Cummins



|Cummins Group, Opre3320.501 Project |

|Cummins |

|A Global Supply Chain Leader |

| |

|Harold Allen, Adam Evans, Greg Moldovan and Toliver Noey |

|12/4/2013 |

Executive Summary

Cummins was formed by Clessie Lyle Cummins, who saw the market potential for the diesel engine. He wanted to “make people’s lives better by unleashing the power of Cummins.” He did so by “being the first to market with the best products.” The massive highway projects sponsored by the United States government boomed business and enabled Cummins to expand internationally into the company that it is today. It currently employs 46,000 people and makes a net income of $1.65 Billion.

Cummins is split into 4 departments: Engine, Power Generation, Components Business, and Distribution. The engine segment focuses on research and development along with production of engines. Power generation is comprised of five business units that include: commercial products, alternators, commercial projects, power electronics and consumer. The component segment provides the parts that make up Cummins’ engines. All of these parts are moved by the Cummins distribution segment.

Orders for products can be done by phone to a Cummins representative, by fax to a customer assistance center, or by an electronic data interchange (EDI). Cummins uses a web based procurement system by Thomas Industrial Network/ Ariba Solution, called Buy It Now. Using this system, Cummins purchases parts or raw goods from suppliers who shipped them by land, sea, and rail to regional warehouses near manufacturing plants, where they are stored for a short time as inventory.

After the good is manufactured it is shipped Just-In-Time to Original Equipment Manufacturers (OEMs) such as Ford, as finished goods, as well as other distribution channels where they sell just the components as parts. Cummins boasts that they can manufacture and deliver any out of stock product to you within 10 days. This is made possible by their unique information system known as “Frontier” which tracks products from order to delivery.

This "Frontier" system coupled with Cummins' reliable, and economically viable engines have given them a reputation that is hard matched. Products are received on time and are well made. Still, Cummins has competitors such as Caterpillar Inc., Detroit Diesel Corporation, and Navistar International Corporation to worry about. The main challenge for Cummins is to keep up with Environmental Protection Agency (EPA) standards. While Cummins has done a good job reducing emissions, there are constantly new regulations to reduce the harm on the environment.

Cummins owes part of its success as a company to their world class supply chain. Although Cummins does such a good job, a possible improvement could be to cut the warehousing cost of suppliers by using a Just In Time system.

Company and Division

Cummins is a fortune 500 company that is headquartered in Columbus, Indiana. It was founded in 1919 by Clessie Lyle Cummins, from whom its name is derived. Clessie Cummins saw the potential for the Diesel engine and created the first diesel automobile to attract investors. W. G. Irwin was enamored with the engine as much as Clessie Cummins was and provided huge sums of cash to break speed and endurance records. These records lead to favorable publicity, and a favorable foothold in the trucking industry (Cummins History).

The massive U.S. highway project of the 1950s was the catalyst Cummins needed. The machines making the highways were powered by Cummins engines, as well as the trucks driving on them. Sales topped $100 Million, and the country expanded abroad, opening its first foreign manufacturing in Scotland (Cummins History). Today, Cummins has more than 5,000 facilities in 197 countries and territories. It currently employs 46,000 people and makes a net income of $1.65 Billion (Fact Sheet).

Part of Cummins success comes from its presence in the expanding markets of China, Brazil, and India. The other is due to the fact that they have divided their company into four parts: Engine, Power Generation, Components Business, and Distribution.

The engine segment of Cummins produces diesel and natural gas powered engines for trucks, busses, mining, marine, rail, and recreational vehicles. The size of these engines varies from 1.4 to 91 L displacement and from 31 to 3,500 horse power (Schaefer). The Engine segment accounts for about half of total revenue.

The power generation segment handles components and design for most power systems. “The Power Generation segment consists of five business units that include: commercial products, alternators, commercial projects, power electronics and consumer” (Schaefer). New technologies are constantly being explored by this segment. Cummins uses both its internal R&D program as well as finding partners to outsource some of the research cost.

