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Why Caterpillar Considers Google a Major Competitor

Posted by Tom Lombardo | Fri, Aug 21, 2015 @ 07:00 AM

The heavy equipment industry seems to be working feverishly to overcome an economic recovery that keeps hitting snags:

  • China devalued the yuan to pump up demand for her exports, hoping the move would arrest a stock market slide that’s hammering regular workers and international investors alike.
  • In July, OPEC increased its oil production to the highest level in three years, driving the price down to a six-year low.
  • The dollar just keeps getting stronger (too much of a good thing), shrinking our Federal deficit  to what it was before the taxpayers bailed out Wall Street but also making global sales harder.

Caterpillar’s second quarter profits fell 29% because of these international shenanigans.

Heavy-Equipment-Caterpillar

 

CEO Doug Oberhelman told Equipment World, “Currency impacts from a stronger U.S. dollar are causing sales in many countries to translate into fewer dollars than we initially expected.”

Since many heavy equipment dealers participate in the international market for pre-owned machines, you might be feeling the impact of some of this, too.

Fortunately, Caterpillar gives us some solid insight into how owners and managers might handle the situation for the remainder of this year and into the next.

Big Iron Meets Silicon

Over the last year Caterpillar has made some fascinating moves that have more to do with silicon than big iron.

The big iron’s a given – advances in hydraulics have enabled amazing capabilities and next-generation engine technologies will not only stride past Tier 5 requirements but will provide fuel efficiencies that can drop to the bottom line. Deere, Case and Komatsu are completely on top of these advances, too, although Caterpillar is the only one so far who will pay you if your fuel consumption exceeds what they tell you to expect.

Heavy-Equipment-GoogleSo Caterpillar has concluded that its competitive advantage has more to do with helping contractors manage their fleets cost-efficiently.

Their partnerships reveal their thinking.

They saw the Google self-driving car threat five years ago. So before Google became the company that took over the construction site, Caterpillar partnered with Trimble Control Technologies.

Together they developed the AccuGrade system, which uses GPS devices like the ones attached to this bulldozer to accurately guide earth movers without surveying delays:

Heavy-Equipment-GPS

They also bought a minority interest in Uptake, which makes sensors that are installed in the equipment to take continuous measurements of wear or usage.  

And they partnered with Modustri, a company that makes ultrasonic inspection hardware.

Those devices collect vast amounts of data on every system within a piece of equipment and transmit it to a software application that makes sense of it.

Caterpillar believes that the future of heavy equipment sales rests in that software.

An Ultrasonic Crystal Ball

Caterpillar sees nothing but upside.

Through another partnership with Tremble they’ve already developed significant internal software resources, known as “Product Link” and “Vision Link,” to handle the vast amounts of data produced by the 300,000 wired machines they have worldwide already.

Fleet owners see nothing but upside, too.

They can track machines at far-flung job sites from a single office and proactively plan maintenance so it’s done when it’s needed and so parts are replaced just before the end of their useful life. They can identify operators who need additional training. They can even improve their best practices company-wide by analyzing the telemetrics from across their whole business.

Caterpillar builds the new sensors into all its machines and activates them under a separate user agreement. Machines manufactured in the last decade can be retrofitted.

And usually Caterpillar also knows what’s going on with their customer’s machines, so they can proactively move replacement parts and/or the talent to install them in anticipation of their customer’s needs.

Not a Machine – A Solution

light_bulbsIf it’s starting to sound like Caterpillar is thinking of selling a system as opposed to a single machine, then you’re seeing the same future they do. Caterpillar intends to use software to become an integral part of every customer’s business processes.

Caterpillar’s vice president of construction and infrastructure industries, Paolo Fellin, told Equipment World, “People used to ask us about dig depth and lift capacity. Now it’s: ‘How can you help me set up the jobsite so it is more productive? How do I know if my machines are working at full capacity? How do I know if an operator is using my machine well?’ We’ve gone from a customer wanting a machine to a customer wanting a solution.”

They’re even helping their customers make money through their partnership with Yard Club, the peer-to-peer equipment rental service. It enables owners to rent machines that they might otherwise leave idle.

And by creating opportunities for those renters – who may often be subcontractors on the make – Caterpillar will almost certainly establish a long-term relationship with them even before you sell them their first CAT.

The sensors and Product Link monitoring even take some of the risk out of renting the equipment because if it’s mishandled it will let the owner know. Imagine a bulldozer that can speak for itself and complain when a driver repeatedly pops it out of gear!

The Business Case for Mitigating Risk

That future is now, and there’s a good reason Caterpillar has focused on using software for risk mitigation throughout its business.

Mitigating risk increases profitability, pure and simple, and in the same way an equipment owner would invest in telematics to help eliminate unexpected failures and the accidents and slow-downs they cause, you might consider investing in technology that can eliminate some of the risk in your cash flow.

Most of our heavy equipment dealers receive up to seventy percent of their income in the form of checks. There’s no reason for you to accept any risk to something that critical. We’ve been guaranteeing checks for businesses like yours for over thirty years, and we offer COD and Multiple Check services that can help you close sales as well.

If you’re focused on the future like Caterpillar, make sure nothing holds you back. Learn how here.

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Topics: Heavy Equipment

Written by Tom Lombardo