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Business

Hitachi Construction Machinery using data to strike it rich

Keeping tabs on miners' activities offers opportunity in spare parts

Hitachi Construction Machinery expanding its parts replacement services to ensure stable revenues.

TOKYO -- On the heels of two foreign acquisitions, Hitachi Construction Machinery is tweaking its strategy to boost revenue from its mining equipment business.

Hitachi Construction Machinery is looking to its vast pile of operational data on its mining equipment customer records on replacement parts to plump up its profit. By devoting more attention to replacement parts, the Hitachi unit hopes to expand sales, optimize production, cut inventory and generate a steady stream of cash.

Hitachi Construction Machinery bought H-E Parts International, a U.S. company that offers parts and services related to mining equipment, in December 2016. This month, it completed its takeover bid for Bradken, a big Australian mining machinery parts manufacturer.

Hitachi Construction Machinery's sales from the mining components and services business are humming along. They are believed to have risen about 6% on the year in the fiscal year ended March 31.

The company forecasts global demand for parts will grow as mining companies bring idled machines back into service to boost production amid a recovery in commodity prices.

Remotely profitable

Hitachi Construction Machinery will combine its remote monitoring service, called ConSite, and its CPR parts replacement system to jack up sales of components.

The CPR system collects and analyzes records concerning the replacement of parts for mining equipment it has already sold. Based on that analysis, the company regularly sends maintenance and other staff at its agents to mining sites to suggest to customers the best time to replace worn parts.

The CPR system covers around 3,000 mining machines, or roughly 90% of Hitachi Construction Machinery equipment in operation. The system creates records on replacement of parts for mining machines, mainly based on information from agents. The company hopes to improve the accuracy of this data by combining CPR with the ConSite service, which remotely monitors the mining machines in operation.

By expanding sales of components for hydraulic shovels and other mining equipment, the company aims to build a stable revenue structure that is less dependent on demand for new gear.

The ConSite service is still mostly limited to the company's construction machinery business. The service will be expanded to cover mining equipment, which will have to be fitted with sensors and GPS devices.

Hitachi Construction Machinery will try to persuade its customers to take up its ConSite service at mines. It wants the service to cover 20-30% of its equipment in operation by fiscal 2019.

Mining companies typically adjust their maintenance spending in accordance with changes in the commodities markets. Hitachi Construction Machinery will try to make the most of its sales opportunities by determining in advance when its customers need replacement parts.

Kenji Ota, Hitachi Construction Machinery's vice president and executive officer, predicts the company "can expect to see cost savings, such as reductions in unnecessary inventory" by offering the service to its customers.

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