Design & Implementation of a New Supply Chain

Towards a Central Supply Chain

Pon Power and Pon Cat underwent a significant transformation by abandoning the traditional country-based structure in favor of segmentation by market. This change involved four countries: the Netherlands, Norway, Denmark, and Sweden. In each country, local organizations operated, often with multiple business units per country. The aim was to bring production and logistics under one unified structure. While initially appealing, the question remained whether this move could be financially justified. Together with the supply chain management team, we confirmed that it could.

Several key aspects needed consideration. First was the logistics infrastructure for parts. Each business unit had different logistics locations, often linked historically to a major client, an acquisition, or other unclear reasons. This provided a compelling reason to investigate whether the logistics setup could be optimized. By analyzing the required service levels, we determined how many locations were truly necessary and where they should be located. As expected, the outcome was favorable: fewer locations resulted in lower costs.

On the production side, for both marine engines and excavators, the challenge was less about choosing locations and more about effectively managing the supply chain. The simplest task was determining how many employees the new organization would need and identifying the necessary new competencies. Ultimately, a centralized management approach for decentralized locations was selected. The decision to not centralize everything in the Netherlands was influenced by the knowledge and expertise available in key positions across various locations.

Another complex issue was implementing a new management structure to reduce inventory levels and increase availability. This effort was heavily reliant on the primary supplier, Caterpillar. For the management framework, we leveraged best practices from different parts of the organization. The division of roles with the sales team had to be redefined—since sales and production/logistics had been separated—making demand management critical, along with establishing a gatekeeper function. Sales & Operations Planning (S&OP) was restructured with multiple layers, including agendas and participants, to facilitate decision-making at various organizational levels.

Crucial Role for Change Management

Naturally, there was some negative sentiment among the country managers. In the old structure, they had full control over their own supply chain and could directly address those responsible. With the new setup, they no longer had that authority. As a result, considerable time was spent convincing them of the benefits, identifying the risks, and establishing KPIs. As mentioned earlier, a centralized execution at decentralized locations was chosen, which helped build trust, as the best supply chain employees already had a solid internal reputation. The S&OP process quickly became successful due to the competence of the supply chain director and the commitment of top management to attend the S&OP meetings. Tangible results, such as lower inventory levels and higher availability, also contributed to the positive sentiment.

For redirecting maintenance flows during the redesign of the logistics, a step-by-step approach was adopted for each business type: testing systems, running pilots, adjusting processes, and going live.