Global Logistics and Supply Chain Management Analysis: Komatsu Report

This report delves into the global logistics and supply chain management practices of Komatsu, a multinational corporation. It begins with an executive summary and introduction to Komatsu, outlining its products, services, and global presence. The report then explores transport regulations, public policy, and strategic supply chain management within the company. It examines various global transportation modes, including motor carriers, railroads, airlines, water carriers, and pipelines. Furthermore, it addresses transportation security and risk management, supported by literature review and Komatsu's practices. The analysis incorporates academic and practitioner literature, providing a comprehensive overview of the subject matter. The report concludes with recommendations for Komatsu, offering insights into enhancing its global logistics and supply chain operations.

Running head: GLOBAL LOGISTICS AND SUPPLY CHAIN MANAGEMENT
Global logistics and supply chain management
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GLOBAL LOGISTICS AND SUPPLY CHAIN MANAGEMENT
Executive summary:
The report elucidates the understanding of the global logistics and supply chain practice in the
context of the organization that is deeply involved in the global logistics. The selected
organization for the evaluation is KOMATSU that is reviewed in terms of its size, facilities,
supply chain management, risk management and product and services. In addition to the
discussion presented in the context of the selected organization, analysis of the terms such as
transportation regulation, transportation modes, transportation security and risk management is
also supported from the facts of literature review.

GLOBAL LOGISTICS AND SUPPLY CHAIN MANAGEMENT
Table of Contents
Introduction:....................................................................................................................................3
Discussion:.......................................................................................................................................3
Transport regulation and public policy:...........................................................................................3
Strategic supply chain management:...............................................................................................3
Global Transportation Modes – Motor Carriers & Railroads..........................................................3
Global Transportation Modes – Airlines, Water Carriers and Pipelines.........................................3
Transportation Security...................................................................................................................3
Transportation Risk Management....................................................................................................3
Recommendation:............................................................................................................................3
Conclusion:......................................................................................................................................3
References list:.................................................................................................................................4

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Introduction:
The report has been prepared to gain an understanding of the practices of global logistics
and supply chain management. Analysis of the supply chain management has been presented in
the context of the selected organization Komatsu that is a multinational corporation of Japan
engaged in construction, manufacturing, forestry, mining and military equipment along with the
industrial equipment such as thermoelectric generators, lasers and press machines. Komatsu is an
international leader in the field of mining and construction equipment, is a diversified producer
of industrial use product and services, and was established in year 1921. Organization is
committed to provide innovative and safe products and services that would meet the expectation
and needs of the customers all around the world (home.komatsu, 2019).
Company has two divisions of the products and services which comprise of industrial
machinery and others and mining, construction and utility equipment. The products under the
former include large presses, press brake, small and medium sized enterprise, plasma cutting
machines, laser cutting machines and machine tools such as crankshaft millers, transfer
machines, machining centers, battery production unit and grinders, temperature control
equipment and defense related equipment. Under the construction utility and mining equipment,
organization is engaged in the production of continuous miners, electric rope shovels, hydraulic
excavator, bulldozers, wheel loaders, dump trucks, motor graders, mini excavators, other specific
equipment, mining equipment and attachment and parts. It also produces forestry equipment’s
such as forwarder, harvester, feller buncher and forestry specific machines based on the
construction equipment’s (komatsu.co.za, 2019).

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Komatsu targets a broad range of customer and the large companies are the customers in
the mining segment who are engaged in the development of natural products. Some of its
customers in the construction segment are tiny and large construction companies and individuals
and these implies that the company has a diversified portfolio of customers.
The consolidated net sales in the fiscal year for 2017 has increased by 38.7%, it aims to
grow above the industry average rate, and the total amount of revenue for the fiscal year 2017
stood at 2250 crores USD. Financial year 2018 marked an increase in the operating income to
JPY 271.5 million that is by 56.0% due to expanding sales volume that has expanded the volume
of sales and this has caused operating income to improve to 10.9%. In addition to this, there was
an in increase in the operating income due to acquisition to JPY 35.3 billion and this has
translated the operating income ratio to 11.1% (home.komatsu, 2019).
For the analysis of the logistic management, elaborated discussion is presented on the
strategic supply chain management of organization, its public policy and transportation
regulation, global transportation modes, transportation risk management and transportation
security. Analysis of all the facts concerning the discussion is supported by practitioner and
academic literatures. The objective of this paper is to create and gain a better understanding of
the factors associated with the supply chain management. Furthermore, total number of
employees of Komatsu limited is recorded at 59632. Total number of foreign citizen employees
have grown and this accounted for 67% of total number of employees of Komatsu group
(home.komatsu, 2019).
The announcement of new plan for its headquarter in the district of Milwaukee’s Harbor
has provided Komatsu with the opportunity for advancing the state of art facilities that helps in

