AOU Upscaling Circular Business Models Case Study worksheet

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The case company - Caterpillar The case description for this assignment has been compiled from publicly available information on Caterpillar’s website during 2018. The key sources of information for creating the case study are provided in the reference list at the end of this page. Please however, note the following: first, all or any interpretations included in this assignment are those of the task authors at IIIEE, Lund University and are not intended to present views held by the case company; second, case information on the company site may have changed - even if this is the case, - please use the information provided in the case study description below; this is sufficient for completing the assignment. References are provided for those interested in reading beyond the assignment. Caterpillar – Case Study “Wherever possible, we keep resources in the Caterpillar value chain through a circular flow of materials, energy and water. Our focus on developing better systems optimizes our use of resources, maximizes the total life cycle value of our products and minimizes the cost of ownership for our customers. Viewing our equipment through a total life cycle lens allows us to make sustainable progress for communities, the environment and the economy.“ Caterpillar website, 2018 From the Caterpillar website, 2018 For first-life sale, Caterpillar offers machines and services to develop, amongst others, infrastructure and natural resource assets. As value proposition, the company strives to provide customers with quality equipment that provides the best economic proposition and lowest life cycle costs for their business, including maintenance services for increasing efficiency and lifetime of their machines. The company operates through its three main customer segments - Construction Industry, Resource Industry, and Energy and Transportation. Caterpillar offers regular maintenance check-ups at their local dealers and performance optimization through digital monitoring. Material acquisition, manufacturing, and establishing the sales channels are key activities, while key resources and capabilities are the companies’ manufacturing technology as well as the machine design for remanufacturing. Material costs make up the largest share of overall costs, followed by fixed costs such as labour. Revenue is generated through sale of machines and services. To organize take-back and reintegrate machines in the value chain at the end of their first use cycle, Caterpillar offers customers return of products’ core parts. As value proposition, customers receive a deposit in exchange for the core. Increasing core recovery rates is a challenge for any manufacturer engaging in remanufacturing activity, but offering an economic incentive to return the component helps keeping embodied value within the Caterpillar network. Caterpillar’s close relationship with customers helps identify core parts before they break to increase value of recovered parts. Key activities to collect and reintegrate cores include reverse logistics and disassembly of the machines and their cores. Key resources and capabilities are the reverse logistic network and transport capabilities, as well as the global dealer network to facilitate take-back. Operating reverse logistics as well as paying the deposit are substantial costs and no revenue is generated at this stage. However, it allows Caterpillar to retain value in core parts and prepare them for additional sale. Caterpillar enables additional sale of core parts through offering most of its machines in remanufactured or rebuild condition. A complete certified remanufactured and rebuild machine includes more than 350 tests and inspections, automatic replacement of approximately 7,000 parts. As value proposition, remanufactured products come with a ‘like-new machine’ warranty, but with a price well below the price of a new one (typically, 25 per cent lower). Through offering remanufactured machines, Caterpillar can tap into the after-market of their products and expand to customer segments to whom the lower price is attractive. Main channelsare dealers that keep in close relationship with customers and inform about the possibility of remanufactured products and their benefits. Key resources and capabilities are those to operate key activities as quality checks and remanufacturing (e.g. robotic disassembly; washing). Key partners include partners developing testing and remanufacturing technologies. Costs include remanufacturing (technology and labour), but through additional sales of their product and the attached services, Caterpillar continues to generate revenues and makes the most out of the value embodied in used components Circular Business Model: Caterpillar VALUE PROPOSITION 1. Offer 2. Value proposition 3. Customer segments 4. Relationships customers/partners A. Collect & reintegrate (substitute primary materials) 6. Key resources/ capabilities 7. Key partners 8. Channels Machines and services to develop infrastructure ………A1……….. ……………………………… ………A2……….. Low life-cycle costs, repair and upgrade services ……………………………… Construction industries ………A3……….. ……………………………… ………A4……….. Close, e.g. maintenance and performance optimization ……………………………… VALUE CREATION AND DELIVERY 5. Key activities B. First sale (with prolonged use) 10. Revenue flows Return of ‘core’ ………A5……….. ……………………………… ………A6……….. ……………………………… ………A7……….. ………A8……….. Manufacturing technology, design for remanufacturing Suppliers, Dealers ………A9……….. ………A10…….. D. Additional sale of product or parts E. Enable material recovery Remanufactured machine ………………….