About Konica Minolta

Giving Shape to Ideas

November 7, 2003
Konica Minolta Holdings, Inc.
Konica Minolta Business Technologies, Inc.

Konica Minolta reveals new production strategies and fundamental procurement policies for its image information business.
(at a conference for local partners in Shenzhen, China)

Konica Minolta Business Technologies, Inc. (President: Yoshikatsu Ota) of Konica Minolta Group held a conference for its 350 (approx.) local business partners in Shenzhen, China. At this conference, held in consideration of the importance of the Chinese market, the company explained its production strategies and fundamental procurement policies to the partners.

Konica Minolta Business Technologies, Inc. has its manufacturing bases in Buji and Shilong, Guangdong, which are currently supervised by its Hong Kong-based manufacturing subsidiary, Konica Minolta Business Technologies Manufacturing (HK) Ltd, (hereinafter, “BMHK”). Konica Minolta Business Technologies has already shifted 90% of its production capacity to China, aiming at improving cost competitiveness and responsiveness to foreign exchange fluctuation.

In August 2003, Konica Minolta Business Technologies established Konica Minolta Consulting (SHENZHEN) Co., Ltd. (hereinafter, “BCSZ”), for the purpose of improving its procurement functions in China. BCSZ is now commissioned to procure mechanical and electric components and is engaged in engineering procurement for the plants in Buji and Shilong. For the future, BCSZ intends to broaden its business operations in production designing and technical support for its business partners. As the conference was the first of its kind since the business integration of Konica and Minolta, two top executives---President Ota and Senior Managing Director Sakaguchi --- attended the conference and directly presented the company's production strategies and procurement policies to its local stakeholders, emphasizing the importance of Chinese production.

[Fundamental Policy and Tactics for Production]

As a fundamental policy for production strategy, we will further enhance production speed and flexibility to boost our competitiveness. We will implement this policy specifically through the following three guidelines:

  1. Promote mobility of managerial resources of the company to quickly respond to changing business environments.
  2. Build up the highest quality and reliability in the industry.
  3. Effectively transfer and utilize the knowledge accumulated through our operations in Japan for offshore production, to create a profit-making global production structure.

As for the creation of a global production structure mentioned above, we plan to have operational roles and functions divided and shared between Japanese and Chinese operations according to the following principles: The functions borne by Japanese operations will be to pursue optimal production and procurement methods, better technologies for mass-production and competitive knowledge of mass-production through the development and production of key devices; the functions borne by Chinese operations will be to create profit-making, robust manufacturing bases for the maximization of mass-production effectiveness.

[Fundamental Tactics]
In order to complement and enhance the fundamental strategies mentioned above, we plan to implement the following five tactics:

  1. Improvement of product quality: With quality as our foremost goal, we will carry out customer-oriented production. Taking advantage of our metal molding technology, the most advanced in the industry, we will strive to improve the quality of components.
  2. Quest for low cost production: Making full use of the knowledge we have in Japan and our production capability in China, we will seek maximum profit-generation. In particular, we will seek drastic cost reduction for procurement through the enhancement of cost-effectiveness in development and manufacturing technologies.
  3. Improvement of technological capability: As mentioned in regard to the functions of Japanese operations, we will strengthen our competitiveness through enhanced development of pioneering devices, the development of digital engineering technologies and the accumulation of knowledge for mass production.
  4. Realization of production responsive to changing markets: With the help of SCM, we will reduce production lead-time to quickly respond to market demands. We will also speed up the process for new products from development to commercialization to introduction.
  5. Efficient use of managerial resources: We fully recognize the importance of optimization of the production structure and system.

[Establishment of New Manufacturing Company, “BMHK”]

Manufacturing companies formerly held by Konica and Minolta merged on October 1, 2003 to create a new company, “BMHK”. Before this integration, Minolta had its Chinese headquarters in Hong Kong, which held functions of finance, personnel, outsourcing management and procurement including procurement of electric components and planning, as well as purchasing. Additionally, Minolta was producing MFP* and laser printers through manufacturing subcontracts at its production base in Shilong, Dongguan. It also had representative offices in Shanghai and Shenzhen, providing support to subcontractors for the optional production of MFP, and engaging in procurement of mechanical components, respectively.
Similarly, before the integration, Konica had its Chinese headquarters in Hong Kong handling financial and trade-related operations, and was manufacturing copiers through manufacturing subcontracts with High Known, Ltd.", in Buji, Shenzhen. With this integration, Konica Minolta established its 100% owned subsidiary “BCSZ” in August 2003 in Shenzhen, which started operation in October taking over all procurement functions from the two companies. The plants in Shilong and Buji, currently supervised by BMHK, will continue their manufacturing operations as before for the time being.

