Why do the Japanese need an elephant who can dance Russian ballet?

And one of the most recent examples – the launch of Panasonic IP-cameras production at the facilities of MERLION – confirms this intention.

Evgeny Karpov, Head of Security and Data Storage Solutions Department at Panasonic Russia, and Yevgeny Achkasov, Director of Network Equipment Procurement and Telecommunications Department at MERLION, told our readers about the reasons for the production localization in Russia, about why MERLION was chosen as a partner in that project, why the distributor needed that production and why, according to the results of its implementation, partners of the two companies would be "in the black".

CRN/RE: Why do your companies need this project?

Evgeny Karpov Recently, the demand for equipment manufactured in Russia has been growing in various segments of the IT and security markets of our country. Domestic customers, and, first of all, the companies with state participation, transfer the priority of purchases towards local products. And the share of such projects is growing from year to year. And the main idea of Panasonic philosophy is to hear the requirements of the end customer and to satisfy them as fully as possible. Therefore, we have always been quite flexible in relation to various issues of localization of equipment for the Russian market, whether it is certification, or a non-standard integrated solution, or a new design that takes into account extreme operating conditions. We are ready to respond to client's wishes. Especially if their fulfillment may result in an increase in our sales.

It should be noted that some colleagues, having seen the trend of "import substitution", localized production much earlier than us. But we as a Japanese company are always very thoughtful in making such decisions and take into account the requirements of our partners and end customers. And when the number of questions about the localization of our products reached a significant level, we began the implementation of this project. We analyzed how difficult it was to start production, and realized that, given the requirements that Panasonic imposes on quality standards, it was not very easy to do. We began to look for a partner to perform the task (frankly speaking, at first there were several candidates for launching local production) and chose MERLION.

Evgeny Achkasov: For us, this step was also quite logical: if we talk about the products, the IP-cameras of the vendor (though in the non-localized version) have long been part of our portfolio. Moreover, despite the fact that MERLION has recently been engaged in this business area (security – author's note) we, as a supplier of safety equipment, are already among the top five leaders (according to the company's internal analytic service – author's note). That is, we are already a serious player in this market and we are going to continue improving our position.

I can only confirm Evgeny's words that the demand for solutions produced in Russia is really growing. And it's not just about IP cameras. I manage the department where there is equipment not only for video surveillance. And for all product lines, we constantly receive requests for devices manufactured in Russia from our partners. These are the details and peculiarities of project activities, and our main task is to respond to these requirements as quickly and efficiently as possible. The process is gathering pace, and we must be ready: next time, when a specific order for equipment produced in Russia is received from our partners, it shall already be in our portfolio and in stock.

CRN/RE: And why does MERLION, i.e. a distribution company, participate in this project from the Russian side?

Е. К.: Firstly, it is our long-standing and very reliable partner for various product categories, and iRU, which is part of the MERLION Group of Companies, is well known as a Russian IT manufacturer. In addition, one of the decisive factors was the flexibility and scalability of the production, which the company has. Of course, there are other manufacturers in Russia, and, as I've said, we negotiated with them. But most of them have factories and production facilities designed for regular streaming production of the "average" amount of products. And for the project business (IP-cameras are often supplied for projects), it is not always convenient: for one project it is necessary to produce several dozen cameras, and for another — several thousand pieces, and the manufacturer shall be able to quickly scale capacity. And iRU was able to meet these non-standard requirements as well as all our internal requirements for production and product quality better than other companies which we considered to be our partners.

CRN/RE: Does it mean that Panasonic IP cameras of Russian production will be available only to MERLION partners?

Е. К.: Despite the fact that we have chosen MERLION as our partner, the distribution system of our products does not change. Accordingly, partners will be able to purchase localized products from any of our distributors. But planning product volumes and placing orders at the production site, as before, will be through Panasonic Russia, irrespective of the distributor from whom this order has been received.

CRN/RE: To what extent did you have to change the iRU production process to start the release of new products?

Е. А.: Firstly, for the assembly of IP-cameras, separate production facilities and premises on the basis of our warehouse complex in Bykovo were allocated, in accordance with the recommendations of the vendor, the equipment necessary for the production and, what is very important, for testing of finished products was purchased. In addition, during the preparatory period and at the moment, there were and there are three representatives of Panasonic involved in the production process at the enterprise, they are highly qualified specialists who have been working in the corporation for more than 20 years.

Е. К.: It took us about a year to launch local production: iRU engineers came to our main plant for training, got acquainted with the production and our internal quality standards, which were then transferred to Russian production processes. And, as confirmed by Japanese engineers who work at the iRU factory, the production process and the quality of products fully comply with internal quality standards at Panasonic. I would like to note that at the moment in Russia we perform a complete equipment assembly, and according to the developed roadmap, in the near future the level of localization will increase, which will allow us to release products that fully meet the requirements of St-1.

