YASUYUKI ISHIIExecutive officer in charge of SCM strategy
An efficient SCM foundation is essential to the stable operation of the Kirin Group's businesses and to the continued creation of value.
At Kirin Company, the manufacturing departments, plants, and distribution departments of the operating companies work closely together to provide customers with a steady supply of safe, secure products at low cost. In addition to the technologies and know-how that we have cultivated, we are aggressively introducing new technologies and facilities. In this way, we are working to create new value. In particular, in the midst of a shift toward customers enjoying products in individual ways, it is necessary to provide a diverse array of products and services, and the establishment of SCM for that purpose has become an important task.
In addition, in recent years the operating environment in the pharmaceutical industry has changed dramatically. To respond to the Japanese government's measures to control healthcare expenditures, the reevaluation of manufacturing costs has become a necessity. At Kyowa Hakko Kirin, a reorganization of manufacturing bases is currently under way, and through this initiative, Kyowa Hakko Kirin will strengthen its cost competitiveness by achieving increased efficiency in manufacturing and a high GMP* level. In addition, Kyowa Hakko Kirin will continue working to enhance manufacturing technologies and will maintain and improve its competitive advantage.
In recent years, customer preferences in the beer market have diversified, and there is an increased need for beers that enable greater enjoyment of individuality by reflecting varying tastes and different ideas from brewers. In response to these trends, Kirin Brewery is moving ahead with the development and introduction of new technology that will enable small-lot production of a wide range of products. For example, progress is being made with the utilization of cross-flow filtration equipment. In comparison with conventional diatomaceous earth filtration equipment, when switching between types of beer cross-flow filtering limits inefficiency as well as the generation of waste. In this way, Kirin Brewery is building a system that can handle not only the production of established products such as Ichiban Shibori beer but also the low-cost, timely manufacturing of diverse products in the amounts needed. In addition, in 2014 we established Kirin Innovation Factory Yokohama, which has small-scale, wide variety brewing facilities, at the Yokohama Plant. In 2015, in Daikanyama, Tokyo, we opened SPRING VALLEY BREWERY TOKYO, which combines a brewery and a restaurant. These facilities are contributing to the creation of diverse value that is not limited to existing beers, such as craft beers and cider.
Kirin Beverage continues working to reduce costs, including the costs of packaging materials. These efforts are centered on PET bottle products, which account for 70% of Kirin Beverage's sales. For example, Kirin Beverage was a leader in making its own PET bottles. In 1997, Japan's first in-line PET bottle aseptic blow-fill equipment was introduced at the Matsumoto plant of Nagano Tomato (currently, Shinshu Beverage Company). In addition, in 2000 highspeed in-line PET bottle aseptic blow-fill equipment was introduced at the Kirin Beverage Shonan plant. In this way, we achieved cost reductions through mass production.
Moreover, to achieve further reductions in the cost of packaging materials, steps were taken to conduct in-house manufacturing of the preform used to form PET bottles. In 2003, an industry first was achieved with the introduction of preform molding machinery on a beverage production line at Kirin Distillery.
Moving forward, through the aggressive introduction of new production technologies, we will strive to reinforce our cost competitiveness and increase corporate value.
Each year, top management of the technical departments of Group companies, such as Kirin Holdings, Kirin Company, Lion, and Brasil Kirin, gather for the meeting of the Supply Chain & Technical Committee, where they discuss collaboration among a wide range of fields related to SCM, including R&D, engineering, quality assurance, environmental technologies, and production technologies. At these meetings, examples of successful initiatives are shared, and the committee discusses and makes decisions regarding Groupwide themes addressed through working groups in each field. In these ways, we are working to generate Group synergies.
Moreover, each year we hold the Global Seeds and Needs Forum to foster the utilization of Kirin Company's advanced R&D functions at Group companies. The members of Kirin Company's R&D department directly visit operating companies in each region and match the technology seeds of Kirin Company to the needs of the local operating companies. In this way, we are working to accelerate the growth of each company.
Kirin Engineering is a company that handles the construction of plants and the installation, expansion, and repair of manufacturing facilities. Kirin Engineering has special strengths in food and pharmaceutical plants. In addition, Kirin Engineering is also leveraging these strengths to implement business initiatives outside the Group in the food, pharmaceutical, and biotechnology industries. Kirin Engineering has developed a workforce of engineers in a variety of fields. These engineers have acquired experience and technologies in plant construction and repair in Japan, and now they are expanding their activities to overseas regions. Engineering that leverages specialized technologies cultivated through a wide range of projects and the perspective of users supports Kirin's initiatives to maintain and strengthen the SCM foundation and contributes to the creation of value that addresses the needs of customers.
