This is the biggest challenge we face in setting up an independent operation for the Americas,” says CEO Quinn of the effort to get the parts business up and running well. Moving heavy loads of sand and concrete at construction sites, or rocks and ore at mines, causes severe wear on excavator undercarriages and bucket parts such as teeth.
Boosting Parts Supply
There is considerable activity in parts such as these because they are consumables. Hitachi Construction Machinery data for the term ended March 2022 shows parts sales for construction machinery accounted for 10% of consolidated sales, and parts sales for mining machinery another 10%: parts make a major contribution to corporate performance, representing 20% of annual sales.
Until now, though, Hitachi Construction Machinery Americas relied on Deere to handle parts supply, and as a result, never built its own parts supply system in the Americas. “We supplied authentic Hitachi Construction Machinery parts to Deere, but only in limited quantities. We had to build our own system from pretty close to scratch, and as Quinn says, it’s our biggest challenge,” explains Hiroyoshi ‘Dai’ Tanaka, Vice President, Customer Care at Hitachi Construction Machinery Americas.
Hitachi Construction Machinery Americas opened its parts distribution center in Jackson, Georgia, completing construction in only a little more than five months, between August 2021 and the official launch of the independent operation on March 1, 2022.
“The term ‘fill rate’ refers to how much product we need to keep on hand to ensure we can fulfill a customer order,” says Tanaka. “We began supplying parts ourselves in March 2022, and while there are still a few problems, the fill rates are finally reaching reasonable levels.”
He’s confident the firm can significantly improve customer support once they get a better understanding of the local situation: “Our on-site tech support is very, very good, because we’re the company that designed and manufactured these machines. Our goal now is to thoroughly grasp the needs of each customer, and build a system to supply them with the parts they need as soon as possible. There’s no doubt in my mind that we can supply parts even more efficiently than we do now to customers throughout the Americas, so they can keep their machines running. And I plan to prove it.”
In December 2016, Hitachi Construction Machinery of Japan acquired two firms overseas: H-E Parts International, LLC in the US, and Bradken Pty Ltd in Australia. Both have considerable experience supply parts for mining machinery in the Americas, and the Japanese firm is leveraging their expertise in parts sales and supply to develop new markets.
Hitachi Construction Machinery also plans to implement a telematic service solution similar to ConSite for its parts business. “We’re planning on building on the technology used now in our ConSite Mine solution that tracks structural fatigue in parts not on regular replacement schedules,” says Tanaka. In the past, it was never possible to accurately set replacement schedules for parts like these, which rarely break but are expensive to replace. Because shipping takes time, an unexpected breakdown meant that machinery would be out of service for too long.
“If we can provide a more accurate replacement schedule, we can arrange to have parts sent from the parts center in Japan and deliver them just when they are needed. Many of our dealers are very interested in the idea. Their willingness to try it out is one of the reasons behind the American success story, I think,” he adds.
Tanaka is determined to build the parts business Hitachi Construction Machinery Americas will need to remain a leader in the sector.
Launching Rentals in Latin America
Another business sector that Hitachi Construction Machinery Americas hopes to grow into a major pillar of corporate revenue in the Americas is rentals. The construction machinery rental business is very active in North America, and manufacturers are selling hard to rental firms in anticipation of surging demand driven by the trillion-dollar Infrastructure Investment and Jobs Act. “This is an enormous business opportunity in North America,” says Vice President Sales, Simon Wilson.
“In the US, demand for construction machinery in infrastructure projects, and renewable energy generation plants is expected to remain strong for several years to come. We are exploring demand in Latin America, too. The economies of many of the nations in that region are growing. That means demand growth not only in the mining industry, but in construction machinery as well, and potentially rentals should account for a big chunk of that business,” continues Wilson.
“We have ideas to participate in rentals in a number of Latin American nations but our main focus is North America,” revealed Jason Mizen, National Rental Accounts Manager of the company. “The rental segment will continue to grow and we expect it will be 30% of our construction machinery business,” he added.
Hitachi Construction Machinery Americas already has experience in delivering construction machines to rental operators, as it’s been supplying wheel loaders directly since 2017. Wilson is confident: “We’ve accumulated quite a bit of expertise in the rental business in North America, and we plan to apply that in Latin America to make a significant contribution to Hitachi Construction Machinery Americas. By getting in on the ground floor we can offer the market new products and ideas, and drive major market growth.”
Different nations use different sizes of machinery, but Hitachi Construction Machinery Americas is already getting requests from local dealers to handle their products and plans to enter into concrete negotiations in the near future.