GLOBAL LOGISTICS AND SUPPLY CHAIN MANAGEMENT
capabilities expansion on a global scale. The new facilities are designed for enhancing
efficiency, safety and environmental sustainability that helps in delivering innovative solutions
and providing better services to customers (mining.komatsu 2019).
Discussion:
Transport regulation and public policy:
Research on the intermodal transportation has great potential due to its remarkable
growth that do not match with the comparable level of academic activity. Selection of the
transportation mode is key decision in logistics management along with the carrier and mode of
choice. It requires the identification of relevant performance variables such as service level, rate
of negotiation along with evaluation of performance of carrier. Since distribution and
transportation is instrumental in gaining competitive advantage, transportation is more than the
incurred cost. One of the important challenges that is witnessed in logistics management is
international growth as higher cost is yield due to global transportation to the markets and from
sources (Dubey et al., 2017).
The public policy is an increased activity in the field of environmental, social
responsibility and this reflect the heightened public and government concerns, and it is supported
by emerging literature on green supply chain. The public and state environmental concerns is
faced by the logistics industry such as waste disposal, air and water pollution and consumption of
energy. It is indicated by the analysis of empirical research that the operation of current logistics
is not viewed in terms of sustainable logistics that are neither depending strategically nor
operations on the public regulation and policies. Regulations and policies only act as one of the

GLOBAL LOGISTICS AND SUPPLY CHAIN MANAGEMENT
factors driving the logistic industry towards sustainability. However, the market consolidation is
caused by the measures and certain policies and complying with such environmental standard is
tough for transport business.
Komatsu observes the regulation and laws concerning the health and safety by setting up
the targets for activities along with compliance with emission regulations. The company is
engaged in the business operation by complying with the rules of business community and laws
and regulations and take continuous efforts to reduce the impact on environment. Moreover,
Komatsu delivers the product with exceptional safety by meeting the latest international standard
and laws, which are unsurpassed to the customers by other competitors.
Strategic supply chain management:
Supply chain management plays a crucial role in the current competitive scenario as they
also provides competitive advantage to prevail in the industry. Strategic supply chain would help
organization in managing the integration of several functional areas for enhancing the flow of
information from strategic suppliers through distribution chain and manufacturing units. It would
cause to develop and enhance sustainable competitive advantage by satisfying customers and
cost reduction. Strategic supply chain management helps the firms in transcending by opening
the door to unique blended strategies. The primary driver is the strategy made within the firm
and under this; organizations are constrained from using generic strategy such as low cost leader
or prospector (Abbasi & Nilsson, 2016).

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The diagram above depicts the problem solving strategy for simulation in the logistics
company using distributed model. The problems in the experimentation of supply chain
management is provided with the alternative solutions using the distributed model based strategy
incorporating all the functionalities. Distributed model forms the basis of the problem solving
strategy as it helps in extending the specification step.
Sales figures of dealers worldwide is checked by Komatsu on a real time basis and the
level of inventory is kept low by combining the data on sales figure with data related to
inventories and production at distributors, plant and dealers. The company has been successful in
lowering the distributor energy to zero in countries such as India, North America, China, Japan,

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Brazil, Thailand and Indonesia. It is prioritized to provide support to the customers throughout
the life cycle of the products and these services comprised of supplying the re manufactured
components, replacement parts, equipment rental, retail finance and sale of used equipment
(Saenz et al., 2015). Komatsu differentiate itself from the competitors by offering a wide range
of services to their customers when purchasing new equipment and thereby avoids price
competition. Therefore, it can be inferred that Komatsu has not implemented the generic strategy
and competes on providing the customers with wide range of services. The after sales service of
Komatsu is placed as a system that helps in keeping the new products selling and customers are
advised by dealers on the way to improve machine utilization using the KOMTRAX system that
assist in analysis of data obtained from machines (komatsu.com.au, 2019). In addition to this,
based on usage data obtained through the system, recommendation is made to customers on
maintenance services and replacement.
Global Transportation Modes – Motor Carriers & Railroads
For most of the firms, transportation is the most crucial single element in the logistic
costs and it adds value to the product by allowing then to reach safely to the customers. Business
can produce on much larger scale with an improved transport management system as they have
the required demand levels and capacity to support more volumes. The operating cost of logistics
enterprise is affected by the transportation accessibility and cost of land. Manufacturing and
distributive trades, high value products and short distance is favored by the characteristics of
motor carrier. Motor carriers because of its flexibility have captured all the freights moving from
warehouse and wholesaler to retail stores (König & Spinler, 2016). However, the difficulties is
associated with the increasing cost and despite of the issues associated with the highway

