As one of the world's leading elevator and escalator companies, KONE's mission to provide customers with innovative and eco-efficient solutions has stood the test of time. And after 100 years in business, the company continues to search for more efficient ways to operate while providing top-notch customer service and managing costs effectively.
Founded in 1910, this long-standing company operates 800 service centers in 50 countries around the world and delivers approximately 50,000 new elevators and escalators to customers per year. With a service base of approximately 650,000 elevators and escalators and more than 270,000 automatic building doors, KONE strives to offer the best "people flow" experience by developing and delivering solutions that enable people to move smoothly, safely, comfortably, and without waiting from one place to another.
With more than 32,500 employees globally, KONE's corporate headquarters are based in Helsinki, Finland, with the Americas headquarters in Lisle, Ill. With a sales, field management, service, and construction fleet of approximately 3,000 vehicles in North America and 14,000 vehicles globally, managing such a large, far-reaching, global fleet takes seamless and streamlined management. Here, the company's internal strategic sourcing team - supporting fleet management - takes the lead.
"KONE strategy sets the customer very clearly in the focus of all our operations," said Steve Cox, VP of sourcing at KONE. "To successfully execute our strategy, a major change program, a process improvement model called KONE Way is ongoing in KONE."
The sourcing team uses a broad category management structure involving key stakeholders throughout the entire organization. Utilizing a KONE Way global initiative called Project O2xygen, as well as operating a fleet quality improvement team in the Americas, the group shares best practices globally and leverages worldwide supplier services.
"Doing our homework up-front, which includes benchmarking and evaluating alternatives, and then developing a strong implementation plan, allows our sourcing team to be effective," said Roger Greene, KONE's sourcing director. "Including key stakeholders is a critical component."
Greene teams up with category management to identify and implement initiatives that improve operational performance and reduce total cost.
Other KONE strategic sourcing and fleet core strengths include:
■ Improving the fleet operating model to reduce out-of-stock purchases, streamline processes, and centralize order management.
■ Consolidating suppliers to leverage spend and utilize supplier core competencies.
■ Supporting fleet maintenance through a vehicle maintenance assistance program.
■ Operating a cross-functional fleet improvement quality team, which assures all key business areas (operations; business development; environmental health and safety; HR; health and safety; finance; category management; and key suppliers) collaborate about and contribute to operational effectiveness and customer support.
■ A focus on total cost of ownership (TCO), aligned to mission-critical customer service for maintenance, repair, and installation requirements.
■ Implementing the EcoSafe driving program to reduce accidents, fuel consumption, and related CO2 emissions, as well as supporting safety and environmental excellence goals.
■ Optimizing vehicle selections and size to increase the use of SmartWay vehicles throughout the fleet, thus improving eco-efficiency.
"Our team is committed to these improvement principles: safety, eco-efficiency, employee engagement, cost effectiveness, and providing the best service for our customers," Cox said. "Focused on these principles, we can optimize total cost of ownership in our fleet."
Efforts Lead to Cost & Time Savings
Through several recent key initiatives within the organization, significant cost and times savings resulted in a highly efficient and effectively run fleet, including a 15-percent fuel cost reduction for the targeted passenger fleet; a 50-percent reduction in dealer out-of-stock purchases in 2009; a savings of more than $100,000 per year in acquisition costs; and a 13-percent accident rate reduction over the past two years based on a safe-driving focus.
While fleet administrators handle the vehicle ordering process and support drivers in regard to policy, KONE's fleet management company handles leasing, fuel, and the accident management program.
With vehicles in 50 countries across the globe, bringing the fleet together globally allowed best-practice sharing and critical standardization in policies and procedures.
"Historically, we operated at a local country level and have now expanded our focus to the next level," Cox said. "We now benchmark in the Americas and align processes globally for maximum efficiency."
From late 2008 through 2009, the fleet team's focus on process optimization included rolling out a vehicle maintenance assistance (VMA) program, a centrally managed program through KONE's fleet management provider. In 2009 alone, the program saved $350,000. Sourcing expects continued benefits going forward with visibility of performance data around routine repairs, tire replacements, etc.
