk Slovaks high path and low power.

However in the second example you
can see that two of these groups and

high box were combined into one bundle and

this would provide vendors the opportunity
to provide a price discount on this

bundle of products as opposed
to an individual group.

After creating these groups
in these bundles and

bottles that we were able to reduce the
total number of beds I could be placed on

products from as you can see the large
number of cyclists and screen only seventy

six this we expanded this to all five
bins and we were able to reduce the total

number of bits that could be submitted on
these products to two hundred thirty five.

Now Christine is going to walk us
through the vendor in order to click on

individual products we have been
debating since all thirty three vendors

in our project and after doing so we found
that many of the Benders had questions

about the nature of the comment or
option as well as how to use the tool and

we use this as an opportunity whether it's
conference to answer all these questions

in your body top left in order for
the bidding process included.

And the reason for that price is

first company next

right here description products right

here product right

price and then they're

not just there and.

Otherwise they don't

want to go back to that but

this is an auction process.

And has been built and all the suppliers
man has not been another of it

and they will not be around.

Betty and they will employ all
the information that they gathered from

the documentation model in order
to outwit the winning bidders and

comment for a large process
over the course of our project

one round of this option process and
now we're going to work as they're

out which is our second mother dollars so
I

start the process to vendors and

since there are costs

by X I J where

transportation costs.

We also have to soft constraints are all

over kind of the first of these cost

factor percentage over cycle

to capture the relationship between higher

cost factor and what it costs

in order to kind of first get here.

And one two three zero is

not recyclable at all that has the highest
percentage of recyclable material

and higher percent discount

from their current vendor vendor for
example if one supplier has

a percent discount for
necessary in order to switch vendors

everyone drives five percent
as necessary discount

and has a strong relationship
between the second vendor

five the first two
constraints are fine and

they were in place to make sure that
you should at least one time and

more than once we also include
additional business constraints which

is to ensure that required
service level constraints

are these First and
Third Street which allows

the maximum number of vendors that
can be chosen by the model next step.

This option out of

which contained information.

Consolidation consolidation.

Where Caterpillar can adjust the various
parameters as they see fit for

example they could adjust the vendor
quality level the vendor P.P.L.

as well as the number of vendors to be
included in the solution here is where

Caterpillar can also choose to include or
not include the favor ability and

recyclability constraints as well as set
the weights on those constraints upon

pricing the run model by the vendor

consolidation to output the cost of the
new solution as well as the base cost and

the solution and the percentage
savings that this represents.

So for example It also displays the vendor
bundle supplier at least in shows and

so in this particular
solution vendor twenty five

will provide a bundle
sixteen to suppliers seven

as Kate discussed earlier there are nine
suppliers in the scope of our project who

currently spend one point seven million
dollars annually all packaging materials.

There are thirty three vineyards
under these nine suppliers and

of these thirty three of these thirty
three miners eight of them are able to

provide this to the vendor bidding tool we
found it necessary to submit to construct

an additional eight markets in
order to fully me supply or demand.

Please know that these were constructed
using historical prices and

the forty six percent of the product ID
codes remap their actual vendor builds

our solutions will we read through several
different scenarios in our solutions

show savings anywhere from seven
hundred thousand one million dollars

annually which represents a forty
to fifty percent cost reduction for

Caterpillar and on average these solutions
have six to seven recommended vendors.

It will also be necessary for
Caterpillar to purchase a one time

Express optimization license which is in
the range of one hundred thousand dollars

as I mentioned earlier we completed
several different scenarios and

these are three of the scenarios.

The first scenario allows for
a single item from the vendor builds and

provides a savings of six hundred
ninety eight thousand dollars and

a forty percent call for adoption and
reduces the vendor base to Sicko.

The second scenario.

Also builds on the first and allows first
single item bills from the markers and

this accounts for assuming the existing.

Vendor prices could be arm throughout
the entire vendor base and

this represents a savings
of fifty eight percent.

And eighteen percent of this was a huge
by utilizing the Commodore options and

there are a number of recommended vendor
of the six and the various Aleutian also

builds on the first solution includes the
business constraints of favor ability and

recyclability.

And reduces the estimated savings to six
hundred fifty nine thousand dollars and

has nine suppliers or nine vendors in the
recommended solution who we have several

recommendations for Caterpillar to use
on further versions of this project and

we're going to recommend that
Caterpillar have a well defined supplier

dispersions news program which will still
take the data collection process and

we're also going to recommend
the caterpillar all training sessions

with the vendors which will aid in
the understanding of the comet or

options up Caterpillar may also
find it beneficial to utilize

the sourcing tool which is a live option
to all which will increase the competitive

nature of the business among others
who caterpillar would also need to

reevaluate versus They see that increasing
or decreasing demand after one year.

Who is to interview the objectives
of our project were to

reduce the number of vendors in
the caterpillar supply chain as well as

provide a cost savings opportunity and we
tired of this problem not using a contra

option design implementation as well as
an intern program and the delivery was to

Caterpillar of intervening to as well
as of the consolidation to all and

together these provide annual savings of
seven hundred thousand dollars to one

million and with fully expect this
solution to be repeatable in other areas

of the globe who this concludes our
presentation welcome any questions.

This time.
And who.

To a to.

A long period of time contact
with them on a daily basis.

So we are working with them and trying

to our relationship or if we were

able to work with some of our
contacts there conference.

Everything

I could

in as.