KONE sourcing TOMI KOMMERI, HEAD OF INDIRECT SOURCING 18 SEPTEMBER 2017 AALTO MANAGEMENT OF EXTERNAL RESOURCES

Transcription

1 KONE sourcing TOMI KOMMERI, HEAD OF INDIRECT SOURCING 18 SEPTEMBER 2017 AALTO MANAGEMENT OF EXTERNAL RESOURCES

2 Sourcing as a job Sourcing is not about cheating and beating the suppliers

3 Sourcing as a job A NICE COMBINATION OF VARIOUS CHALLENGES Working closely with management Working closely with all KONE teams Working closely with suppliers Analysis Strategic thinking, target setting and roadmap planning Change management People engagement and leadership Operational fire fighting

4 Interested? Summer trainee program, follow kone.com

5 KONE Sourcing CONTENTS KONE in brief Sourcing transformation KONE category management Case 1: Direct materials Case 2: Car fleet Case 3: Travel Case 4: Solely price driven category Learnings

6 More than 100 years in business

7 KONE Today KONE is a global leader in the elevator and escalator industry: KONE provides elevators, escalators, automatic doors, turnstiles, monitoring and access control systems services covering the entire lifetime of a building, from the design phase to maintenance, repairs and modernization solutions Family-owned company, founded in Finland in 1910 Over 52,000 employees 450,000 customers Net sales EUR 8.8 billion in 2016 Listed on the NASDAQ Helsinki since 1967

8 KONE has grown significantly over the last decade Sales (MEUR) Elevator & escalator units in KONE service ( 000 units) Employees EBIT (MEUR) 3x 2x 2x 5x 8,800 > 1,100 52,100 1, ,300 2,

9 KONE has a broad global coverage: we have our own operations in more than 60 countries Hyvinkää Helsinki Torreón Allen Coal Valley Essen Ùsti nad Labem Cadrezzate Pero Kunshan Nanxun (GiantKONE) Chennai Head office Global R&D site Production site KONE is present KONE collaborates with distributors in over 80 countries 12

10 A typical working day for KONE Over 1.1 million units in service orders booked ~ 450 units delivered every day ~ 70,000 maintenance visits ~ 450,000 customers served Operations in over 60 countries ~10,000 packages through our distribution centers

11 Sales distribution 2016 Sales by business Sales by market (2015 figures in brackets) EMEA = Europe, Middle East, Africa 14

12 Over half of KONE s 52,000 employees are in the field everyday Employees by market, 2016, % Employees by job category, 2016, % Maintenance and modernization New equipment sales & installation Manufacturing Administration, IT, R&D (2015 figures in parenthesis) 15

13 OUR VISION KONE delivers the best People Flow experience We provide Ease, Effectiveness and Experiences to users and customers, over the full life cycle of buildings.

14 We have entered a new phase in our strategy Capitalize on new technologies to add value for customers in new ways Cater to changing customer expectations Drive smart and sustainable urbanization Increased differentiation Higher speed of bringing new services and solutions to market

15 So what? IMPLICATIONS FOR SOURCING Production, employees and customers in all continents stakeholders Various backgrounds and cultures New Elevators and Escalators = centralized, standardized Maintenance and Modernization = decentralized, less standardized, diversity 1,1M units in service. Not all of them KONE brands Strong focus on China market People Flow New technologies Safety and quality

16 KONE Sourcing CONTENTS KONE in brief Sourcing transformation KONE category management Case 1: Direct materials Case 2: Car fleet Case 3: Travel Case 4: Solely price driven category Learnings

