Caterpillar, Inc: Consolidating Packaging Material Vendors to Reduce Supply Chain Costs

Date
2011-12-14Author
Davignon, Katie
DeBow, Danielle
Eldridge, Christine
Gay, Brad
Kim, Young Gul
Moon, Heeseung
Suen, Courtney
Wood, Daniel
Metadata
Show full item recordAbstract
Caterpillar purchases products and parts from over 1,000 suppliers worldwide. Suppliers
select packaging material vendors and pass related costs to Caterpillar. To consolidate this
vendor base, the team designed and implemented a combinatorial auction that allows for
single-product bids along with bids on bundles of products to receive quantity discounts. The
team developed a tool for selecting winning vendors through an integer program with
business constraints. The solution is estimated to provide an annual savings of $700K-$1M in
the Midwest region, and is scalable to be implemented globally.
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- ISYE Senior Design [36]