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transportation, they would continue to function of the logistics function’s backbone. Railroad on
other hand has the capacity of significantly handling revenue and intercity tonnage and
efficiently transport large tonnage over distance. Nonetheless, because of expensive investment,
operations on railroads incur higher fixed costs (Lam & Dai, 2015).
Global Transportation Modes – Airlines, Water Carriers and Pipelines
Pipeline mode of transportation is unlimited as it can be laid under water or on land and
the cost of pipeline construction vary in accordance with the diameter and the cost increase in
proportion to the increase in distance. Hence, amongst all the mode of transportation, pipelines
has lower variable cost and higher fixed cost. Higher fixed cost is attributable to requirement and
construction for control stations, right of away and pumping capacity. Once the pipeline has been
constructed, the variable cost incurred on it would be lower as they are not labor intensive. The
limitations of using pipeline as the mode of transport comes with respect to the commodities that
are transported (Wong et al., 2015).
Practically, air routes are unlimited and the constraints of this particular mode of
transportation are multidimensional and involve the site. Recently, air transportation has been
playing a growing role in global logistics and has been accommodating growing quantities of
high value freight. Higher cost is one prohibitive aspect of air transport; however, high speed
would help in trading off such cost along with other elements such as logistic design and
elimination of inventory and warehouse. The capability of airfreights is limited by aircraft
availability and lift capacity. However, the assignment of dedicated planes to freight operation is
limited by the erratic nature of freight demand coupled with higher cost of jet aircraft
(marketrealist.com, 2016). For many industries, airfreight logistics is essential to complete their

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functions and supply chain. It is indicated by the data from research that the transport market of
freight keeps growing.
In order to provide the services for meeting the demand of customers, Komatsu covers all
the modes of transport and the team suggesting the most effective and efficient options of
shipping available. Customers are provided with highly effective transport solutions that are
backed by the supporting services. Komatsu offers both unmatched flexibility and dependability
with the customized solutions concerning road truck. The consolidation less than truckload
services and co load helps in improving the distribution pipeline and reducing the cost.
Furthermore, the strategic alliance around the globe provide customers with the flexibility to
select from a range of ocean and freight service options and these are tailored seamlessly to
compete with end to end visibility (Yawar & Seuring, 2017).
Transportation Security
When selecting the transportation routes, it is required by the transport companies to take
security concerns and the transportation and logistics companies should promptly respond any
change in the risk levels. A close look is taken by the organization on how dependent their
business is on particular chokepoints and logistics hubs. Some of the study reveals that the
measures of security in the logistic and supply chain is not implemented by many organization
and they are not properly acquainted with the security issues. Security in the transportation
system of the logistics is the application of procedures, policies and technology for protection of
the supply chain assets. Security threats in the supply chain is analyzed with the help of tool such
as risk matrix, which classifies the measures concerning security. The matrix has built two
common section when developing the security plans that is the risks, which has high possible

GLOBAL LOGISTICS AND SUPPLY CHAIN MANAGEMENT
impact and low probability and risk representing low impact and high probability (Formentini &
Taticchi, 2016). It is revealed by the research work that the pressure from government influences
the implementation of security measures by the company that is reflected in the number of
mandatory regulations. However, these are seen as obstruction in smooth and efficient
functioning of the supply chain because of extension o time in movement of goods and higher
cost (Ho et al., 2017).
Transportation Risk Management
Over the recent decades, there has been the development in the risk management of
supply chain and it deals with the identification and management of risks in the supply chain.
Literature review presents various methods for the risk management of supply chain and this
include stochastic approach and deterministic approach. It is demonstrated in one of the papers
that the effective organization has the risk management framework of supply chain that is closely
related to operational and strategic realities of the activity. A tool helps in the dissemination and
the framework of risk management of supply chain depicts understanding the disruptions of the
supply chain for tracing its operational performance. Literature review has performed empirical
analysis regarding the examination of key drivers of supply chain and its vulnerability. It has
been found from the analysis that better supply chain management is dependent upon the high
implementation degree of risk management strategies (Aven, 2016).
All the uncertainties that could threaten the sustained growth of group is recognized by
Komatsu group such as product quality concerns, environmental issues, elimination of anti-social
forces and information security problems. Komatsu has established rules for risk management
that helps in correctly recognizing and managing the risks in addition to basic policy concerning