The component segment provides the parts that make up Cummins’ engines. The Components are split into filtration, turbo technologies, emission solutions, and fuel systems. Components amount to 18% of revenues (Schaefer). Filtration includes fuel, hydraulic, and lube for the engines. Turbo technologies primarily serve North America, Europe and Asia. It “designs manufactures and markets” turbo parts for engines. Cummins is dedicated to meet new emission standards. The emission solutions section has the responsibility to design and manufacture the parts involved with passing emission tests. The fuel systems segment works on new and replacement fuel systems for Cummins’ trucks (Schaefer).

Cummins also has a distribution segment that “consists of 19 company-owned and 18 joint venture distributors that service and distribute the full range of Cummins products and services to end-users” (Schaefer). Full range of services includes maintenance and other services “catered to specific client needs” (Schaefer).

Vision/Mission

Vision: “Making people’s lives better by unleashing the power of Cummins.”

Mission: “Unleash the Power of Cummins by:

Motivating people to act like owners, working together.

Exceeding customer expectations by always being the first to market with the best products.

Partnering with our customers to make sure they succeed.

Demanding that everything we do leads to a cleaner, healthier, safer environment.

Creating wealth for all stakeholders. “

Organizational Chart

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Major customers

“At the start of 2010, Cummins had 56 joint ventures in 18 countries. Some of these partnerships include deals with Komatsu, Scania, Tata, Dongfeng Motors, Foton Motors and Brunswick-Mercury Marine. Cummins also has an ownership stake in 85 percent of their global distribution network, providing a steady profit stream for the company.” (Schaefer)

“In 2009, Caterpillar announced their exit from the on-highway truck engine market to focus on off-highway heavy-duty trucks. Although the on-highway market represented only six percent of Caterpillar engine sales, the move positively affects Cummins and their position within the market. The move is thought to be related to Caterpillar’s lack of commitment to meet 2010 EPA emissions standards. Caterpillar is a key competitor of Cummins in the on- highway truck engine market, and their exit reiterates Cummins’ superior technological lead in emissions standards and fuel economy” (Schaefer).

Cummins sells their engines and components to Original Equipment Manufacturers (OEMs) such as Ford, as finished goods, as well as other distribution channels where they sell just the components as parts. They make “long-standing relationships with many of the leading manufacturers in the markets [they] serve, including PACCAR Inc., International Truck and Engine Corporation (Navistar International Corporation), Chrysler LLC, Volvo AB, Daimler Trucks North America (formerly Freightliner), Ford Motor Company, Case New Holland, Komatsu, and Volkswagen.” They are a part of a network of over 500 company owned and independent distributors, with about 5,200 different dealer locations (CMI 10-Q).

Order Processing

One can find Cummins products in a multitude of ways because of its vast distribution network. Cummins sells its engines in final goods, as well as just the engine. Orders for parts can be done by phone to a Cummins representative, by fax to a customer assistance center, or by an electronic data interchange (EDI) (Cummins Filtration). EDI’s can automatically schedule orders when your inventory runs low. If there is no value added network (VAN) in place, Cummins also accepts filled out order forms over the internet. Cummins also has a catalog from which you can order from in many different languages. If an item is out of stock, Cummins can manufacture and ship that item to anywhere in the world within 10 days (Quickserve).

“All orders will include:

• Cummins Bulletin Number and Quantity (ask for assistance from the Cummins Customer Service representative if the bulletin number can't be determined. Be sure to provide your engine serial number and the type of Publication you are requesting.)

• Complete shipping address.

• Credit Card information (No COD shipments or personal checks) Be sure you provide:

o Credit Card type

o Credit Card number and expiration date

o Full Name as written on card” (Quickserve)

Customer Service Metric

Cummins prides itself to be able to provide service to any part of the world. Their customer support is handled in central call stations based on regions. Their staff is required to be friendly as well as knowledgeable. If they themselves don’t know the answer, they will be able to direct you to someone who does know. Cummins uses six-sigma training to provide quality. Six-sigma is paired with their own 5S techniques to continuously improve customer service (Cummins Service and Support). 5S includes the sorting and discarding of unwanted items, straightening items so that they may be clearly identified and stored, sweep and clean work areas, standardize processes and self discipline so that one may carry out their task.