…..… ………….……… ………E1.……. …………..C2……...... ……….D2.…… ………E2.……. After market …………………. ………E3.……. Close ………………… ………E4.……. Machine owners …………..…….......... Close, e.g. performance ……………………..… optimization Material acquisition, manufacturing Quality checks, reman …………..C5……...... …………………. ………E5.……. Transport ………….……… ………E6.……. ………E7.……. ………………….....… Dealers for return Reman tech Reman tech developers ……………………………… ………………….….... ………………… Dealers Dealers ……………………………… Dealers ……………..……...... Material costs, fix costs Deposit, reverse logistics VALUE CAPTURE 9. Costs C. Collect & reintegrate (organize take-back) ……………………………… ……………………...... Sale machines and services None …………………. ………E8.……. Reman (tech and labour) …………………. Sale of machines and services …………….…… ………E9.……. ………E10..…. Assignment Assignment Description Background This course assignment is all about giving you a chance to deepen and apply your skills on how circularity is implemented and upscaled. The aim is to train you in becoming a more proactive person in the transition to a circular economy. The assignment in this course is divided into three shorter parts spread over Weeks 2-4. General requirements; In this assignment you will be focusing on both the business context and innovation with two tasks: 1) The first task is to consider how entrepreneurial business ideas are affected by external factors, broadening your analysis to the context that the case company is operating in. Are there any changes in the legal framework that could make it easier for Caterpillar to operate in a circular manner? You should identify two examples of public policies that, if implemented, can promote circularity in your case company. 2) As the transition towards a circular economy ultimately depends on developing new ideas, your second task is to come up with your own ideas. Your second task is to provide two examples of what Caterpillar could change in its business model to become even more circular. For this, we encourage you to use the analysis of Caterpillar’s business model. For instance, think whether there is an additional circular strategy that the company could implement. It will be useful for you to have a look at the non-filled parts (the first and last columns (A and E)) in the analysis of your business model and how these could be capitalized on. Or think about whether some of the business model elements that you already analyzed may be altered to facilitate circularity. For instance, could there be a more compelling value proposition or a new key partnership that makes reaching out to consumers or accessing used products much easier? ➢ You have a maximum of 300 words for each question in the assignment. Assignment Details Make sure you have read attached Case company description and its Circular business model planning tool as your submission will be reviewed and graded based on these criteria: • • Have you identified two public policies that could help the case company operate in a circular manner and briefly explained how each of them can help? Have you given two examples of how to innovate the case company’s business model to increase circularity and briefly explained them? First Task (max. 300 words) Second Task (max. 300 words)
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Assignment

Assignment Description
Background
This course assignment is all about giving you a chance to deepen and apply your skills on how
circularity is implemented and upscaled. The aim is to train you in becoming a more proactive person
in the transition to a circular economy. The assignment in this course is divided into three shorter
parts spread over Weeks 2-4.

General requirements;
In this assignment you will be focusing on both the business context and innovation with two tasks:
1) The first task is to consider how entrepreneurial business ideas are affected by external factors,
broadening your analysis to the context that the case company is operating in. Are there any changes
in the legal framework that could make it easier for Caterpillar to operate in a circular manner? You
should identify two examples of public policies that, if implemented, can promote circularity in your
case company.
2) As the transition towards a circular economy ultimately depends on developing new ideas, your
second task is to come up with your own ideas. Your second task is to provide two examples of what
Caterpillar could change in its business model to become even more circular.
For this, we encourage you to use the analysis of Caterpillar’s business model. For instance, think
whether there is an additional circular strategy that t...


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