Strategy of the KION Group
Objectives of the KION 2027 strategy
The KION Group continued to forge ahead with the implementation of its KION 2027 strategy during the reporting year, despite focusing heavily on short-term measures to deal with the coronavirus pandemic at the same time. The KION 2027 strategy provides the framework for profitable growth in the Group and specifies groupwide targets. The strategy is aligned with the KION Group’s vision: “We are the best company in the world at understanding our customers’ material handling needs and providing the right solutions.”
The KION 2027 strategy is designed to unlock the potential of both operating segments and place an even greater focus on a shared, customer-centric innovation, sales, and brand strategy. The emphasis is on developing and marketing integrated, automated, and sustainable supply chain solutions and mobile automation solutions for customers around the world. In the Industrial Trucks & Services segment, products and services are being transitioned to sustainable energy concepts and being complemented with consultancy and project work. And in the Supply Chain Solutions segment, the range of options for customers is being expanded to include system solutions for special requirements in individual customer segments. The KION 2027 strategy provides the framework in the Group and sets groupwide targets:
- Growth: The KION Group aims to grow at a faster rate than the global material handling market by evolving into a solutions provider in both segments.
- Profitability: The KION Group wants to retain its position as one of the most profitable suppliers in the industry and improve its adjusted EBIT margin so that it is permanently in double digits.
- Efficient use of capital: The KION Group continually strives to optimize the return on capital employed (ROCE). Besides increasing earnings, the focus here is on asset management and efficient use of capital.
- Resilience: Profitability throughout the various market cycles is to be guaranteed by a robust business model. This will involve greater diversification in terms of regions and customer sectors alongside efforts to expand the service business and further optimize the production network.
During the reporting year, capital investment and expenditure in connection with the implementation of KION 2027 was focused on the most important projects in order to preserve liquidity and contain costs. These projects included construction of the new plant in Jinan, eastern China, which began in the third quarter of 2020. Counterbalance trucks in the fast-growing value segment are to be manufactured here. Furthermore, a new warehouse technology plant near Xiamen, China, came on stream and the production facility for material handling solutions in Stříbro, Czech Republic, was expanded. Another major step was the start of production of lithium-ion batteries at the joint venture KION Battery Systems GmbH in Karlstein am Main, Germany. By expanding its international production network, the KION Group is creating the capacity needed to cope with the market growth that is expected after the coronavirus pandemic has been brought under control. The KION Group also strengthened its technological and market position through strategic acquisitions that focused on the areas of automation and digitalization.
Strategic fields of action and measures in 2020
Five fields of action have been defined for the KION 2027 strategy – energy, digitalization, automation, innovation, and performance – for which a wide range of strategic measures were implemented in 2020:
Energy
The KION Group continually develops its products and solutions so that its customers are able to use energy as efficiently and sustainably as possible. Electric-powered forklift trucks and warehouse trucks already made up around 87 percent of order intake (in terms of units) of the KION Group’s Industrial Trucks & Services segment in 2020. A focus of the strategy is to develop and commercialize new energy sources, such as lithium-ion batteries and fuel cells, for industrial trucks and related services, such as the provision of advice on energy matters.
Crucial to this strategic approach is ensuring the long-term availability of lithium-ion batteries while reducing dependence on suppliers. A major step in this regard was the start of production at the new site in Karlstein am Main, Germany of the joint venture KION Battery Systems GmbH. This is strengthening the KION Group’s position in the energy-efficient drive technology market and creating capacity to equip everything from entire future truck fleets to heavy-duty trucks capable of handling large loads. Lithium-ion batteries for warehouse trucks are also to be produced at a later date. In parallel, the KION Group has expanded its portfolio of energy-efficient drive technologies (see ‘Research and development’).
Digitalization
The KION Group is gearing its business to customers’ increasingly digitalized processes in order to improve their intralogistics efficiency. The digitalization of customer solutions – including through the use of the proprietary warehouse management system Dematic iQ – is being accompanied by the digitalization of internal processes and resulting improvements in performance. The KION Group is not only integrating software into its solutions but is also increasingly marketing software solutions as standalone products. Internal organizational structures are also being modernized in order to pave the way for agile development and embed it across the Group.
The KION Group significantly expanded its intralogistics software offering in the area of warehouse management systems (WMSs) by acquiring Digital Applications International Limited (DAI). This is expanding the portfolio of Dematic iQ automation solutions to cover a broader range of applications, from manual operations to fully automated supply chain ecosystems. Another key milestone in product development was the migration of the fleet management solutions of Linde and STILL and of Dematic’s InSight asset performance management (APM) platform to the Company’s own cloud.
Automation
In the field of automation, the KION Group offers customized and scalable solutions for a wide range of customer requirements, from single forklift trucks to end-to-end mobile automation solutions and fully automated large-scale warehouses. These are helping customers move closer to the goal of a ‘lights-out’ warehouse.
The strategic partnership with Quicktron (Shanghai), which was agreed upon in 2020 and underpinned by the acquisition of a minority stake, has significantly expanded the portfolio of AMRs. Dematic has also added to its range of automation solutions, for example for micro-fulfillment warehouses. The latter are a key component of customers’ e-commerce strategies, under which they are increasingly establishing smaller warehouses close to their retailers and end customers in order to be able to deliver to them as quickly as possible. Special industry-specific solutions were also launched on the market.
Innovation
The KION Group develops technologies on a cross-segment basis and in doing so drives forward innovation in the material handling market. It is continuing to invest significantly in research and development, in 2020, at a rate of 2.8 percent of revenue.
In addition to efficient development processes, the KION Group also works with an effective innovation ecosystem. To this end, it partners with research institutes, universities, and companies so that it can go to market with new products and solutions within a short space of time. In 2020, for example, a project was completed that had been undertaken with Canada’s University of Waterloo to conduct research into cable-based technologies for automated storage and retrieval systems. The KION Group is also involved in other government-supported research and development projects, such as the use of mobile robotics solutions in the retail sector.
Performance
The KION Group intends to continually improve internal efficiency, optimize the performance of its products from a customer perspective, and fully leverage synergies.
In the past two years, the groupwide optimization and efficiency program, Performance Excellence, has resulted in tangible success and savings.
In 2020, the KION Group launched another major project, its capacity and structural program. The purpose of the program is to cut costs through the use of suitable working time models on the one hand and, on the other, to reduce the high level of fixed costs resulting from overcapacity, adjust capacity in line with expected market requirements, and create leaner structures. The program is primarily aimed at the Industrial Trucks & Services segment in Europe, where the focus is on optimizing the production network, including adjusting capacity and carrying out accompanying personnel measures.