Procurement

World class organizations like Cummins usually have world class procurement departments or purchasing organizations. Cummins has 7 business segment purchasing organizations and 3 regional purchasing organizations located in Asia, Europe and India:

1. Cummins Emission Solutions Purchasing

2. Cummins Engine Business Purchasing

3. Cummins Filtration Purchasing

4. Cummins Fuel Systems Purchasing

5. Cummins Generator Technologies Purchasing

6. Cummins Power Generation Purchasing

7. Cummins Turbo Technologies Purchasing

8. Cummins East Asia International Purchasing Office (IPO)

9. Cummins European International Purchasing Office (IPO)

10. Cummins India Purchasing International Purchasing Office (IPO)

Cummins uses a web based procurement system by Thomas Industrial Network/ Ariba Solution, called Buy It Now. Ariba offers Cummins a comprehensive and flexible procurement platform. Since Thomas Industrial Network is a subsidiary of SAP, they can offer companies like Cummins a complete procurement system with efficient integration into their current ERP system.

“Ariba offers a spend management solution for company’s purchasing requirements. Customers are offered a large number of supplier catalogs to purchase from. The number of vendors with catalogs on the Ariba Supplier Network is now over 60,000 with in excess of 80 million items. Two million purchase orders are sent to these vendors each month at a value of over $8 billion.

The Ariba software allows a company to automate, monitor, and control the complete purchasing life cycle from requisition to payment. Users can create requisitions that are approved according to pre-configured business rules that each company decides upon. Purchase orders can be automatically generated and sent directly to suppliers, while order acknowledgements and ship notices are sent back to the original requestor.

The invoicing process is simple for the suppliers who can create an invoice directly from the requestors purchase order. The invoices are pre-matched with the purchase order line items and any receiving information, so that the requestor reconcile and pay without delay” (Ariba).

Inventory

The basic inventory strategy used by Cummins falls right in line with their six-sigma manufacturing perspective. Their inventory strategy is to focus on buffering against uncertainty. One of the major aspects of this strategy is related to something called commodity swap contracts.

“We are exposed to fluctuations in commodity prices due to contractual agreements with component suppliers.  In order to protect ourselves against future price volatility and, consequently, fluctuations in gross margins, we periodically enter into commodity swap contracts with designated banks to fix the cost of certain raw material purchases with the objective of minimizing changes in inventory cost due to market price fluctuation.” (Cummins Filed Form 10-Q).

By reducing the uncertainty of the supply of raw materials, Cummins is making it possible to make more accurate analysis regarding safety stock and things of that nature, thus reducing the total carrying cost of inventory.

Another aspect of their inventory strategy is related to where their inventory is held or their geographical specialization. A quick job search on the internet will reveal that Cummins has a lot of warehousing positions available near their manufacturing plants. These warehousing facilities are mostly for parts warehousing for good coming in from the supplier. The use of the facilities to store finished product are most likely kept to a minimum if used at all. The reason for this is the size and weight of most of their finished product. The majority of these large engines and power generators are most likely not held for long until the customer receives them making them closer to Just in Time than the rest of the Cummins supply chain. The carrying cost of these items is very high. The orders are made from large businesses through the distributors, and then manufacturing begins on finished product, while projections are made and items are stored where necessary to maintain relationships with the suppliers. In conclusion, the types of inventory stocked are mostly parts. In this Assemble to Order environment, very little WIP or finished product will be stocked.

Manufacturing

Cummins produces a long line of products. The products include engines, power generation, air handling, filtration, emission solutions, and fuel systems. Cummins has many manufacturing plants across the globe. They have several manufacturing plants that they own and they also have joint ventures with thirteen other companies across the globe. Cummins designs and manufactures its own products in each of their different business segments.

The manufacturing process of Cummins uses a Lean and Six-sigma manufacturing approach. Six-sigma is a set of tools that help in the process improvement of a company.

“Six-sigma has saved Cummins as a whole since the program's inception in 2000; we have applied Six-sigma to manufacturing processes and in the initial design of new products, and also expanded the program to include processes with customers, suppliers and distributors. Six-sigma yields significant cost savings and improved quality as well as strengthening our relationships with these important stakeholders and contributing to the development of long-term relationships” (Marx).