Consolidating and leveraging KONE's supply chain around the world, as well as partnering with the best suppliers and fleet management companies in the industry, also allowed the company to right-size vehicles, reduce greenhouse gas (GHG) emissions, and achieve top customer service goals.
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"As new vehicles, service delivery solutions, and tooling needs emerge, we integrate these to improve total performance," Cox said. "Combining great new products with the right behaviors on how we drive and maintain our fleet builds a positive, continuous improvement culture for our drivers."
Because the company's car fleet GHG emissions constituted up to 40 percent of its entire operational impact on the environment, KONE reinvigorated its fleet through several sustainability initiatives, including a company-wide target of reducing GHG emissions by 5 percent annually. By improving operational eco-efficiency, the company not only reduces its environmental impact, but also contributes to the bottom line of its business performance.
"Project O2xygen was started in 2008 to reduce our operational carbon footprint," said Tim Walter, VP of environmental health & safety at KONE. "We have realized a 3-percent reduction year-over-year from the actions that have already been put into place, and we are targeting a 5-percent reduction in greenhouse gas emissions in 2010 and beyond."
The program focuses specifically on reducing car fleet emissions and embraces three action areas: a car policy focusing on vehicle selection, along with driver rights and duties; harmonization and optimization of the global car fleet; and promoting eco-safe and economical driving, as well as route optimization.
Another recent strategic sourcing success story includes a model selector improvement. KONE now offers the Ford Transit Connect in the Americas in place of a larger van previously utilized.
"This allows us to deliver our services in a much more fuel efficient way," Cox said. "We evaluate our service delivery goals. If a larger vehicle is necessary, then we'll use one. We strive to optimize rolling stock to carry the right part for our customers, thus eliminating any excess load."
In addition, 40 percent of KONE's passenger car fleet moved from six- to four-cylinder vehicles. Limited use of hybrid technology has also been introduced in the car fleet.
Global Carbon Footprint Reduced Jon Barr, director of business process change at KONE, led recent fleet improvement and quality initiatives.
Collaborating with other operational leaders, the fleet quality improvement team right-sized vehicles and increased the company's global operational eco-efficiencies.
"It is extremely important to us that all of our drivers operate our vehicles in an eco-safe and courteous manner. Our operations reflect our brand values," Barr said.
All KONE drivers are encouraged to observe the following practices:
■ Avoid rapid starts and stops.
■ Keep rolling in traffic.
■ Maintain an optimum highway speed (within limits).
■ Use cruise control.
■ Navigate to reduce carbon dioxide.
■ Avoid idling.
■ Follow OEM-recommended maintenance procedures.
■ Schedule periodic engine tune-ups.
■ Replace air filters.
■ Check tire pressure monthly.
■ Check the weather; then check tires.
■ Tighten gas cap.
■ Remove excess weight from the vehicle.
These quality initiatives have directly led to better fuel efficiency through a combination of many actions, including:
■ More eco-efficient driving.
■ Geographically optimizing service route structures using geo-positioning and mapping technology.
■ Reducing the number of service calls through proactive service strategies coupled with remote monitoring technology.
■ Minimizing travel time (and maximizing service employee efficiency) using dynamic dispatching algorithms.
■ Implementing fuel cards to improve tracking fuel types and transaction frequency.
■ In the longer term, renewing the car fleet by adopting a policy of selecting more-efficient car models when buying new cars.
"These initiatives enhance safety, reduce KONE's carbon footprint, and increase productivity all at the same time," Barr said. "Typically, practicing moderate levels of eco-efficient driving can reduce fuel use by an average of 15 percent."
At an operational level, eco-safe driving is supported with printed materials distributed to drivers, such as brochures that detail safe-driving practices, posters displayed at each office location, and a policy handbook placed in each vehicle.
The fleet quality improvement team, which includes 12 core members representing different functions throughout organization, meets every two weeks to discuss potential areas for quality improvement. And according to Angela Polenske, KONE's sourcing manager, assessing continued progress on quality programs is critical.