17 Corporate social responsibility report WHY SOURCING IS RELEVANT?

18 Corporate social responsibility report WHY SOURCING IS RELEVANT? Actively developing supplier excellence

19 Corporate sustainability report 2017 WHY SOURCING IS RELEVANT?

20 Commodity Trends WHY SOURCING IS RELEVANT? China Europe Copper & St. Steel [RMB/t] 64,000 54,000 44,000 34,000 24,000 14,000 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 6,400 5,400 4,400 3,400 2,400 1,400 Hot-rolled Steel [RMB/t] Copper & St. Steel [EUR/t] 7,500 6,500 5,500 4,500 3,500 2,500 1,500 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 1, Hot-rolled Steel [EUR/t] Copper Stainless Steel HR Steel Copper Stainless Steel HR Steel United States Brent Oil 90 Copper & St. Steel [USD/t] 10,000 8,000 6,000 4,000 2,000 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 1,250 1, Hot-rolled Steel [USD/t] Price per barrel Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Brent Oil Copper Stainless Steel HR Steel Confidential KONE Corporation

21 Global Sourcing was one of the strategic must-win battles in CUSTOMER FOCUS We deepen our understanding of our most important customer groups and segments and improve our sales approach 2 PRODUCT/SERVICE PORTFOLIO Our cost competitive and innovative solutions enable us to grow in mature and growing markets. 3 OPERATIONAL EXCELLENCE We streamline our processes to become more productive and faster 4 GLOBAL SOURCING We use our joint purchasing power and collaborate with suppliers to improve cost competitiveness. 5 ESCALATOR & DOOR BUSINESS We improve profitability in the escalator business with a new product portfolio and low cost production, and in the door business by collaborating better within SEB

22 Changing role of Sourcing FROM Price driven Unit Focus Fragmented processes Maverick Buying Reactive Multiple Supplier Interfaces Functional TO Cost driven Enterprise Focus Harmonized processes Contracts Compliance / Mgmt Proactive ONE face to supplier Cross-functional

23 KONE Sourcing CONTENTS KONE in brief Sourcing challenges KONE category management Case 1: Direct materials Case 2: Car fleet Case 3: Travel Case 4: Solely price driven category Learnings

24 Categories Elevators Escalators Modernization Major projects County units Door business Spares Supply HQ KONE category management framework Businesses Facilities ICT Travel Car Fleet Installation Subcontracting and Equipment (MPB, TRB, KDB, Spares,...) Logistics Signalisation Electrification Cars & Doors Escalators Mechanics Machines Category management concept is key success factor for crossfunctional collaboration. Category teams consist of Sourcing, R&D, factories and Quality - represent the cross-unit interests of all business through the conclusion of Global Frame agreements. Category teams can be driven by sourcing or other functions. Our motto is: Global Reach Local Presence"

25 KONE Supplier Quality Mgmt (SQM) = drivers of Supplier Development together with Sourcing Dedicated global team Supplier Development process Segmentation based supplier management Audits Quality Steering Meetings Performance follow-up, scorecards Certificates

26 Total Cost of Ownership Negotiate, tender Develop cross-unit processes, centralize, outsource Price * Quantity + FTE/time + Other Quality, safety, logistics Leverage cross-unit Demand management September 2017 KONE Profile 2016 Confidential KONE Corporation

27 KONE Sourcing CONTENTS KONE in brief Sourcing challenges KONE category management Case 1: Direct materials Case 2: Car fleet Case 3: Travel Case 4: Solely price driven category Learnings

28 Direct Materials TOTAL COST OF OWNERSHIP KEY DRIVERS Impacting factors: 1. Specifications Material requirements Standard vs KONE design How suppliers/kone can manufacture effectively? Easy to install Low maintenance costs Reliability, risk of quality issues 2. Make or buy Low cost countries Supplier s capability provide high quality and adequate capacity to meet remarkable load changes 3. Price negotiations, customer-supplier relationship 4. Logistics 5. Demand Volume Sourcing can address just a minimal share of TCO with traditional opportunistic sourcing approach

29 KONE Sourcing CONTENTS KONE in brief Sourcing challenges KONE category management Case 1: Direct materials Case 2: Car fleet Case 3: Travel Case 4: Solely price driven category Learnings