Since the introduction of Six-sigma Cummins has estimated that the quality process has saved the company an estimate of around 2% of its annual revenue per year. The chart below shows how Six-sigma belts projects during the 10 year period.

[pic]

The following operations descriptions are for the different business sections of Cummins:

• Engine: The manufacturing plant focuses on research and development, manufacturing of the engine, and reconditioning of the products. Product design and testing design is the main function of the R & D technical centers. Products tests are administrated on test stands that are stationary, which allows for the performance of the product to be measured. The tests are used for certification purposes.

• Components: Operations at the components group include assembly, metal stamping, tube bending, welding, machining, primer, paint, and the testing of the performance of product.

• Power Generation: This consists of product design, alternator manufacturing, Research and Development, Assembly of the power plant, and controls, and product testing. The alternator manufacturing plant conducts the following operations, machining, lamination stamping, rotor and stator winding, resign impregnation, and assembly.

• Distribution: Cummins distribution provides parts and service for all Cummins products worldwide.

Cummins has many manufacturing plants across the globe. Cummins has nine manufacturing plants worldwide. The Majority of the plants are located in the United States and the state with the most plants is Indiana. Six of the plants are Joint Venture manufacturing plants, and one is a Licensee.

Logistics

The first part of the logistics process once the parts are ordered by procurement is to get those parts to either warehousing or the manufacturer. According to the supplier’s handbook the process for becoming a supplier is a stringent one especially including their six-sigma manufacturing requirements (Cummins Supplier Portal Home). This should come as no surprise in this type of industry that can be easily related to the automotive industry. The level of integration must be very high. The supplier may have only a single customer, in this case Cummins, for one of their products. A good example here might be a specific type of alternator specifically designed for one of Cummins on-road engines. That product may be a large percentage of the supplier’s revenue, and therefore the supplier is sort of propped up by the manufacturer. Since there are quite a number of these supplier organizations Cummins has taken the obvious path to handle that portion of the logistics and outsourced it.

The instructions for suppliers are listed clearly on the Cummins website. All parcel shipments less than 150 pounds are to use Fedex unless otherwise instructed by a local Supply Chain Manager. Any shipment greater than 150 pounds in the United States and Mexico is instructed to go through “freight pay and optimization companies”. East and Northeast United States suppliers are to use Concentrek, Inc. and all shipments to Cummins Power generation, in Fridley, MN use a company called Transplace. Ryder logistics is even used in Tennessee and the UK uses a massive global logistics company called Schneider Logistics (Cummins Supplier Portal Home). Some of these companies are equipped to handle any type of transportation to just about anywhere in the world. Overall it is clear that Cummins really holds most of the power when it comes to their relationship with their suppliers.

Once parts inventory is brought in, and manufacturing produces the finished product using the parts, then their extensive distributor network comes into play. An example of that network in North America is shown on the map below where all of the Cummins distributors in North America are shown (). Each one of the distribution region has a separate set of products, and their own section of the Cummins website. Everything beyond parts supply must be handled internally by Cummins’ own supply chain managers.

[pic]

Transportation

Due to the size of the organization it is safe to assume that all types of transportation are used with perhaps the exceptions of air and pipeline transportation.  The goods being transported are heavy machinery, so there are no liquids not actually housed inside the engines, and the weight is far too high for air transport. The majority of what is utilized is most likely class 8 trucking transportation.  “Cummins’ main customers are truck manufacturers including PACCAR, Daimler Trucks, MAN Nutzfahrzeuge AG (MAN), and Ford.)” (Johnson 3). Though it is not explicitly stated it is most likely that Cummins has its fleet of trucks to transport goods from manufacturer to distributor, and from distributor to customer. It is also likely that they are trucks with Cummins engines due to a favorable cost structure for such an endeavor. As noted in the image below a large portion of their engine revenue is from companies producing heavy duty trucks ideal for transporting diesel engines across land. Since the collaboration in an integrated supply chain is very high it would be simple and favorable to both parties to work out a deal for manufacturing such a fleet to transport diesel engines.

