A project for a Cat Logistics

The company and the warehouse

(Here are the slides from the client visit.)

Caterpillar sells “big yellow equipment” to support heavy construction: earth movers, bulldozers, road graders, and so on. The Cat Logistics DC south of Atlanta is a service parts distributor: They send parts to Caterpillar dealers or owners of Cat equipment.

Cat Logistics carries about 185 000 parts, but this number is constantly growing. Each time Caterpillar introduces a new product, the DC must add the appropriate spare parts, of which there can be thousands. And, because Cat equipment lasts a very long time (50 years is not unusual), parts tend to stay in inventory unless superseded by engineering changes.

Recent growth has been unusually rapid because of business acquisitions and because of engineering changes to address new requirements for pollution controls. (Rough estimate: 15,000 new parts a year due to new models and engineering changes; 5,000 discontinued parts due to obsolescence and engineering changes. Result: 10,000 new parts per year.)

Warehouse operations

There are two kinds of orders. Seventy-five percent of the pick-lines are stock orders, requests from Cat dealers to replenish stock consumed by direct sales to the end user or in the regular service of equipment. The DC knows these orders in advance. They are batched and picked during the 3rd through the 1st shifts. They are shipped, mostly by dedicated truck, to reach the customer by 7AM.

Twenty-five percent of orders are emergency orders, which are urgent because the need for a part may have idled expensive capital equipment or even a halted construction project. Emergency orders are generally for a very few (1-3) critical parts that are slow-moving and so not held by the dealer. These orders are not known in advance and are picked as they arrive, up to one hour before scheduled departure of the truck.

There is a small seasonality to the business, with the Atlanta DC seeing a ten percent increase in outbound during April through October each year. This seasonality is more pronounced at DCs further north.

The DC runs three shifts, with most picking during shifts 3 and 1, and with receiving and internal replenishment during shifts 1 and 2.


Any sku held in less-than-pallet quantities is stored in a single location.

The DC has three main types of storage:

In addition, there are some specialized storage areas, including floor storage, cantilever rack, pallet flow rack, security cage. And there are areas for hard-to-handle-or-store items, such as tubing, hydraulics, rollers, etc.

As a general rule, the DC prefers that all storage along an aisle be uniform in size.

Concerns of Cat

In the next few years the DC expects to add about 25 000 new skus. Where will these be stored?

Growth is expected to reflect the current mix of sku statistics.

A lesser, related concern is the filters, which is the fastest-moving family of skus. Currently they are all stored together in aisles 98 to 03 of pallet rack. Should they be handled differently?


The company data is copyrighted and proprietary. You may use it for the purposes of this course only. If you would like to use it for something else, please contact me to discuss.

The Item Master, Sales History, and Bin Map are also available as a single MS Access database (113MB).

New and frequently updated: Here are some questions that have been asked of the client together with responses.


Suggestion: Consider each storage area separately (bins, light rack, heavy rack) and develop a strategy for each. (Addendum: The client suggested that you not try to improve bins, as they are currently being redesigned.) Look for how to gain the most value for the least effort. Build a “terraced” set of recommendations that enable the client to get some benefit quickly and then build on that.

The most straightforward way to make room for more skus is to build it by extending the warehouse. But this might not be necessary if space can be better used within the current facility, perhaps by reducing aisle widths to create more room for storage or by using space on the shelves more efficiently.

First steps