A Recommendation for Initial Parts Stock Quantities Will Now Be Included in Service Letters{1000, 7000, 7751, 7752} Caterpillar

Caterpillar Products: All

Introduction

A MAXIMUM INITIAL ORDER RECOMMENDATION will now be included within the body of Service Letters. The following information describes the basis for this recommendation and the proper use of this recommendation.

Basis for the Recommendation

The current Caterpillar practice holds the publication of Service Letters until enough parts are available to fill the EXPECTED INITIAL ORDERS.

EXPECTED INITIAL ORDERS are predicted by multiplying two variables. The first variable is the FORECASTED COMPLETION RATE. This is provided by the CPI Fix-It Team. The second variable is the STOCKING TARGET. The STOCKING TARGET is set by CPI Parts Authorizations for each type of Service Letter.

Use of the Recommendation

In the past, dealers have based initial orders on the affected population and historical data. In the future, the MAXIMUM INITIAL ORDER RECOMMENDATION will be provided to dealers in the Service Letters.

This recommendation represents the maximum quantity of parts that should be ordered by a dealer at the start of a Service Letter. The recommendation will be expressed as a percentage of the population that is covered by the Service Letter. The MAXIMUM INITIAL ORDER RECOMMENDATION is equal to the EXPECTED INITIAL ORDERS forecast that was described earlier.

Each dealer should limit the initial order to no more than the MAXIMUM INITIAL ORDER RECOMMENDATION unless the dealer needs a greater quantity of parts in order to perform known repairs. If a dealer orders parts in excess of the MAXIMUM INITIAL ORDER RECOMMENDATION, other dealers may be shorted of parts that are needed for repairs.

Illustration 1 below shows an example of the MAXIMUM INITIAL ORDER RECOMMENDATION that will be included in all Service Letters.

Illustration 1	g01397373

Multiplying the MAXIMUM INITIAL ORDER RECOMMENDATION by the entire population in the Service Letter equals a number that represents the quantity of parts that is available at Caterpillar distribution centers at the time of publication. Caterpillar will manage the supply of parts over the life of the Service Letter in order to fill orders from the dealers.

Once dealers have made the initial order based on the recommendation, dealers should manage successive orders over the life of the Service Letter in order to replenish parts that are consumed in repairs. A dealer should not order more parts if none of the initial parts have been consumed. If a dealer is certain of imminent service work that will consume more than the initial order, additional orders or larger orders can be placed.

Note: The ultimate responsibility for ordering the total number of parts that are needed to satisfy a Service Letter lies with the dealer.

The MAXIMUM INITIAL ORDER RECOMMENDATION is intended to provide several benefits.

• Availability of parts for repairs at all dealers should be improved by reducing unused parts stock at dealers around the world.

• Fewer parts will remain in dealer inventories at the completion of a Service Letter.

• The distribution of parts stock will be optimized. This will result in faster publication of Service Letters.

• The FORECASTED COMPLETION RATE from the CPI Fix-It Team will be utilized better throughout the distribution channel.

The MAXIMUM INITIAL ORDER RECOMMENDATION should begin to appear in Service Letters in the near future.

Please distribute this message to all appropriate dealer personnel.