[pic]

Information Systems

Facilitating Cummins’ transportation network as well as other core areas in Cummins’ supply chain is their new business transformation and information system.  Cummins’ desire to transform is due in part to the vast and numerous challenges that manufacturers face today.   No longer is it enough to operate with minimum levels of inventory and raw materials or just streamlining processes. They also need forecasting and e-commerce solutions to improve and enhance the customer’s experience.

In today’s interconnected marketplace, customers need to be delighted, not just satisfied. Delighting the customer begins long before the customer receives a finished good or service. Even though Cummins prior ERP system was adequate, Madhavi Isanaka, the executive director of IT at Cummins had a new premise, “Design anywhere, make anywhere, sell anywhere”. To achieve this, Cummins needed to move to a single Global Enterprise Resource Planning system, Oracle E-Business Suite R12. Cummins dubbed their new ERP System and business transformation initiative “Frontier” (Baum).

The Frontier program is built around a set of applications, assembled using mostly Oracle products, that automate everything from accepting orders to configuring, building, and tracking products, all the way through the shipping process,” Carver explains. “Oracle provides a seamless flow of information and functionality internally and externally—from a customer standpoint and an end-user standpoint. It automates each step of accepting, managing, and delivering customer orders (Baum).

“Oracle provided the best overall value, and we continue to like the clarity of the Oracle roadmap,” adds Carver. “More recently, Oracle’s bundling of software and hardware, through the acquisition of Sun, has become very compelling. From a dollar standpoint, a functional standpoint, and a business intelligence standpoint, the Oracle solution made sense for us.”

Some key applications and their uses are listed below:

Oracle iStore and Oracle Configurator and Oracle Advanced Pricing - provides a user-friendly front-end interface that allows customers to place customized products for placing orders and configuring products. These modules work together not only to provide user-friendly front end, but also allows customers to do everything from monitor the status of their orders from production to delivery.

Oracle Advanced Supply Chain Planning, Oracle Global Order Processing and Oracle Warehouse and Management - integrates production planning with inventory and warehouse management.  

Oracle Business Intelligence – OBI allows Cummins to examine trends in demand and capacity amongst all of Cummins’ businesses.  With OBI, Cummins has seen improved margins due to more efficient use of resources ().

“For the first time, executives can see global sales and global margin, seamlessly, from our Oracle Business Intelligence applications. They have reliable insight into the fulfillment, management, and supply chain metrics. This has allowed us to eliminate discrepancies in sales reporting and improve our forward-looking margins.” (Baum)

Uniqueness

The ultra-adaptive Enterprise Resource Planning system is not the only thing about Cummins that make them stand out above the rest. Cummins is renowned worldwide for their ability to create reliable, fuel-efficient, low emission engines that are used in equipment ranging from personal automotive to heavy equipment for construction and mining.

Sustainability in most cases comes at a high cost either economically, environmentally or both. This is especially true in the manufacturing industry. Cummins defies the usual by continually striving to lessen their carbon footprint.

“Cummins has aggressively cut its own greenhouse gas emissions, beating its own goals by reducing emissions by 28% from 2005 levels in 2010. This achievement allowed the company to win the EPA's inaugural Climate Leadership Awards. Now Cummins has set an ambitious goal of reducing emissions 40% from 2005 levels by 2015. For its own products, Cummins views tighter fuel efficiency and emissions regulations not as obstacles, but as opportunities to showcase the company's market-leading technology in making the cleanest, most efficient engines. Cummins has a big presence in the natural gas engine market through its joint venture with Westport Innovations and as a fuel source, natural gas is not only cheaper than petroleum, but dramatically cleaner, helping truckers save money on fuel and contributing fewer particulate pollutants and greenhouse gas emissions.” (Ferry)

Cummins uniqueness in creating the world’s cleanest diesel engines was highlighted in 2012 when Navistar International, one of Cummins competitors, had double fines levied against them when their engines were found to be non-compliant with EPA standards. To continue to do business, Navistar purchased engines and engine components from Cummins.