"In order to measure these quality areas going forward, our team is working on developing key indicators," she said.
Another initiative getting underway in 2010 is the company's eco-safe driving program. The key focus is the safety of KONE drivers and other road users - with a target to reduce accidents by 15 percent. Other benefits will be reduced CO2 emissions and fuel/repair costs. Key elements include a focus on driving behavior and vehicle maintenance and loading.
"The safe driving focus has resulted in a 13-percent reduction in accident rates over two years. This is a start and needs even more attention through our eco-safe drivers training," Polenske said.
Optimizing Resource Allocation
One of KONE's top best practices is "journey management." The organization has placed a high priority on reducing the amount of energy and time spent driving. According to Barr, the best way to minimize this effort is to eliminate unnecessary miles driven.
"KONE uses mapping technology to optimize the allocation of our equipment under service to KONE route technicians based on equipment service needs and geo-position," he said. "This optimizes our response time and the time spent performing maintenance by eliminating unneeded travel time."
The company continuously optimizes service technician work plans throughout the day, as work is completed or when unplanned customer service requests occur. This dynamic dispatching strategy further improves KONE's response time to service requests, as well as minimizes driving time.
"The wonderful thing about journey management is that the safest mile driven is the one you don't have to drive," he added. "And you can't have GHG emissions if you don't drive."
Reducing windshield time has dramatically affected KONE's focus areas. Because the company has a constantly evolving customer base, management must continually geo-locate customers, thus requiring a sophisticated system that understands business priorities and how the team needs to best respond to unplanned events.
"We operate under a complicated decision matrix of how we dispatch our people," Barr said. "So we are constantly tweaking the system, given our knowledge of customer requirements, and then we prioritize customer response."
Right-Sizing Emphasizes Safety
KONE's key fleet principle is maintaining the safest, most eco-efficient, and cost-effective vehicle fleet in the industry. The company's vehicle selection criteria heavily weights vehicles IIHS-rated "good" for front and side impact and containing other key safety features, such as stability control. KONE also prefers to select vehicles that meet the U.S. EPA SmartWay certification.
Additional criteria for KONE fleet vehicles relate to vehicle size/capacity, total cost of ownership, comfort, and convenience. Vehicle size/capacity is coordinated to job role, and wherever possible, the lightest vehicle meeting business needs is selected.
"These practices result in decreased acquisition costs," according to Polenske.
Once the vehicles hit the roads, managers implement maintenance and expense control measures to minimize operational costs and enhance occupant safety.
"KONE recognizes the importance of a properly maintained vehicle for safety, eco-efficiency, and cost reasons," Greene said. "Each driver is responsible to ensure that preventive maintenance and re-pairs are completed promptly in accordance with manufacturers' minimum requirements."
Fleet management specifies attention be paid to routine maintenance items to promote safe operation and minimize the need for expensive unplanned repairs. Another prime directive includes loading vehicles in compliance with manufacturer payload ratings for the vehicle classification.
Also, towing is allowed only when authorized equipment has been approved for installation by fleet administration.
Essentially, every effort must be taken by drivers and supervisors to minimize vehicle expenses.
Monitoring Financials Closely
Moving into the future, KONE's sourcing and fleet management intends to keep a close eye on its fleet financials, specifically total cost of ownership, including lease terms, residual projections, fuel cost trends, accident impacts, and maintenance costs.
Initiatives will continue to focus on a 5-percent year-on-year reduction in GHG emissions, implementation of the EcoSafe Driving program, and reducing costs through process improvements and vehicle selections.
These actions will be supported through cross-function collaboration with business leaders in all phases of KONE operations.
Cox also indicates the sourcing and fleet team will continue to ensure fleet financials stay in line with company goals through a budgeting process that includes forecasts for fuel, maintenance, and new-model acquisition strategies to leverage new model efficiencies.
"Going forward, our key opportunities include continuing to focus on driver safety and efficient driving practices, as well as optimizing service routes to minimize driving time," Cox said.
According to Greene, KONE will also continue to head in a "right-sized" direction. "We'll operate with vehicles that offer better gas mileage and run more efficiently."