KONE Sustainability Report 2017

KONE 2017 | SUSTAINABILITY REPORT Enabling our partners and societies to prosper 41 document the transformation of raw mate- rials to finished goods. The MES provides information that helps understand how current conditions on the factory floor can be optimized to improve production output and implement production quality improvements. KONE also started a pro- ject to develop its long-term product life cycle management. The 10X Better Factory program con- tinued aiming to further enhance the quality of our in-house production and to support the harmonization of process con- trol activities in production lines. Investments in production automation, especially in factories in Italy, Finland, the Czech Republic and China, continued. The volume ramp-up of KONE’s newest factory in Allen, Texas, was com- pleted during 2017. First opened in 2016, the new site enables more efficient logis- tics operations due to reduced transpor- tation distances. KONE’s project to build a second factory in India has moved to the construction phase which will continue during the year 2018. In logistics, the connections between China and Europe have developed signif- icantly. There are currently several direct rail connections between the two conti- nents, and the latest one is direct route from Finland to China. This is important because it allows us to minimize the usage of air freight and we have already achieved significant results in this regard in 2017. Responding to customers’ needs We adapt our supply chain to take cus- tomers’ different requirements into account. One of the latest examples of this involves packaging development, where we are working on solutions to allow us to better accommodate various customer needs and make installation as smooth as possible. We collect customer feedback on the quality performance of our supply chain operations systematically and analyze it using Six Sigma tools before taking cor- rective action. According to the global NPI Customer Loyalty Survey we carry out each year, our efforts to achieve supply chain excellence have been successful from the perspective of both product quality and installation quality. However, one of KONE's suppli- ers had delivery issues in 2017, with the situation improving during the year. KONE and the supplier worked to mitigate the impact to KONE's customers. This was one of the reasons contribution to the fact that we were not able to meet the 3% annual carbon footprint decrease target. Better quality and productivity through learning At KONE, we employ a set of techniques and tools to improve the productivity and quality of our operations. By applying Lean and Six Sigma philosophies, we are able to reduce waste and control process variation throughout the entire supply chain as well as in product and process transitions. In the supply line the trainings during 2017 focused especially on overall capa- bility development. A large number of employees gained new skills when they received Kaizen training as part of Kaizen events. Each production unit completed many corrective actions as part of a continuous improvement program with a greater focus on full chain activities. We have also continued our Lean Capability Process Control & Zero Defect activities by con- ducting regular assessments and setting targets and action plans. We continued implementing and maintaining the 5S* method in our offices, factories, installation sites, and distribution centers. Furthermore, we have developed a Lean manual and a management model of continuous improvement in implement- ing these principles. Several hundred Lean and over 100 Six Sigma projects were also successfully completed in 2017. To date, over 280 KONE employees have qualified as Six Sigma Green Belts and Black Belts, and the training continued during 2017 in the same way as in previous years. LONG-TERM RELATIONSHIPS WITH OUR SUPPLIERS We seek to build long-term relationships with our suppliers and customers. Our supplier relationships provide business opportunities and employment for thou- sands of suppliers globally. KONE only produces selected compo- nents in-house, and our own production consists largely of the assembly of sourced components. Our suppliers and their sub- tier suppliers are a critical part of KONE’s supply chain. Our approximately 20,000 suppliers provide KONE with raw materi- als, components, modules, and logistics and installation services. In addition, there are approximately 10,000 suppliers who deliver indirect materials and services to KONE. All our new suppliers must sign KONE’s Supplier Code of Conduct and all our stra- tegic suppliers are required to comply with ISO 14001 certification. Each year, KONE delivers over 3.4 million packages from distribution centers to installation sites, and around 1.4 million packages of spare parts from distribution centers to customer sites. 3.4 million packages amount to a weight of 1,370 million kilograms, or 3.3 million cubic meters in volume. Top 10 supplier locations 1 • China • Italy • Finland • United States • Austria • India • Czech Republic • Estonia • Mexico • Germany 1 Suppliers that provide products for new equipment to KONE distribution centers and factories. *5S methodology: sort, stabilize, shine, standardize, and sustain.