Excelling in engine and power generation equipment by providing top-notch quality and customer satisfaction has enabled Cummins to charge premium prices for their products. Over the past five years, this was realized as they were able to return 170% to stockholders.

Another unique aspect of Cummins is their charitable community involvement endeavor; “Technical Education for Communities.” This program gives economically disadvantaged youths experience and skills to obtain good jobs in the manufacturing industry. This program was initially launched in Morocco, India and China, but it is expected to be launched in other communities as well (Ferry).

Competitors

Cummins has a few main competitors. Yahoo Finance has the following companies listed as competitors, Caterpillar Incorporated, Detroit Diesel Corporation, and Navistar International Corporation. Caterpillar has the biggest market share out to the three. Please see graph below for data.

[pic]

("CMI Competitors | Cummins Inc. Common Stock Stock - Yahoo! Finance." xx)

As Cummins grows and competitions get stronger in the market Cummins will prevail. It is important to understand that Caterpillar is one of the largest companies in the World and they also manufacture heavy equipment. Caterpillar and Cummins are strong competitors. There are Cummins generators on almost every military base. With that said there was also a caterpillar engine in the same area. The power generator is a big chunk of Cummins but the Cummins engine is a powerful competitor on the highway. Dodge has had a contract with Cummins since 1989 to produce diesel engines for the Dodge Super Duty. Cummins has produced two engines for the product line of the Dodge Super Duties. The longest engine was the 5.9 liter diesel engine, and the second is the 6.7 liter diesel engine. The reason the 6.7 was created by Cummins was to help keep up with rules and regulation from the EPA. Cummins has kept the longest contract and longest living diesel engines on the road for personally owned vehicles. Competitors in the POV field include the Duramax diesel engine which is in the General Motors line of products and the Ford Power stroke diesel engine. These are strong competitors in the line of engines. Out of the three Cummins has become the top engine in this market.

Current/Future Challenge

As the rules and regulation of the Environmental Protection Agency (EPA) are put into action many companies have struggled to meet new standards. The biggest trials have been the four tier standards for the diesel engine. So what is the 4 tier standard? The answer is the Tier 4 standard is for all off-road diesel powered engines. According to Diesel net,

“Tier 1-3 Standards. The first federal standards (Tier 1) for new non road (or off-road) diesel engines were adopted in 1994 for engines over 37 kW (50 hp), to be phased-in from 1996 to 2000. In 1996, a Statement of Principles (SOP) pertaining to non-road diesel engines was signed between EPA, California ARB and engine makers (including Caterpillar, Cummins, Deere, Detroit Diesel, Deutz, Isuzu, Komatsu, Kubota, Mitsubishi, Navistar, New Holland, Wis-Con, and Yanmar).”

These rules created a problem for engine makers. The steps had to be put into phases and the finial 4th tier would be implemented during the time period of 2008-2015. The first stages have been completed and Cummins has developed new technologies to help keep up with the demand from the EPA. That is one reason Cummins had to create a new engine. The 5.9 liter turbo diesel could not handle the new regulations or the new technologies that were introduced. Cummins created the 6.7 liter turbo diesel. This engine could handle the standards from the EPA and still have enough power to keep up with the new equipment that had to be installed on model vehicles 2007 and above.

The standards that were implemented were to keep Nitrogen Oxide and Particle Matter to a minimum. Greenhouse gasses have been a huge concern over the past decade. Scientists have done many studies about greenhouse gases and how the gases affect the planet. As these studies are completed and submitted to the government agencies, companies like Cummins have made the step to help protect the environment.

Future issues for Cummins are the tier 4 standards. This standard is set forth for engines ranging from 174 horse power to 751 horsepower to be reduced by 80 % compared to the standards of 2011. The EPA is asking engine makers to have extremely low levels of Nitrogen Oxide and Particle Matter emitted from the exhaust of the engines. Cummins has met these standards early and could beat all deadlines the EPA put forth.