30 Car fleet TOTAL COST OF OWNERSHIP Thesis work done last year by Aalto ERM studend 1. Demand management Optimize the nr of vehicles Minimize the fuel consumption = eco initiative Reduce accidents = safety 2. Brand & HR management Image, green fleet Safety 3. Price Vehicles, leasing, maintenance, racking Fuel? 4. Logistics, process Tapes, racking Fleet management workload Car fleet TCO optimization is primarily about demand management

31 KONE Sourcing CONTENTS KONE in brief Sourcing challenges KONE category management Case 1: Direct materials Case 2: Car fleet Case 3: Travel Case 4: solely price driven category Learnings

32 Travel Spend development Travel ban communicated by Exec Board KONE travel spend KONE turnover

33 Travel TOTAL COST OF OWNERSHIP 1. Demand management Budget is the driver of TCO How to avoid travelling? 2. Compliance Minimize the use of tickets with unrestricted change option Book early in advance Use the online tools to minimize travel agency fees 3. Price Travel agency, hotels, airlines Travel TCO optimization is 95% about demand management

34 KONE Sourcing CONTENTS KONE in brief Sourcing challenges KONE category management Case 1: Direct materials Case 2: Car fleet Case 3: Travel Case 4: Solely price driven category Learnings

35 Solely price driven category? Right price is always one key element of TCO...however we could not identify any purely price driven categories in KONE

36 KONE Sourcing CONTENTS KONE in brief Sourcing challenges KONE category management Case 1: Direct materials Case 2: Car fleet Case 3: Travel Case 4: Solely price driven category Digitalization

37 We are investing heavily in new technology CONNECTED EQUIPMENT Connecting >1 million equipment to the cloud CONNECTED CUSTOMERS Increased business value through better communication and productivity CONNECTED EMPLOYEES Supporting the collaboration and efficiency of our people CONNECTED USERS Personalized experience for users Technological enablers: Connectivity, IoT cloud and cognitive analytics

38 New innovations and personalized services by using data More than 400,000 customers Over one billion people using our equipment every day Lifetime business with long-lasting customer relationships Data on a wide scale for mass customization When we connect more equipment, the amount of data grows exponentially Long relationships create a long digital footprint New and personalized services 41

39 We embrace collaborative innovation WHY? Making use of innovation that happens outside KONE Fast learning and optimal focus of resources Bringing new solutions to the market faster WITH WHO? Technolog y companies Smart building partners Start-ups Customers

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41 Intelligent services for elevators and escalators are here KONE is revolutionizing elevator and escalator maintenance with new KONE 24/7 Connected Services that are based on real-time data and analytics. For customers it means improved safety, full transparency and more value.

42 Partnering with start-ups at hackathons around the world 45

43 Bringing new challenges for sourcing Speed Develop in uncertainty Bimodal and agile project models Learn and develop through implementation No clear specs Manage partners and ecosystems We need new approaches and contractual models to manage partnerships We have to develop new competences in sourcing. Cross functional alignment

44 KONE Sourcing CONTENTS KONE in brief Sourcing challenges KONE category management Case 1: Direct materials Case 2: Car fleet Case 3: Travel Case 4: Solely price driven category Learnings

45 KONE Learnings Cross unit category management Cross functional category management Total cost of ownership Price vs Demand management Quality and safety Sourcing in the agenda of top management Digitalization setting us new requirements

46 KONE high-rise laboratory at Tytyri, Finland It is an underground facility built in an active limestone mine. There are 11 shafts with a combined length of one mile. Free-fall tests enable speeds of up to 26m/s. KONE UltraRope is tested there. High-rise elevators have been tested there over the past 20 years. It houses a world s deepest test shaft reaching a depth of 350m.

47 Makkah Clock Royal Tower Hotel Makkah, Saudi Arabia It was critical that up to 75,000 people could exit all seven buildings in an organized and timely manner five times a day for prayer. KONE s specially recruited design and project teams delivered a solution that met these extreme people flow challenges. Tomi.kommeri@kone.com September 2017 Confidential KONE Corporation