A Solutions Provider

DRIVEN TO INNOVATE: “Innovation isn't static, and neither is Daikin,” said Yu Nishiwaki, COO, Daikin Applied Americas, during the 2023 Daikin Group Sales Meeting’s keynote address. (Staff photo)

Daikin’s leaders stressed the company is transitioning how it serves its customers, shifting into more of a solutions provider role rather than continuing to serve solely as an equipment manufacturer.

“We are taking a holistic view of the building, not just the HVAC system,” said Yu Nishiwaki, COO, Daikin Applied. “Our focus has shifted to include the building’s life cycle ecosystem. No matter where a customer is on that life cycle journey, we are here to supplement your building solutions and provide a boost to your business. We believe this is a new model for a better future.”

Jim Macosko, vice president, product and sustainability solutions, Daikin Applied, said the company is dedicated to building great systems and comprehensive solutions.

“Over the years, our focus has tended to be more product-centric,” he said. “We’ve focused on producing the best chillers, rooftop units, etc. However, the themes that are driving the industry, such as electrification and decarbonization, require us to take a step back and examine the entire building and how it’s using energy. We’re now aiming to develop products with an eye toward building performance. We’re not just creating the best equipment; we’re committed to diagnosing and prescribing how systems best fit into the buildings themselves.”

Supply Chain Challenges

Daikin, much like all HVAC manufacturers, has encountered a plethora of supply chain issues. When discussing the topic, Nishiwaki refrained from placing blame on outside sources.

“We found the problem, and the problem was us,” he said. “It’s our responsibility to get parts to the line. It’s up to us to make sure suppliers have enough capacity. We had to do a lot of self-reflection, and getting to the root cause has unlocked a new way of thinking; we had to innovate from the shop floor to the top floor. As a result, we’ve become a better business that is much more attuned to our people and customers.”

Daikin has taken extensive steps to strengthen its supply chain. This included conducting a process failure mode and effects analysis (PFMEA), an analytical tool used to evaluate and identify potential failures related to operational processes.

“Through this, we identified our riskiest suppliers and developed strategies to ensure we had a backup plan in case of an emergency,” said Kyle Evenson, vice president and general manager, AAH operations, Daikin Applied Americas.

As a result, Evenson said the company’s supply chain performance has rebounded to a 97% performance rate.

“We still have challenges with lead times, but, overall, we’ve significantly minimized our risks and improved our supply chain,” he said. “Our Daikin Applied air factories are executing on-time deliveries in the upper 90th percentile, which is incredible. We’ve also cut down our lead times by almost 70% over the last six to nine months. We’re extremely happy with where our supply chain performance today.”

Inflation Increases 

By 2021, the COVID-19 pandemic increased the inflation rate to 7.5% as of January 2022, a level not seen in the U.S. since the 1980s.

“Inflation has certainly had an impact on our company,” said Doug Widenmann, senior vice president, marketing, Daikin Comfort Technologies. “In July of 2022, the AIA [American Institute of Architects] estimated commercial market growth of roughly 6%. In January of 2023, that rate remained at 6%. In July of 2023, market growth was forecast to jump to 19%, a massive increase. This rapid change in forecast is an example of some of the challenges the entire industry is facing.”

Throughout 2021-2022, Daikin, much like the entire industry, was challenged to account for commodities and metals, inbound and outbound labor, and the rising cost to do business.

In the face of difficult times, Daikin worked diligently to remain the best partner possible, said Evenson.

“Through all of these pricing challenges, we never retroactively increased prices,” he said. “If we charged a price, we stuck with it — even if transportation, logistics, or supply surcharges emerged, we absorbed all of that.”

Sustainability, Electrification, and Decarbonization

When it comes to sustainability, Daikin is not only talking the talk, it’s walking the walk. The company is currently seeking to reduce its carbon footprint 50% by 2030 and be fully carbon neutral by 2050.

“We’re really focusing on what we can do within our own walls,” said Rob Landes, director, HVAC systems applications, Daikin Applied. “We’re also dedicated to exploring how our products and solutions enable customers to pull that sustainability lever.”

In line with the push for electrification, Daikin continues to tout inverter and heat pump technologies, as it has for decades.

“Once used primarily on chillers and larger equipment, inverter technology is now being included in smaller equipment, as electronics have become more affordable,” said Landes. “Inverters are a key enabler, helping to make heat pumps operate more efficiently and at lower temperatures. We’re seeing a lot of interest in heat pumps in the commercial space and are confident they will be even more prevalent in the near future.”

As companies continue to satisfy electrification, decarbonization, and sustainability goals, Daikin remains able and willing to help, said Landes.

“Regardless of where you’re at on your journey, we want to partner with you,” he said. “We have the solutions available to help you efficiently achieve your goals.”