Abhishek Panda

MBA/0082/57

Komatsu Komtrax

1. Assess the impact of Komtrax on Komatsu?

Komtrax was a data management system installed in the equipment made by Komatsu which captured machine
consumption and performance related data and reported it on a daily basis to servers maintained by the company. This
information was then presented for the viewing for customers and Komatsu analysts. The impact of Komtrax can analysed
as follows:

a. Consumption pattern identification

By integrating the equipment with multiple application servers via Komtrax controllers, Komatsu was able to gain
insights into the differences between different markets. For example, it was found that Chinese operators ran their
small excavators 20 hours per day, which was much higher than was typical elsewhere. This called for toughening of
quality standards for China market. In Saudi Arabia and UAE, the machines were operated under very high
temperature and dusty conditions, which required for some modifications in the bull dozers for middle east market.

b. Data driven production planning

Construction activity and economic growth usually move in tandem and this enabled Komatsu to identify incipient
declining trends across the markets. By leveraging the data from Komtrax, Komatsu moved away from its old method
of manufacturing based in inputs from marketing team and moved on to production based on forecasting using
Komtrax. This provided coordination of production schedules across the company based on rolling retail forecasts
and actual operational data.

c. Insight driven services to customers leading to value enhancement of used equipment

By enabling the prospective and existing buyers to see the complete usage and maintenance history of each machine,
it helped the customers gain insights about the optimal usage and maintenance so as to reduce fuel consumption and
better manage rental and used model offerings (“Komtrax Plus” installed on mining machines). For rental based
models, it helped the customers to manage their fleet in a much efficient way through real time usage and location
data. The rental companies leveraged the data to minimize the distance and transportation cost of moving machines
between job sites.

d. Management of delinquent accounts

Through remote control access to the Komtrax controller (essential for operation of the equipment), Komatsu was
able to disable machines (purchased on installment payment plans) for which buyers had fallen behind on payments.

2. How should Komatsu move ahead?

Komtrax offered a technological edge to the customer, but it failed to gain traction in emerging markets such as India and
China, where the users often did not recognize the added value, and thus were much less willing to pay for it. Komatsu
passed on the cost of the data communication services for the first 2 years on the customers, which again exacerbated the
problem in emerging markets. Though, it was well received in markets where customers valued the additional services.

It faced competition from against rivals with low cost and local customer service advantages in emerging markets.
Emerging markets were extremely slow at adopting new technologies as labor savings had less importance as labor costs
were low. Komatsu can implement the following steps to achieve long term competitive advantage:

a. Educate the customers

Cost of ownership, including fuel and actual repair costs, was as much as 5-8 times the initial purchase price of the
equipment. Customers are often unaware of the magnitude of such associated costs, due to which they don’t value the
additional services which improve their operational efficiency. Along with displaying customers the performance
data, it can add a “Savings achieved” metric to make the customer aware of the tangible benefits of the service.

b. Insights to distributors
Komatsu has to respond to orders from distributors regardless of the true underlying demand, which hampered its
future revenue due to dormant existing inventory of the distributors. It can provide consultancy services to the
distributors to plan their demand orders effectively to synchronize the production with true demand.

By making the stakeholders aware of the tangible benefits of Komtrax, Komatsu can gain higher sales for its
equipment.
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