Caterpillar to link suppliers

Middleware is key to collaboration plan

Caterpillar Inc. is launching a major manufacturing collaboration initiative, with the realization that the project will require as much focus on new middleware as it does on supply chain management and business-to-business software.

The $20.2 billion maker of construction and mining equipment, natural gas and diesel engines, and industrial gas turbines plans to use Dallas-based i2 Technologies Inc.'s supply chain applications to share information with its suppliers as part of an effort to reduce inventories and shorten manufacturing times.

But Michael Hackerson, director of e-business at Peoria, Ill.-based Caterpillar, said the most rigorous work will involve tying hundreds of suppliers into the new system.

"You need a lot of middleware and hardware to link these companies together," Hackerson said. "Everyone's working on different systems, and you can't assume any of them can just plug into what we're building."

That's where IBM enters the equation. Its professional services division is being brought into the Caterpillar project to handle systems integration. According to Bruce Anderson, managing principal for industrial sector consulting at IBM, supply chain collaboration marks a huge opportunity for services firms.

"When you choose to collaborate, you cannot escape the fact that you've now changed the business process," he said. "Different people have to be notified and different actions triggered, and you have to be able to describe those processes to the middleware so it can send things to the right place."

In Caterpillar's case, middleware functions will be handled by IBM's WebSphere application server. Anderson said such projects also may prompt IBM to change the way WebSphere is priced and designed.

The company is considering pay-as-you-go pricing methods, such as usage-based or a la carte pricing, he said. It might also develop a limited-functionality version of the application server for companies that need only some of the basic features of the technology.

"We're going to have to be flexible, because there's no one-size-fits-all way to set up a collaborative network," Anderson said.

Caterpillar plans to start linking suppliers to its network by the end of the year, and executives at the company said they believe that the integration work is a necessary precursor to lowering its manufacturing costs.

"We've already knocked down the prices we pay to our suppliers as much as possible," Hackerson said. "We've got to come up with a better way of doing business for both sides if we want to eliminate costs down the road."

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