The Kirin Group conducts procurement activities in accordance with five basic policies: (1) Steady focus on quality, (2) Fair and open business transactions, (3) Compliance, (4) Environmental stewardship, and (5) Relationships of mutual trust and influence with suppliers.
In conducting its procurement activities in the alcoholic beverages, non-alcoholic beverages, foods, and pharmaceuticals and bio-chemicals businesses, the Kirin Group's objectives are Q (quality), C (cost), and D (delivery) + sustainable procurement.
The alcoholic beverages, non-alcoholic beverages, and food businesses use nature's bounty as raw materials, centered on agricultural products. Accordingly, these businesses are directly affected by changes in harvest amounts stemming from climate change and by fluctuations in market prices resulting from changes in the supplydemand balance. Consequently, we are working to maintain a stable supply chain while collaborating with suppliers so that we can steadily provide safe, secure products at optimal prices.
For example, we procure malt, which is a primary ingredient of beer, from three continents—North America, Europe, and Australia. In addition, we are coordinating procurement measures to ensure that we can acquire the required amounts of materials and to minimize the influence of market prices. For example, we are utilizing longterm contracts with producers of hops.
For major suppliers (approximately 75% of total procurement amount), each year we implement a survey regarding society's demands and expectations for the supply chain. We ask suppliers to submit a "Supplier CSR Confirmation," and to follow compliance. Moreover, to ensure fair business practices, we conduct a supplier satisfaction survey each year to receive feedback about the Kirin Group's procurement activities. Moving forward, we will strive to implement open, fair transactions through two-way communication.
Through these activities, while implementing a PDCA cycle we will continuously cooperate with suppliers and work to further promote CSR procurement efforts.
Since 2010, the Kirin Group has consolidated the procurement functions of Kirin Brewery, Kirin Beverage, Mercian, and other companies in the Japan Integrated Beverages Business, including raw materials, packaging materials, sales materials, general materials, equipment, and media. These initiatives have achieved reductions in costs and increases in efficiency. In 2015, we commenced initiatives targeting joint procurement in the pharmaceuticals and bio-chemicals business. Furthermore, overseas we are collaborating on a global level with subsidiaries in Oceania and Brazil, with implementation starting from the establishment of procurement strategies. We are working to maximize the Group's corporate value through the joint procurement of malt, which is a primary ingredient of beer, and other commonly used items, and through the mutual sharing of best practices.
In accordance with quality policies that prioritize safety and customer satisfaction, the Kirin Group is promoting quality management that is responsive to the distinctive characters of the Group's businesses, which extend around the world, and to the characteristics and needs of various regions.
The final quality of products and services is assured by departments that are independent from the supply chain. For the Japan Integrated Beverages Business, we are consolidating analysis and testing operations at the Integrated Beverage Analysis Center of Kirin Company's Quality Assurance Department.
Working closely with the supply chain, the Integrated Beverage Analysis Center works to secure the safety and security of products and services, which form the foundation of value creation. These include raw material acceptance inspections and product analyses as well as development assessments for new products and new production technologies, investigations based on inquiries from customers, and quality assessments for sales promotion materials.
Aiming to support the growth and development of Japanese wines through Chateau Mercian, in July 2015 Mercian began leasing farmland in the Kataoka district of Shiojiri City, Nagano Prefecture, in order to expand self-managed vineyards. Based on the concepts of appropriate land and appropriate varieties, since the 1970s Mercian has leveraged the grape cultivation and wine-making know-how cultivated through Chateau Mercian. Mercian has pursued the distinctive quality and characteristics of Japanese wine so that Japan will become a world-class wine-producing region. In these ways, Mercian has worked to achieve long-term growth. Plans call for grape planting to begin in the spring of 2017 and for the development of a mature vineyard in 2023.
Mercian will conduct testing initiatives that can only be implemented on self-managed vineyards, acquire know-how in regard to grape cultivation, and provide feedback for cultivators working under contract. In addition, in consideration of the agricultural problems of an aging workforce and people choosing to give up farming, Mercian will explore a new form of agriculture with grapes cultivated by corporations.