CRN/RE: Production of cameras in Russia will begin only when you have specific projects?

Е. К.: No, the production has already started. And the use of production capacities will depend on the orders of distributors who need to maintain a certain level of inventory and the release of production lots for specific projects. On the basis of these two factors the sales forecast will be made, on its basis manufacturing order will be formed. Thus, from month to month the number of cameras produced can change dramatically.

Е. А.: I hope that we will not have problems with planning. MERLION's business has a highly developed statistical component — we have extensive experience in handling with a variety of equipment and large amounts of statistical data on the basis of which we can plan our work effectively. We will use the same tools for the production loading planning: when we have enough statistics to forecast consumption more accurately, we will be able to produce a number of cameras on a regular basis, and our partners can buy them from the warehouse.

CRN/RE: Who do you think the partners will sell this equipment to?

Е. К.: Our video surveillance systems have already been used in all vertical markets. And can't even name the segment where there are no successful projects implemented. But we have defined three strategic verticals for the near future: public sector, energy and transport.

CRN/RE: And do you think that local production will be able to cover the needs of the entire Russian market in Panasonic IP-cameras (or only three verticals you have specified)?

Е. К.: Yes and no. Now we produce only three models of cameras: WV-S1132, WV-S2131L, WV-X6531N*. However, using these models, we can cover the needs of a large number of objects. Within the localized production, an internal box camera which can be used outdoors in the presence of camera housing, indoor dome camera and outdoor PTZ camera will be manufactured. This is one of the most popular and highly-demanded cameras on the Russian market, but they are only a small part of the range of IP-cameras produced by Panasonic. Therefore, the local market need for these models will be covered mainly by the forces of Russian production, but other products (both other models of cameras and all other equipment necessary for creating a video surveillance system), will be supplied from the main factory. If the customer requires such a solution to be created with the use only Russian-made equipment, we have partners in Russia — local companies that will readily participate in such projects.

Е. А.: And we, by the way, consider a possibility for expanding production and including other Panasonic equipment. But our joint decision on this issue will be made based on the needs of the market. If we understand that there is a demand on the market, and the vendor agrees, we will quickly expand the line of localized products.

CRN/RE: And the last question. And what are the advantages of this production localization for your partners?

Е. А.: Firstly, our joint partners with Panasonic have an additional opportunity to promote vendor solutions, i.e. high Japanese quality and all the know-how that Panasonic products are famous for, into serious large projects. Into those that were previously unavailable to them because of certain requirements from the state.

Е. К.: Indeed, we have fulfilled one of the requirements of the end customers. Have the customers had a need for local production? Ok, we've launched it.

Secondly, by making such investments in this project, we could prove to our partners that despite the tough competition on the Russian market of security and video surveillance systems, this market remains one of our priorities. And we have very optimistic plans about it.

And, thirdly, after the production had been launched, we started working on its optimization. This will allow us to make the equipment produced in Russia more attractive both in production terms and the price in the near future.

CRN/RE: The word "investment" was mentioned...

Е.А.: As agreed by the parties, we cannot disclose the amounts that have been invested in the project. And to be honest, when the project has already been launched and the production has been started successfully, it does not matter. What is more important, for example, is that we are ready to continue investing in the future. The project is one of the strategic business areas for us in a rather interesting and capacious segment of the market. Therefore, we plan further development of the project.

Future investments primarily mean the desire and ability of our company to expand production. And whether we do it or not depends only on the market and on the needs that it will dictate.

Currently, our facilities are fully equipped with the equipment and specialists that are required for the production of the currently defined volume of production. But if we understand that for the implementation of the project of our partner the production needs to be expanded, we are ready to do this and what is more important is that we have the opportunity to invest very quickly in additional production facilities and human resources.

Therefore, our commitment to fulfill the order for any number of IP-cameras of Russian production within a foreseeable time frame is not an exaggeration. If the partner needs to order a few pieces for a project (or a few pieces need to be supplied for some small project), such a number of cameras may be picked up from our warehouse or requested from other Panasonic distributors. If the project requires the production of several dozen, hundred, thousand and even dozens of thousands of product units — it is a very good order. And we'll do our best to scale the production and implement this project. We have no limitations on the volume of the order with which the partner can come to us. Just because MERLION looks like an elephant only from the outside. But believe me, this elephant can dance Russian ballet. We are really big, we have a lot of resources and a lot of opportunities. But we are very flexible. We can quickly and efficiently respond to changes that occur on the market. And as soon as we understand that we have to add something to fully meet the needs of our partners, we will do it immediately.

* Cameras produced in Russia will have different model names. At the same time, the vendor guarantees that Russian and Japanese cameras will not have differences in functionality, technologies and warranty obligations.