Otis Elevator

Accelerating Business Transformation with IT

List of Content
Company Background & Overview Market in Elevator industry

Otis Elevator Company Milestones

New Objective e-Global Supply Chain

New Initiative that makes Otis a #1 service company, worldwide!

Company Background & Overview I

The worlds largest company in the manufacture, installation and service of elevators, escalators, moving walkways, and other horizontal transportation systems Founder: Elisha Graves Otis Born Aug 3 1811 - Died Apr 8 1861 Life-time Achievement : Improvement in Hoisting Apparatus Elevator Brake BHAG (big, hairy, & audacious goal): In 1854 Otis dramatized his safety device on the floor of the Crystal Palace Exposition in New York Invention Impact: His BHAG not just make a huge transition from his humble beginning (master bedstead mechanic )to great inventor but also alter the face of the globe.

 Size and Scope

Company Background & Overview II

Statistically, Otis is the world's most popular transportation company The equivalent of the worlds population travel in Otis elevators, escalators, and moving walkways every three days According to United Technologies, Otis elevators carry the equivalent of the world's population every nine days I. Employment Of 60,000, nearly 90% worked outside the United States. (53,000 out of 61,000) II. Headquartered in Farminton, Connecticut, Otis possessed international facilities in Japan, France, Germany, Spain, Korea, and China. III. Revenues Climbing from $6billion in 2000 to $8billion by the end of 2003 with 80% coming from outside the United States. ($11.7billion in 2009)

 Size and Scope IV. Installed Base By 20004, Otis had 1.5 million elevators and 100,000 escalators operating throughout the world. (2.3 million) V. Service Base Otis had elevators in 10 of the worlds 20 tallest buildings and more than 1.4 million elevators and escalators under maintenance. (1.7 million) VI. Global presence Otis sold products in more than 200 countries and territories. Major manufacturing facilities in Americans, Europe, and Asia. Signature Projects are as follows:
492 m 468 m 452 m 350 m 553 m 828 m

Company Background & Overview III

 Size and Scope VII. Companys two tallest elevator Engineering Test centers a. Shibayama, Japan (505 feet/154 meters above ground; 89 feet/27 meters below ground) b. Bristol, Conn., United States (384 feet/117 meters above ground)

Company Background & Overview VI

VIII. Otis Areas Otis operation was organized into six regional businesses: North and South American (NSAA) South Europe and Mediterranean (SEMA) North and East Europe and Africa (NEEA) United Kingdom and central Europe (UCEA) North Asia Pacific (NAPA) South Asia Pacific and Gulf (SAPA)

 Size and Scope

Company Background & Overview V

VIII. UNITED TECHNOLOGIES CORP. (UTC) Since its acquisition more than 25 years ago (1976), Otis had always provided solid and steady profit contribution to UTC. In the period from 2000 to 2003, Otiss contribution to UTCs profit increased from 25% to 35%.

Operating Profits (% of UTC)

12%

9% 7%

35% 11%

Otis Elevator Company Carrier

Pratt & Whitney

26%

Market in Elevator industry

Major hardware competitors in Elevator industry Otis, KONE, Schindler Holding, ThyssenKrupp, Hitachi, Kinetek, Mitsubishi Electric, Tatung, & Toshiba. Extremely intense competition from small firms mainly due to: Steady demand, Low barriers to entry, and High profitability (Esp. before the advent of microprocessor-based control ) Market landscape

Major growth drivers in Installedbased economy

western developed contries
aging population increasing demand for retrofits in existing old facilities

Asia Pacific and other developing regions

Global construction and engineering activity house-building market

population density
highest growth in population density

elevator market in China is built almost entirely on revenue and profits from new sales, compared to more mature markets where service account for as much as 75% of revenues and profits

MAJOR GROWTH DRIVERS IN SERVICE-BASED ECONOMY (MATURE MARKET)

The aging of current installation stringent requirement of maintenance activity regulated and enforced by law

The aging of current installation

Q: What did Otis do to reach such a scale? This is primary purpose of this case study.

Otis Elevator Company Milestones I

Strong Foundation of Mechanical Engineering 1903 Introduce Gearless traction electric elevators Become standard ever since could be employed in buildings of any height and operated at much higher speeds than steam-powered elevators. rarely necessary to replace a wellmaintained gearless machine, even when a building is modernized greater than 500 feet per minute Lift rate is slower but the reduction offers the advantage of requiring a less powerful motor to turn the sheave. Operated at speeds from 38 to 152 (125 500 ft) meters per minute. Carry load of up to 13,600 kilograms (30,000lb).

Otis Elevator Company Milestones II

Major breakthrough in Mechanical Engineering Announce Gen2 machine-roomless elevator in 2000
Standard since 1800s

Traditional heavy steel cable wraps around a flexible cord

Flat polyurethane coated steel belts wraps around steel cord 30mm wide (1 inch) 3mm thick (0.1 inch)

reducing drastically the required diameter of the sheave

eliminating the bulky machine room normally required for gearless traction electric elevators and geared traction elevators

100 years evolution Bulky machine room Machine-roomless

Otis Elevator Company Milestones III

Major breakthrough in Electrical Engineering Automated Control

1915 1924

Self-leveling device Microdrive Signal Control System

Automatically keep the platform level with the floor Automatically controlled acceleration, speed between floors and deceleration as the car approached the landing Automatically schedule elevator service during highdemand periods Employed the power of microprocessors to control every aspect of elevator operation

1937 1979

Peak Period Control Elevonic

followed by Electric door safeguard & more sophisticated dispatching system, allowing elevators to become fully automated.

