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World first hoses and fittings agreement ensures high quality, affordability

In what it describes as a ?world first arrangement?, Komatsu Ltd in Japan has transferred the intellectual property of its Komatsu specific hydraulic hose designs to Australian fluid transfer solutions supplier Pirtek Fluid Systems.

The arrangement enables Pirtek service personnel to assemble and on-sell over 1200 genuine hydraulic hose and fittings designs (manufactured by Bridgestone in Japan to Komatsu factory specifications) through either Pirtek?s 88 service centres or 300 mobile service units across Australia. By using a detailed design matrix, every Komatsu hose manufactured by Pirtek will meet the strict Komatsu Engineering Standard – or KES (see page 42 for further details).

The 10-year partnership is expected to benefit Pirtek to the tune of $10 million a year and will grow its Komatsu-related business by $14 million annually. It will also save Komatsu Australia at least $500,000 each financial year in write-downs on disused and obsolete hose assemblies.

Most importantly for the customer, the partnership promises to deliver Pirtek manufactured Komatsu genuine hydraulic hoses that will be within 15 per cent of the price of competitive aftermarket products. This could potentially eliminate the need for both Komatsu and Pirtek?s customers across Australia to use inferior non-original equipment hose assemblies on Komatsu earthmoving equipment, including wheel loaders, dozers and excavators.

SUBSTITUTING THE ASSEMBLY PROCESS
In a joint press launch at Pirtek Australia?s manufacturing and testing facility in King?s Park, Sydney, Komatsu Australia president Bill Pike said that the new partnership arose because a review of Komatsu?s customer support division revealed that its hydraulic hose programme was underperforming.

?The area we identified as having unrealised potential was the supply and fitment of replacement hydraulic hoses,? he explained. ?When a hose fails, a machine stops operating and the financial losses can mount very rapidly. In those circumstances, operators are primarily concerned about the speed and fitment of a replacement and they are less concerned about whether the hose is of original equipment origin.

?We knew Komatsu operators were increasingly looking to the aftermarket hose industry for replacement hose assemblies. To find out why, we took a long hard look at our structural arrangements to the supply and fitment of genuine hose.

?We concluded that our stock availability, delivery times and prices were all contributing to a relatively low uptake of genuine Komatsu hydraulic hose. This was concerning to us because we saw Komatsu operators resorting to non-genuine hose assemblies and by doing so they were compromising the long-term reliability of their machines.

?It was also a concern to us that operators could be compromising the safety of their employees. A blown hose under pressure can have catastrophic consequences.?

In turn, the slow uptake of genuine hydraulic hoses for Komatsu earthmoving equipment by Komatsu customers was impacting on the quality of the inventory.

?Once it has been sitting on the shelf for a certain amount of time, a hydraulic hose becomes unsellable,? explained Scott Grant, the group general manager of customer support and business development for Komatsu Australia.

?This is an endemic problem associated with the storage of hoses industry wide. The KES benchmark we employ specifies a hydraulic hose must not be sold or fitted after four years on the shelf. Sadly, this was the date the majority of our hoses were exceeding while still in our warehouse.

 ?Once a hose has passed its fit-by date, it is destroyed or written off as a significant cost to business. The total cost of these write-downs was exceeding the total revenue of our hose business. So purely from a Komatsu perspective, it made perfect business sense to change the way we conducted our hose business.?

Komatsu Australia concluded that its goal must be to deliver more competitively priced hose parts to customers in a more efficient manner. ?The simple answer was to substitute the assembly process, using Australian expertise, while still utilising the same KES fittings and hose,? added Amber Mahony, of Komatsu?s technical support systems division.

?We needed to ensure the integrity of manufacture was upheld. Not only was Pirtek the only company able to demonstrate to Komatsu its ability to assemble hoses to KES, they were the only company able to guarantee continuity of supply of the approved Bridgestone hoses and fittings.?

The Pirtek assembled product consequently went through 18 months of intensive research and development to ensure that it complied with the KES benchmark.

?It became evident that quality was not going to be an issue as far as Pirtek was involved. It was at this point that the decision was taken to license the intellectual property of the host programme to Pirtek, now a trusted Komatsu partner,? said Amber.

