Tsuneishi Adopts Cisco's IP Communication System

January 26, 2005


Termination of PBX System and Management Integration Enable Sharp Cost Cuts
Better Efficiency in Communications and New Work Style Expected

Tsuneishi Corporation (Representative: Katsushige Kambara; Capital: 320.0 million yen; Location: 1083 Tsuneishi, Numakuma-cho, Numakuma, Hiroshima; hereafter "Tsuneishi") announced on January 26, that it commenced the use of an IP communication system provided by Cisco Systems K.K. (Representative: Yasuki Kurosawa; Capital: 2.22 billion yen; Location: 2-14-27, Akasaka, Minato-ku, Tokyo; hereafter "Cisco").

The new IP communication system has been introduced as part of Tsuneishi's medium-term IT promotion plan issued in fiscal 2003 with aims of such as improving working environment through IT utilization, saving expenses, and prompting its efforts to change the employees' morale to fortify their horizontal ties. The company is planning to gradually remove its previous telephony system, consisting of about 20 PBXs, until it completes the entire shift to the IP communication system. Among the four areas, into which the company's Tsuneishi Factory is divided, IP communication has already been implemented in the repair dockyard since September 2004, and in the headquarter building since October 2004. Tsuneishi is planning to extend the IP communication system to the shipbuilding dockyard and the marine park area in the Tsuneishi Factory, and its other bases (the Tadotsu Factory and the Tokyo Office) by the end of fiscal 2005, along with the company-wide introduction of near 1,000 IP phones.

In view of introducing the IP communication system, Tsuneishi also reorganized its network system. The previous network was formed with a LAN using 100Mbps Ethernet and a WAN using Frame Relay and ISDN. We reconstructed the LAN environment over about a month from December 2003, by upgrading the backbone to Gigabit-class, introducing a dual core switch, changing the routing protocol (from RIP to OSPF), and so on. The WAN environment has also been changed to IP-VPNs and local IP networks.

Tsuneishi believes that this IP communication system enables sharp cost cuts because it can trim PBX maintenance costs (of slightly more than 3 million yen per year) required every time we refreshed our office arrangement, the number of subscriptions to public networks (to around 40 lines, from about 100 lines), and operation costs, after integrating operation management. Communications are expected to be smoother and more efficient, as the IP system makes it easy to use the IT system in conjunction with the telephony system. We are planning to introduce Cisco Unity in the near future, with the view to developing applications incorporated with the IT system. Tsuneishi is also considering adopting wireless IP phones and Cisco IP Communicator (Cisco IP SoftPhone).

Outline of the Network System

The following figure shows the structure of our new network system, built in line with the implementation of IP communication.

The LAN backbone uses a Gigabit Ethernet based on the Catalyst 3550 switch. A redundant architecture is built by using two switch units, while the routing protocol has been changed to OSPF, from previously used RIP. The Catalyst 3550 series has also been applied for the edge switch, with end-networks achieving data rate of 100Mbps. We have installed two Cisco CallManager units, which are the Publisher and the Subscriber, respectively. The Cisco 3725 is used as a gateway to public switched telephone networks (PSTN) and PBXs. IP phones have already been used in the Tsuneishi headquarter building, the repair dockyard and CRS (a car recycling affiliate established in November 2004, locating inside the headquarter building), and the CallManager is controlling the system from the machine room in the headquarter building. We are currently using the Cisco IP Phone 7912 and the Cisco IP Phone 7970.

The WAN environment uses two types of services. We are using local IP networks provided by NTT Corporation around headquarter, and IP-VPN services at the other bases. The bases connected via IP-VPNs include the Tadotsu Factory, the Tokyo Office, Tsuneishi Technical Services Philippines, Inc. (TTSP), Tsuneishi Heavy Industries (Cebu), Inc. (THI) and Tsuneishi Group (Zhoushan) Hull-Body Production, Inc. (THB). In accordance with the network update implemented at headquarter, these company bases have changed their internal phone systems to VoIP, from previously used VoFR, which sends and receives voice data using Frame Relay technology.

Benefits of the IP Communication System

Tsuneishi is expecting the following benefits from the implementation of IP communication.

