Make your dealers your partners

A decade ago, many observers predicted Caterpillar's demise. Yet today the company's overall share of the world market for construction and mining equipment is the highest in its history. And the biggest reason for the turnaround, writes Caterpillar's chairman and CEO Donald Fites, has been the company's system of distribution and product support and the close customer relationships it fosters. The backbone of that system is Caterpillar's 186 independent dealers around the world. They have played a central role in helping the company build close relationships with customers and gain insights into how it can improve products and services. How did Caterpillar build such a strong network of dealers? Fites attributes the company's success to several factors. For one thing, the company stands by its dealers in goods times and in bad. In addition, it gives them extraordinary support, helps ensure that the dealerships are well run, and emphasizes full and honest two-way communication. Finally, Fites stresses the emotional ties that have developed between Cat and its dealers over time. The tight working relationships that Caterpillar has forged with its dealers hold important lessons for managers at other manufacturers. In many manufacturing industries, distribution and product support remain underappreciated strategic assets, but that status will soon change, contends Fites. Engineering excellence, manufacturing efficiency, and quality are rapidly becoming the ante to get into the game. Over the next 10 to 20 years, companies will need superb distribution systems capable of providing outstanding customer support if they are to prevail in the global economy.