BREAKTHROUGH FOR FAMILY COMPANY
The partnership is a coup for Pirtek Fluid Systems, a 100 per cent Australian-owned family company which this year celebrates 30 years of continued service to the hydraulic industry.

Its founder and executive chairman, Peter Duncan, established the company in December 1979 when he moved his family from his native New Zealand to Sydney. The new expert high pressure hose provider rapidly grew over the next seven years, officially becoming known as Pirtek in 1986. In the same year, Pirtek began franchising its branches across the country.

?By operating on a franchise model, the company was able to tailor its business to each specific geographical location,? recalled Glenn Duncan, the managing director of Pirtek Fluid Systems, and the son of founder Peter Duncan.

?There is nothing like having local people service local people. Not only do these businesses have the capacity to fully integrate themselves into the community, they are able to put back into the community.

?Many of our franchisees sponsor local teams and various charities. This localised service always adheres to Pirtek?s core values, that is, the best products and the best price in the shortest possible timeframe.?

Today, Pirtek Australia has 88 branches in Australia, operates over 320 mobile service units and employs more than 700 staff. Its annual turnover within Australia exceeds $150 million. On a global level, Pirtek encompasses over 300 branches with 1500 mobile service vehicles. Outside Australia, Pirtek operates in the United Kingdom, North America, New Zealand, Singapore and South Africa.

Pirtek also boasts a National Association of Testing Authorities (NATA) approved laboratory at its King?s Park facility which it not only uses for its own quality control but which it also leases to outside clients.

?Utilising more than $1 million in test equipment, the lab has been instrumental in the Komatsu-Pirtek partnership,? Glenn Duncan added. ?We are able to manufacture hose assemblies using Bridgestone hose fittings and testing them in every point of compliance with Komatsu?s own standards.Using KES, we have developed a hose matrix that will be available to all of our branches. Our longstanding relationship with Bridgestone has ensured we can provide security of supply for all Komatsu customers.?

Another likely factor in the Pirtek-Komatsu partnership was Pirtek?s commitment to training. Each of its mobile service technicians is trained to Certificate II in engineering (high pressure hose assembly), which is a nationally recognised qualification issued by the Vocational Education and Training Accreditation Board (VETAB). Every branch also has an accredited trainer who assesses new employees in training and Pirtek?s head office employs a dedicated national training manager. Employees must also undertake refresher training each year so that they are aware of the latest developments in the hydraulics industry. As Pirtek technicians will be entrusted with the hose assembly to the KES benchmark, it is no surprise then that they have had extensive tuition. Indeed, on a press tour of Pirtek?s warehouse, one of the technicians was put through his paces as part of a hose assembly demonstration.

Glenn described Pirtek?s new alliance with Komatsu as a ?breakthrough partnership? and an opportunity about which many Australian companies ?can only dream? to significantly increase the size of Pirtek?s business and to expand its accessibility to the machinery market.
?In our 30th year, we are now honoured to work with Komatsu in developing this partnership,? he said. ?We do not for one minute underestimate the extent of the task at hand. We will need to work hard to ensure the integrity of the Komatsu system is upheld.?

SERVICING THE CUSTOMERS
Both Komatsu and Pirtek are confident that Komatsu customers will receive a replacement hose assembly from Pirtek within 72 hours of order. Depending on geographical location, 90 per cent of those customers should also be serviced within 24 hours.

Glenn Duncan added this response time could be even less. ?Most of our networks are under a one hour response time, so if we?re down the road, it?s just one hour, so we?re just reducing it all the time,? he said.

?Downtime is very important and that?s where a company would be pressured to use an aftermarket product. So if we have a fast response time, we are reducing the temptation for a customer to not use the original product.?

Scott Grant also emphasised that in addition to speedy delivery, the Komatsu-Pirtek affiliation would deliver on quality and price.
?Every Pirtek manufactured hose will be of the same quality as the Komatsu factory manufactured equivalent with a warranty to provide peace of mind,? he stressed.

