Komatsu: increasing supply chain efficiency through a digital transformation
Komatsu, the leading construction equipment manufacturer, has transformed the way it conducts business through the introduction of new technology.
Traditionally renowned for its unique and unrivaled products, Komatsu had outdated processes and urgently required a system to help speed up its orders. This led to the company partnering with SAP two years ago, in a collaboration which saw the software giant create Komatsu a tailored system called K-View — an automated portal that streamlines processes and provides real-time visibility into inventory and order status. Through this system, it allowed the time it takes Komatsu’s orders to be completed within 30 seconds in a move that significantly enhanced efficiency and customer service.
Daphyne Woodard, Manager of the Order & Distribution (O&D) Continued Improvement of Komatsu America Corp, speaks to Supply Chain Digital about the process behind the firm’s implementation of K-View and how operations have become more straightforward.
How does Komatsu differentiate itself from its peers and reinforce its competitive advantage?
The “Komatsu Way” stands for safety, law, quality, delivery and cost. Paramount to our mission is the safety of our employees, which also includes their families. It’s also important to us that we ensure compliance comes before anything else that we do. The “Komatsu Way” drives our corporate governance and manufacturing competitiveness across our network of distributors.
In what ways does your new SAP-built solution K-View help increase supply chain efficiency?
The K-View portal has increased our supply chain efficiency in multiple ways. The automated portal streamlines our processes and also provides real-time visibility into our inventory and order status. Most importantly, K-View has cut the amount of time it takes to create orders from hours to 30 seconds, improving productivity and customer service.
How does increased efficiency improve Komatsu’s relationships with its clients and partners?
The K-View portal enables us to be better partners to our dealers by making it easier for them to conduct business with us. It has decreased the time they have to invest in non-value-added tasks, like reviewing our catalogue and submitting orders, so they can serve their customers more quickly. Additionally, because the system is mobile ready and provides updates in real-time, our dealers are able to provide their customers with timely updates.
Currently 2,000 external and internal team members use K-View. Dealer feedback to the portal has been so positive that we’ve already introduced it across our supply chain teams.
In terms of Komatsu’s relationship with SAP, why was it chosen as part of your digital transformation?
SAP has been part of Komatsu’s core applications for many years. Since it was already our trusted partner, we reached out when the opportunity arose to expand our digital transformation.
Is K-View just the first step in an extended transformation? What other technological innovations do you plan on implementing in your manufacturing, supply chain and logistics processes?
The current deployment of K-View is our first step in an extended transformation. We initially wanted to develop a portal that supported our distributors and end-customers. After its launch, we realised how beneficial the portal was for our business, so we expanded it to our departments and entire supply chain.
We plan to grow this digital transformation and begin launching the portal throughout Komatsu America’s network globally. Additionally, Komatsu Limited has noticed the positive impact the portal has had on our business. As such, it has been enquiring about how they could potentially integrate K-View into its supply chain.
Our team will continue to grow and evolve the technology we utilise in North America and throughout our global network.
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How do you manage the cultural shift and potential workforce disruption that accompanies technological adoption?
We ensured we communicated early and often, in order to put our teams at ease. Before we developed the portal, we first engaged five distributors and made them a part of the testing process. Additionally, we continuously shared updates about the digital transformation across our network so that other distributors would not be surprised when we launched K-View.
Through this constant communication, our dealers’ mindsets changed. Everyone became excited about the system and wanted access to it quicker than anticipated. When the portal went live in October 2017, our goal was to have all our distributors on K-View by March 2018. However, because everyone was aware of the benefits of the portal, they wanted to be able to use it right away. As such, all of our distributors were added to K-View within three months.
How do you continue to ensure that safety is a top priority?
At the core of Komatsu’s ethos is our continuous improvement cycle: PDCA — Plan, Do, Check and Act. We develop a plan, execute it, continually check on its effectiveness and act on feedback from our employees. If we need to make a change, we will do so and start the PDCA cycle anew.
What are your plans over the next year or so? What’s the next top priority for Komatsu?
For the next six to 18 months, we will continue to deploy K-View across our network. We are currently testing phase four and deploying it in October. This phase entails integrating three different systems that our floor plan machines management teams utilise into our streamlined system. In November, we will kick-off phase five: integrating our forklift business line into the portal. Once this line is part of the system in April 2020, all of our North America business will be a part of K-View.
Starting in August 2020, we will integrate our four U.S. stockyards to K-View as part of phase six. Once we are live in November 2020, this will enable distributors to pick up machines faster, which ultimately helps their customers. Furthermore, we will launch four additional phases from 2020 – 2022. This thorough digital transformation is part of our continued commitment to our customers and employees to maximise our corporate value through quality and reliability.
NTT DATA Services, Remodelling Supply Chains for Resilience
Joey Dean, the man with the coolest name ever and Managing Director in the healthcare consulting practice for NTT DATA and is focused on delivering workplace transformation and enabling the future workforce for healthcare providers. Dean also leads client innovation programs to enhance service delivery and business outcomes for clients.
The pandemic has shifted priorities and created opportunities to do things differently, and companies are now looking to build more resilient supply chains, none needed more urgently than those within the healthcare system. Dean shares with us how he feels they can get there.
A Multi-Vendor Sourcing Approach
“Healthcare systems cannot afford delays in the supply chain when there are lives at stake. Healthcare procurement teams are looking at multi-vendor sourcing strategies, stockpiling more inventory, and ways to use data and AI to have a predictive view into the future and drive greater efficiency.