1. Cost Savings
By removing PBXs, we will no longer need PBX maintenances, which have been implemented every time we renew the office layout. Tsuneishi broadly changes its office arrangement at least twice a year, having spent 3-3.5 million yen per year on PBX maintenances. However, we will no longer need to spend such expenses, when the company-wide shift to IP communication completes. In addition, the integration of the telephone system management with the information system is expected to sharply reduce management costs, and to optimize (cut) the number of our subscriptions to public telephone network services. We have already trimmed our public telephone service subscriptions to 50 lines, from the previous subscriptions of about 100 lines. We are expecting to eventually reduce such subscriptions to around 40 lines, and to broadly cut costs of basic charges and rates.

2. Smoother, More Efficient Communications
Tsuneishi considers IP phones are not just an "alternative to conventional phones," but a new communication tool, which is effective to prevent communication loss. During our communications with customers, for example, we could prevent misunderstandings by saving calls on digital recorders, and also make our clients' resentment broadly known by delivering their "direct complaints" throughout the company using groupware. As ships are only produced on orders in this industry, "makeover" caused by communication loss severely impacts manufacturing costs. In addition, as we receive most orders from overseas clients, English is usually spoken in our business conversations. It is one of our extremely important issues how we prevent communication loss.

3. Advanced Work Style
We repair hundreds of vessels per year at the repair section, which is one of our key businesses, and our veteran employees are pursuing the job, restlessly traveling between the dock and the office. Based on these circumstances, we have generally used supplemental tools such as transceivers at dockyards, where smooth communications are difficult only with conventional fixed phones. We are therefore considering using wireless IP phones at dockyards, with the expectation to make communications smoother. Although transceivers only allow communication with particular people, IP phones allow calls to external phones, let alone to internal phones. Furthermore, holding TV meetings is easy with IP networks, using the CallManager 4.0, which supports Cisco VP Advantage. One of our plans is to convert the TV meeting system currently used at the Tokyo Office into a VP Advantage-compliant IP system, and to make the most of TV meetings also at overseas design subsidiaries.

4. Higher Motivation of Employees
After integrating the telephony system with the IT system, we will be able to improve the office environment by removing obsolete devices such as phone lines. This is expected to boost our employees' motivation. We are also planning to develop applications based on both the IT system and the telephony using Cisco Unity, with the view to further increasing convenience for our employees.

About Tsuneishi Corporation
Tsuneishi Corporation is an old shipbuilding company founded in 1917. Tsuneishi has been making a significant contribution to the development of our local society by continuing to supply safe, high-quality vessels under its philosophy to "pursue stabilization and development of business for the employees' happiness." Meanwhile, Tsuneishi started to build shipbuilding dockyards on Cebu Island, the Philippines, in 1995, and on Shuzan Island, China, in 2004, in the course of its aggressive efforts to survive the ongoing global pricing competition with its unique international strategy, which is unlike any other leading shipbuilding companies' all over the world. We are also making a great contribution to the global economy as a shipbuilder with approximately 6,000 employees, including those at its overseas affiliates. Brief and detailed information about Tsuneishi Corporation can be found at the following Web site.

About Cisco Systems K.K.
Cisco Systems K.K. is a Japanese company of Cisco Systems, Inc. (NASDAQ: CSCO) of the United States, a worldwide leading provider of networking products to be the base of the Internet/Intranet. Cisco is internationally offering a broad-range of solutions and products in the advanced technology field, from hardware such as the Cisco router series and the Catalyst switch series, to the Cisco IOS, a network OS referred to as the world's de facto standard, IP telephony, wireless, storage, security, networked home, and optical applications. To help companies, groups and organizations achieve higher productivity, Cisco Systems are proposing networked virtual organizations (NVO). Company profile and information about Cisco Systems can be found at the following Web site.

Cisco, Cisco IOS, Cisco Systems, Catalyst and the Cisco Systems logo are registered trademarks of Cisco Systems, Inc. and/or its affiliates in the United States and certain other countries. All other product names and company names mentioned in this document are trademarks or registered trademarks of their respective owners.

Tsuneishi Corporation
URL: http://www.tsuneishi.co.jp/
Contact: Yoshinori Satoh
Strategic Management Planning Department
Telephone: +81-84-987-4915
E-Mail: press@ts.tsuneishi.co.jp

Cisco Systems K.K.
URL: http://www.cisco.com/jp/
Contact: Ryoji Maeda / Mari Okamoto
Public Relations Group
Telephone: +81-3-5549-6500
E-Mail: press-jp@cisco.com