Cummins is also taking initiative on the recycling of their products. Cummins uses the slogan, “Reduce, reuse, recycle”, which is a slogan used by environmentalist across the globe. Cummins remanufactures their used products which is cost effective to the customer. 50 million pounds of material is reused or recycled by Cummins each year. By recycling the products 85% less energy is used compared to mining, refining, and the tooling of the metal used to build the equipment. On average a saving of 200 million pounds of greenhouse gases is saved from pollution the environment. Cummins remanufacturing has become so successful that they are being recognized worldwide. Cummins will be opening two new remanufacturing plants in India and China to keep up with the demand for remanufacturing.

Recommendations for Potential Improvement

If Cummins supply chain were not already very well managed it would not be in the top 25, therefore any recommendations to make might present themselves as an opportunity as a matter of timing. One thing that Cummins could do to improve their supply chain is to find ways to bypass warehousing. If their level of integration with some of the suppliers that are used more consistently is increased, then a Just in Time model could be applied from the supplier to Cummins manufacturer section of the supply chain. Some parts are likely already integrated like this, consisting of larger or expensive parts like engine blocks. An opportunity to improve this might arrive when an engineering innovation came out that allow one part to be used on multiple products or something of that nature. Cummins could fully integrate that part into their supply chain and make it Just in Time since the use of that part just became more stable.

Turing the supplier to Cummins manufacturing section to a Just in Time model as it is now, without waiting for an opportunity to present itself would be difficult, but not necessarily impossible. The logistics and transportation would have to be developed by Cummins in order to do it, but considering the fact that they make the engines used in trucking, it is still a reasonable thought process. It would probably cost more to handle the logistics internally, and there would be a fixed cost regarding additional truck fleets and managing, those fleets. However, it is important to note that they would also save dramatically on warehousing and the labor involved there, the carrying cost of inventory, and the property and personnel required to keep all of those things going. Since this type of logistics is already one of their core competencies, there is little reason remaining not to take the entire operation as close to JIT as possible.

Conclusion

Cummins’ supply chain is extremely complex. Cummins is a huge organization that supplies the world with heavy, expensive equipment that hold very high carrying costs. They use heavily integrated IT systems to manage their lean environment. They utilize mostly ground transportation in a huge logistical network. The overall system pushes from the supplier to warehousing, then pulls from manufacturing to the customer which sometimes is the end customer and sometimes is not. Their overall strategy is to use six-sigma. Cummins will continue to charge forward with the best diesel emissions, and the best service in the industry.

Supply Chain Diagram

Works Cited

"Ariba." Cloud-Based Network Solutions for Buyers and Suppliers. Ariba Inc., 2013. Web. 2 Dec. 2013.

Baum, David. “Global Super Power. Cummins Power Generation Syncs Global Production with Integrated ERP” PROFIT. ORACLE. Nov 2011. Magazine. Oct 2013.

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Company and People (2013): n. pag. The Wall Street Journal. Web. 2 Dec. 2013.

"." SEC Filed Form 10-Q. Cummins Inc., 31 July 2013. Web. 24 Oct. 2013.

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"Heliocentris and Cummins Sign Strategic Supply Agreement." Fuel Cell Today [Hertfordshire, UK] 17 Sept. 2013: n. pag. Web. 24 Sept. 2013.

Humphreys, P. K., V.H.Y. Lo, and R. T. McIver. "A decision support framework for strategic purchasing." Elsevier Science 107.1-3 (2000): 353-362. Science Direct. Web. 24 Sept. 2013.

Johnson, Nick. Investment Thesis. Publiciation. The University of Iowa School of Management. Henry Fund Research, 15 Nov. 2012. Web. 25 Nov. 2013.

"Logistics Services Schneider Logistics." N.p., 2013. Web. 29 Oct. 2013.

Schaefer, Nicholas. "Cummins Inc. Recommendation." N.p., 2010. Web. 2 Dec. 2013.

Marx, Michael. N.p.. Web. 27 Nov 2013.

"Sustainability Report A Legacy of Dependability and Responsibility." . , July 2009. Web. 27 Nov. 2013.

"Quickserve." Cummins Inc. N.p., 2013. Web. 2 Dec. 2013.

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Aerostar (supplier)

Warehouse

Manufacturing and Distribution

Nissan Titan Plant

(Customer)

Mike Erdman Nissan Dealership

(Final consumer)

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