GLOBAL LOGISTICS AND SUPPLY CHAIN MANAGEMENT
risk management for ensuring stable development and business continuity. Moreover, an
established risk management committee reviews the risk management system by improving and
evaluating upon the response measures that helps in controlling of the risks. A channel for risk
reporting and a manual for creating risk management is also being established by Komatsu for
reinforcing the structure of risk management across the group. The group wide system is also
strengthened for contacting employees during emergency by the introduction of broad area
wireless devices, safety confirmation systems and conducting regular training on communication
and safety reporting (Home.komatsu, 2019).
Risk management structure:
(Source: home.komatsu, 2019)
Recommendation:
It is recognized in this competitive world that maximum job efficiency is needed to be
achieved by the customers in their working environment and gaining advantage that would lower

GLOBAL LOGISTICS AND SUPPLY CHAIN MANAGEMENT
operational cost and increasing the efficiency and production. Therefore, it is recommended to
Komatsu to opt for the best option that helps in maximizing the machine performance and
enhancing productivity. The optimal fleet recommendation should help customers in minimizing
the machine downtime, maximizing the durability and reliability of the equipment and improving
the performance (Rajeev 2017). Furthermore, the environmental and safety performance should
be refined by the development of new models for outstanding improvement in environmental
performance and productivity.
Conclusion:
From the analysis of the information gathered on the Komatsu, it has been ascertained
that company has implemented a strategic supply chain management that has caused them to
gain competitive advantage in terms of providing service, as they do not compete on the price
grounds. A competitive strategy has been created by Komatsu that helps in prevention of the
commoditization of the products and profits is generated through the entire life cycle of the
product. Company has evolved into a technological leadership with an efficient and effective
after sales service with low inventories due to the unique combination of activities. Moreover,
the risk management structure is designed effectively that helps in dealing with the risks faced at
different level.

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References list:
Abbasi, M., & Nilsson, F. (2016). Developing environmentally sustainable logistics: Exploring
themes and challenges from a logistics service providers’ perspective. Transportation
Research Part D: Transport and Environment, 46, 273-283.
Aven, T. (2016). Risk assessment and risk management: Review of recent advances on their
foundation. European Journal of Operational Research, 253(1), 1-13.
Dubey, R., Gunasekaran, A., Papadopoulos, T., Childe, S. J., Shibin, K. T., & Wamba, S. F.
(2017). Sustainable supply chain management: framework and further research
directions. Journal of Cleaner Production, 142, 1119-1130.
Formentini, M., & Taticchi, P. (2016). Corporate sustainability approaches and governance
mechanisms in sustainable supply chain management. Journal of Cleaner
Production, 112, 1920-1933.
Ho, W., Zheng, T., Yildiz, H., & Talluri, S. (2015). Supply chain risk management: a literature
review. International Journal of Production Research, 53(16), 5031-5069.

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Home.komatsu. (2019). Retrieved 27 August 2019, from
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https://mining.komatsu/. (2019). Komatsu Mining Corp. announces plans for new headquarters
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headquarters-in-milwaukee-harbor-district
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vulnerability of shippers: Development of a conceptual risk management framework. The
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chain management: A literature review. Journal of Cleaner Production, 162, 299-314.

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Saenz, M. J., Koufteros, X., Touboulic, A., & Walker, H. (2015). Theories in sustainable supply
chain management: a structured literature review. International Journal of Physical
Distribution & Logistics Management.
Will Joy Global’s Shareholders Accept Komatsu’s Proposal for Acquisition?. (2016). Market
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Wong, C. Y., Wong, C. W., & Boon-Itt, S. (2015). Integrating environmental management into
supply chains: a systematic literature review and theoretical framework. International
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Yawar, S. A., & Seuring, S. (2017). Management of social issues in supply chains: a literature
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