Otis Elevator Company Milestones VI

Web-based Technology Innovation (1980s)
Power combination of REM (Remote Elevator Monitoring) and OTISLINE Goal: respond any emergency less than a second, solving problems facing customers and hence reducing maintenance cancellation rate. Advantage: Aided by technology, Otis was able to restructure the company, eliminating several layers of management and speeding communications between field mechanics, customers, and company management.
Management team 24/7 OTISLINE Building managers

1. 2. 3.

Service professionals Diagnostic software monitors equipment continuously and sends data to the REM unit in the machine room. The REM unit sends this information to the OTISLINE center. Data is prioritized and reviewed by OTISLINE specialist.

4 . An OTISLINE specialist alerts the technician if necessary. 5 . The technician arrives at the job site with specific information, tools and parts to work on the equipment .

New Objective I
To become the recognized leader in service excellence among all companies not just elevator companies Worldwide ( In 2002 Bousbib, UTC vice president, corporate strategy and development .) Goal: 1. Transfer core competency of Otis business from manufacturing to service 2. Employ technology to provide an information advantage over Service competitors 3.Fivefold improvement (5x) in Order-to-Hand-Over Cycle within 5 years
Step in Overall Business Process Proportion of Elapsed Time (current %) Cycle Time Reduction (Target Factor)

Project Proposal Sales Processing Order fulfillment Field installation Closing activities Total

3% 8% 30 % 41 % 18 % 100 %

10x 4x 5x 12x 2x 5x

New Objective II
These gains were to be achieved through the coordinated effort of multiple ongoing change programs in engineering, supply chain, and sales and field operations. Major ongoing programs 1. SIMBA (Engineering) Goal: a standard-interface, modular-based architecture defining modules and subsystems from which all Otis elevator systems could be created Result: reduced the number of modules in use and lowered project costs throughout the value chain 2. ACE (Achieving competitive Excellence) Goal: I have concluded that we never need to make anything ourselves Bousbib Result: Otis streamlined manufacturing operations from 52 factories in 1995 to 26 by 2003 Manufacturing would move to where lowest costs and highest quality levels could be achieved 3. SIP ( Sales and installation process) Goal: to rationalize the 65 million hours of annual labor to install, modernize, and maintain Otis products Result: help the customers define their needs, and bring sales and field installation teams together to discuss customer proposals early in the sales cycle

e-Global Supply Chain I

Q1. Why did Bousbib need e-Global Supply Chain badly? Q2. What are the characteristics that e-Global Supply Chain has that make it valuable to Otis ? Q3. What sort of competitive advantages did Otis gain over other elevator Companies by harnessing the power of these two features? Q4. Was he ready for such major overhaul of Otis structure?

Logistics Provider Supplier

Logistics Network Material Flow Integration

Customer
Assembler

Supplier Retailer Bank

Distributor

Internet

Logistics Hub

e-Global Supply Chain II

Q5. What sort of measures to which Otis resorted to harness the power of e-Global Supply Chain , namely, Visibility and Supply Chain workflow Automation ? Answer: From software perspective, e-logistics information transformation project From hardware perspective, Contract logistics center (CLC)

Logistics Provider

Customer

SSI
e-Logistics Network Material Flow Integration

Assembler

SSI Retailer Bank

Distribution Center

Internet

Logistics Hub

e-Global Supply Chain III

Q6. What has Otis achieved through its wave of information transformation? Ans. e-Logistics program & CLCs sustain the quantum leap improvement by In project proposal phase strengthening the effectiveness of SIP; creating data base for elevator configuration In Sales processing phase automating the workflow of all activities regarding booking, validating, scheduling contracts upon acceptance; automating prompting alert system In Order Fulfillment phase providing CLCs a great visibility; enabling CLCs to source supplies and components from everywhere in the world In Field Installation phase transforming Otis from push system to a pull system; allowing SIP to maintain lean manufacturing flows and low inventory levels In Closing Activities phase generating more accurate billing of change order, higher conversion of new equipment to maintenance contracts, and faster collections

LAST PART QUESTIONS

1)

Is e-Logistic program really beneficial to the company and worth the effort and money spend? Should e-Logistic be carried forward to full scale implementation ?

2)

3)

Next mini evolution?

ANSWERS

1)YES, e-Logistics have shown its benefits in the pilot implementation of the program in the European countries and the results are quite promising. Besides OTIS has been investing heavily in IT infrastructure since 1980 so it would be beneficial to make quantum leap and integrate all process. Once fully functional it could make the dream of OTIS of being no 1 service company come true 2)YES, it should carried out at full scale, as there are some obstacles such as training to lot of people and new hardware in less developed nations etc but the company will be ready for future

ANSWERS

3) Data mining as intelligent decision support tools

Final goal is the synchronization of all the activities right from the raw material supplier to the final delivery to the customer optimize the automated movement of material flow based on the information available from supply chain visibility Fine-tune the performance of the supply chain to be in line with the desired Estimate customer patters and act ahead
Supply chain planning Automation Visibility

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