MFP (multi function peripheral): a computer peripheral that functions as a facsimile, printer, etc. in addition to its function as a copier.

[Procurement Policies and Strategies]

BCSZ has signed on a subcontracting agreement with BMHK and has consolidated geographically dispersed procurement offices in Hong Kong and Shenzhen into one in Shenzhen, in order to respond to growing production volume in South China and to achieve the following three objectives:

Secure QCDE(Quality/Cost/Delivery/Ecology) for parts procurement.
Drastically reduce costs by expansion of local procurement.
Promptly secure QCDE on experimental mass production.

In order to realize the objectives, BCSZ has devised the following procurement policies.

OPEN: We will implement an open procurement process, which is transparent and reliable so that the objectives can be globally shared for a long period of time.
FAIR: Based on the free competition principle, we will create “win-win” relationships that pursue mutual benefits through rational criteria.
GLOBAL: We will implement optimal location procurement to obtain competitive advantages.
COMPLIANCE: We will comply with all relevant laws/regulations, corporate ethics and internal rules/regulations.
ECOLOGY: We will take initiatives for preservation of the global environment and mitigation of impact to eco systems to contribute to international society.

[Procurement Strategies]
We will implement the following three strategies to achieve the mid and long term objectives set with regard to QCDE (Quality/Cost/Delivery/Ecology).
1. We will enhance procurement functions in China to realize speedy and flexible response to production needs.
Specifically, we will speed up our decision-making process by changing the management structure from conventional region-based management to function-based management. We will also reflect our concurrent activities to go along with development to real procurement grounds in China in order to produce swift results in expanding production in China. Additionally, we will explore section-based procurement initiatives through consistent management between China and Japan, and implement them with QCDE as our primary goal.

2. We will strengthen our partnerships based on the effectiveness of physical quantity from integration to achieve drastic cost reduction, on-time delivery and further quality improvement. For stronger partnerships, we recognize that the following factors are essential: sharing of long-term visions, cultivation of mutual trust, provision and promotion of technical development/support and management technologies, mutual scientific approaches, collaboration with technical development teams, information-exchanges for mitigation of environmental burdens and so on.

3. We will strengthen our cost development in earlier stages of product development to enhance engineering procurement.
In order to achieve this objective, we have devised the following two tactics: First, we will make proposals for materials, components and processing technologies in earlier stages of development/designing so that they will be reflected in drawings and specifications. Second, we will define partners and prices for proposed specifications in earlier stages of commercialization with technical grounds of optimal QCDE.

Konica Minolta is determined to meet customers' expectations in cost responsiveness through further enhancement of production/procurement functions while continuing to offer various products with a number of differentiators and added values in the field of image information business.

Cautionary Statement Regarding Forward-Looking Statements:

This press release includes forward-looking statements that reflect the plans and expectations of Konica Minolta Holdings, Inc. To the extent that statements in this press release do not relate to historical or current facts, they constitute forward-looking statements. The forward-looking statements are based on the current assumptions and beliefs of Konica Minolta Holdings, Inc. in light of the information available to it, and involve known and unknown risks and uncertainties. Potential risks and uncertainties include, but are not limited to, the ability of Konica Minolta Holdings, Inc. to integrate the operations of Konica Corporation and Minolta Co., Ltd. effectively, as well as the factors identified under "Forward-Looking Statements" of the Annual Report 2002 of Konica Corporation and "Disclaimer Regarding Forward-Looking Statements" of the Annual Report 2002 of Minolta Co., Ltd. Such risks, uncertainties and other factors may cause the actual results, performance or financial position of Konica Minolta Holdings, Inc. to differ materially from those expressed or implied in the forward-looking statements. Konica Minolta Holdings, Inc. undertakes no obligation to update publicly any forward-looking statements after the date of this press release.

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