“The priority should be to shore up procurement channels and re-evaluate inventory management norms, i.e. stockpiling for assurance. Health systems should take the opportunity to renegotiate with their current vendors and broaden the supplier channel. Through those efforts, work with suppliers that have greater geographic diversity and transparency around manufacturing data, process, and continuity plans,” says Dean.
But here ensues the never-ending battle of domestic vs global supply chains. As I see it, domestic sourcing limits the high-risk exposure related to offshore sourcing— Canada’s issue with importing the vaccine is a good example of that. So, of course, I had to ask, for lifesaving products, is building domestic capabilities an option that is being considered?
“Domestic supply chains are sparse or have a high dependence on overseas centres for parts and raw materials. There are measures being discussed from a legislative perspective to drive more domestic sourcing, and there will need to be a concerted effort by Western countries through a mix of investments and financial incentives,” Dean explains.
Wielding Big Tech for Better Outcomes
So, that’s a long way off. In the meantime, leveraging technology is another way to mitigate the risks that lie within global supply chains while decreasing costs and improving quality. Dean expands on the potential of blockchain and AI in the industry.
“Blockchain is particularly interesting in creating more transparency and visibility across all supply chain activities. Organisations can create a decentralised record of all transactions to track assets from production to delivery or use by end-user. This increased supply chain transparency provides more visibility to both buyers and suppliers to resolve disputes and build more trusting relationships. Another benefit is that the validation of data is more efficient to prioritise time on the delivery of goods and services to reduce cost and improve quality.
“Artificial Intelligence and Machine Learning (AI/ML) is another area where there’s incredible value in processing massive amounts of data to aggregate and normalise the data to produce proactive recommendations on actions to improve the speed and cost-efficiency of the supply chain.”
Evolving Procurement Models
From asking more of suppliers to beefing up stocks, Dean believes procurement models should be remodelled to favour resilience, mitigate risk and ensure the needs of the customer are kept in view.
“The bottom line is that healthcare systems are expecting more from their suppliers. While transactional approaches focused solely on price and transactions have been the norm, collaborative relationships, where the buyer and supplier establish mutual objectives and outcomes, drives a trusting and transparent relationship. Healthcare systems are also looking to multi-vendor strategies to mitigate risk, so it is imperative for suppliers to stand out and embrace evolving procurement models.
“Healthcare systems are looking at partners that can establish domestic centres for supplies to mitigate the risks of having ‘all of their eggs’ in overseas locations. Suppliers should look to perform a strategic evaluation review that includes a distribution network analysis and distribution footprint review to understand cost, service, flexibility, and risks. Included in that strategy should be a “voice of the customer” assessment to understand current pain points and needs of customers.”
“Healthcare supply chain leaders are re-evaluating the Just In Time (JIT) model with supplies delivered on a regular basis. The approach does not require an investment in infrastructure but leaves organisations open to risk of disruption. Having domestic centres and warehousing from suppliers gives healthcare systems the ability to have inventory on hand without having to invest in their own infrastructure. Also, in the spirit of transparency, having predictive views into inventory levels can help enable better decision making from both sides.”
But, again, I had to ask, what about the risks and associated costs that come with higher inventory levels, such as expired product if there isn’t fast enough turnover, tying up cash flow, warehousing and inventory management costs?
“In the current supply chain environment, it is advisable for buyers to carry an in-house inventory on a just-in-time basis, while suppliers take a just-in-case approach, preserving capacity for surges, retaining safety stock, and building rapid replenishment channels for restock. But the risk of expired product is very real. This could be curbed with better data intelligence and improved technology that could forecast surges and predictively automate future supply needs. In this way, ordering would be more data-driven and rationalised to align with anticipated surges. Further adoption of data and intelligence and will be crucial for modernised buying in the new normal.
These are tough tasks, so I asked Dean to speak to some of the challenges. Luckily, he’s a patient guy with a lot to say.
On managing stakeholders and ensuring alignment on priorities and objectives, Dean says, “In order for managing stakeholders to stay aligned on priorities, they’ll need more transparency and collaborative win-win business relationships in which both healthcare systems and medical device manufacturers are equally committed to each other’s success. On the healthcare side, they need to understand where parts and products are manufactured to perform more predictive data and analytics for forecasting and planning efforts. And the manufacturers should offer more data transparency which will result in better planning and forecasting to navigate the ebbs and flows and enable better decision-making by healthcare systems.
Due to the sensitive nature of the information being requested, the effort to increase visibility is typically met with a lot of reluctance and push back. Dean essentially puts the onus back on suppliers to get with the times. “Traditionally, the relationships between buyers and suppliers are transactional, based only on the transaction between the two parties: what is the supplier providing, at what cost, and for what length of time. The relationship begins and ends there. The tide is shifting, and buyers expect more from their suppliers, especially given what the pandemic exposed around the fragility of the supply chain. The suppliers that get ahead of this will not only reap the benefits of improved relationships, but they will be able to take action on insights derived from greater visibility to manage risks more effectively.”
He offers a final tip. “A first step in enabling a supply chain data exchange is to make sure partners and buyers are aware of the conditions throughout the supply chain based on real-time data to enable predictive views into delays and disruptions. With well understand data sets, both parties can respond more effectively and work together when disruptions occur.”
As for where supply chain is heading, Dean says, “Moving forward, we’ll continue to see a shift toward Robotic Process Automation (RPA), Artificial Intelligence (AI), and advanced analytics to optimise the supply chain. The pandemic, as it has done in many other industries, will accelerate the move to digital, with the benefits of improving efficiency, visibility, and error rate. AI can consume enormous amounts of data to drive real-time pattern detection and mitigate risk from global disruptive events.”