?Price revealed itself to be the limiting factor when it came to making the decision to purchase genuine hydraulic hose assemblies. Not only were our factory fitments up to 50 per cent more expensive than their aftermarket competitors, they were difficult to source and quite often took days to arrive.

?Now with genuine fittings available, no customer should need to fit an aftermarket hose ever again. We also have an industry-leading warranty in this country at six months. This compares to the aftermarket industry?s varied warranty structure which generally averages out to only seven days.?

FUTURE ROLLOUT
The Komatsu-Pirtek partnership commences on 1 June. Quarry customers will be able to source the new service by contacting Komatsu Australia and Pirtek Fluid Systems? local service centres and outlets.

Both parties are optimistic about the partnership, with the improvement of the international financial climate and with the Australian mining industry expected to be on the cusp of another commodities ?super cycle?. They acknowledge that this ?world first? model could yet be adopted by Komatsu abroad.

Glenn Duncan said the programme would be extended to New Zealand before year?s end because of its ?very similar market conditions? to Australia and the partnership could also be extended to South Africa, ?again because of the similarities of their market with Australia?.
In addition, Komatsu is seeking permission to apply this intellectual property arrangement to the bigger machines that it sources from its plants in Germany. The Komatsu-Pirtek partnership will initially focus on Komatsu?s Japanese-manufactured machines, which account for more than 83 per cent of all Komatsu machines in service in Australia.

?What we have announced is a world first and when it achieves the level of success that we expect, it could become the template for the supply and service of supply of genuine hose assemblies worldwide,? predicted Bill Pike.

?So for the reasons I?ve outlined, this is a significant announcement, one that contains within it benefits for Komatsu, Pirtek and most importantly Komatsu operators Australia-wide.?

Damian Christie attended the announcement of the Komatsu-Pirtek partnership at Pirtek Fluid Systems, King?s Park, NSW, on 28 April 2010.

KES: THE KOMATSU ENGINEERING STANDARD

All Komatsu equipment is manufactured to one standard – the Komatsu Engineering Standard (KES).
Every component used to build a Komatsu machine must adhere to KES – the company?s own quality specification – to ensure maximum durability and reliability of the equipment.

KES is an in-house standard for all companies within the Komatsu Group. Items and contents among Komatsu?s proprietary technologies that are not regulated by the International Standards Organisation (ISO) and Japanese Industrial Standards (JIS) are standardised by the KES.

In many cases, KES exceeds the requirements of the relevant ISO, JIS and German Institute of Standardisation (DIN) standards, as is the situation for hydraulic hoses.

KES ensures that Komatsu manufactures equipment with a superior level of quality to meet the needs of the customer. It aims to minimise machine downtime, a key factor in ensuring the long-term profitability of any equipment purchase.

?Komatsu machines have long been the choice of private operators and government fleets alike,? said Komatsu Australia president Bill Pike.
?Komatsu machines are highly sought after on the used equipment market, keeping resale values high. Whole-of-life cost for Komatsu machinery makes it a favourable choice for operators looking to maximise return on their investment,? he said.

KES also applies to every Japanese-built Komatsu replacement spare part – a standard to which aftermarket suppliers do not have access.
Genuine Komatsu spare parts are designed for ease of fitment. Because they meet KES, they have been manufactured to restore the functionality of the machine to meet the original factory specification.

According to Bill Pike, using the correct genuine spare parts is the best way to guarantee the ongoing reliability and profitability of any Komatsu machine.

?Aftermarket ?fit for purpose? spare parts simply aren?t built to KES – and although they may look identical, the devil is in the detail,? he said.

?Delivering market best practice customer service and spare parts support is a cornerstone of Komatsu?s commitment, which is to ensure the long-term durability of every machine we sell,? he said.

Komatsu Australia?s spare parts warehousing operations are a joint venture with Toll Australia.

Warehouse facilities in Sydney, Brisbane and Perth are backed up by Komatsu?s 31 branches, 15 contract sites, over 20 residents and more than 280 mobile service units.

The Komatsu-Toll system aims to deliver line item spare parts to customers within 72 hours of placing an order – with over 90 per cent of spare parts delivered within 24 hours.

Source: Komatsu Australia/Pirtek Fluid Systems/The Project Group

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