The material provider supporting Japan’s industry

Over the past few decades, we have seen regional manufacturers in countries with lower costs of production replicate certain products originally made by Japanese firms, taking a large market share in consumer goods. However, in certain B2B fields, we see that Japanese firms remain competitive either because they’re technological innovators or because they have a large market share in certain segments. In your particular industry, how is your company able to remain competitive in front of the stiff price competition coming from Asian manufacturers?

I will speak from our company’s perspective because I cannot talk on behalf of all companies in the industry.  We do have a lot of customers daily approaching us and asking us to produce certain products. In the end cost matters, and cost efficiency is always going to be on the negotiation table. So, in many ways, we do lose out to some cheaper labor-cost countries, and that comes down to this cost-efficiency metric. To mitigate this loss we act more on the consulting end, providing total solutions to customers, and that can come in the form of handling, selection, planning, design, construction, and proposals. Basically, we are acting as a one-stop company offering customers proposal-based solutions that meet all kinds of sophisticated needs customers are approaching us with. This method itself highlights many Japanese companies out there also and shows the benefits of selecting Japanese over some regional competitors.

The greatest aspect of Japanese monozukuri isn’t the fact that we are simply producing things, but that Japanese firms can think outside the box and plan ahead of time exactly what a customer may need or require. This results in added value to the customers, and to be honest customers really appreciate this hand-to-hand approach. In my opinion, this is a real strength of not only our company but many Japanese monozukuri companies.

Today Japan is the oldest society in the world and it also has a negative demographic line. This is creating certain challenges, specifically in terms of human labor. Also, fewer people mean a smaller domestic market to sell products to. On the other hand, it is creating opportunities to develop technologies such as automation as well as opportunities to go abroad and export products. What are some of the challenges and opportunities Japan’s demographic situation is creating for your company?

The very existence of social problems here in Japan is inevitably forcing Japanese companies to react, reconstruct, and rethink their business structure in order to comply with the fluctuations in the market. We saw this coming several years ago, and it isn’t something new to us. As you said, it is the oldest society in the world, but when you look at the bright side, the ratio of people above 60 is immensely increasing year-to-year, and that actually creates good business opportunities for us because part of our business is dedicated to the medical field. When you think about elderly people you automatically might go to such things as medical care, hospitality, and mobility, so for that sake, we predicted this change around 2 years ago and we have already developed solutions to provide for this field.

We cooperate with some local Japanese hospitals on co-research, researching products that will be applicable for medical research, especially when you talk about operation tables. While this is the challenge, if I were to speak on the clear opportunities, we definitely see that our products may come in handy in overseas markets. That will come in time, however, and as a Japanese company, we would like to first establish a strong presence in the domestic market. Once we have all our bases covered here domestically, then we might look into introducing some of our products to overseas markets. Obviously, with the COVID-19 pandemic things did slow down, but once things settle down more we are going to be considering the possibility of overseas expansion.

The Covid-19 pandemic introduced a number of challenges to businesses around the world, but in particular, Japan suffered from economic downfall. To add to that we had supply chain disruptions and logistic bottlenecks, the biggest of all was China’s zero-Covid policy. This all led to a series of shortages in semiconductors and materials. On the other hand, the pandemic was a good time for medical device manufacturers. How did your business navigate the pandemic and what are some of the changes it brought to your company?

The game changer was Covid-19 and it required a flip in priorities. One example was the Olympic games, which we thought was going to be a full-scale, worldwide event, and what happened was very unfortunate. Part of our business was goods distribution. We were putting up our best efforts and expecting the Tokyo Olympics to be a full-scale event, but unfortunately, the story was that it wasn’t. This absence of tourists caused a big downside and bad effects on our business because we simply couldn’t sell.

The good side is that the pandemic made us think about the good aspects of our business. We talked about the medical field earlier, and we found great opportunities in PPE equipment so the company pivoted to focus on these lucrative fields. We have antivirus sheets that have served medical facilities well and definitely came in handy during the pandemic. To sum things up there are pluses and minuses to the situation. We experienced some downfalls from the situation but at the same time, new benefits arose from the situation as a whole.

The supply chain also needs to be mentioned because disruptions obviously happened. We have a facility in China but only 5% of all procurement materials overall are coming from Shanghai. As you can imagine it is not a big effect on our business because it is such a small percentage.

 We saw that you also do building materials, logistics with CT sheets, and even stationary. Looking at the future, which particular applications will you be looking to prioritize?

The answer will be medical in many ways, and it relates to the previous answer given. It was a little unexpected, but with the COVID-19 pandemic, we saw an opportunity with medicine and took it. We don’t really even have the numbers we should be expecting from the field, but we do see a lot of potential and we are trying our best efforts to strengthen our business activities in the medical field.

The medical field is a very complex one where there is a lot of regulation required as you are dealing with people’s lives. As you expand into the medical field are you looking for partnerships?

The answer right now is not really. You are right about the regulations and permits being very strict, and you have to cross a great number of layers before submitting a final product. One company you could consider a business partner or affiliate is the hospital. Hospitals here in Japan are mainly governmental entities and they are not like a business in the pure essence of the word. We cooperate with hospitals and actually conduct R&D activities together because in most cases hospitals have excellent R&D facilities. Based　on the hospital’s needs, we usually come up with a product proposal,  and then we conduct the selling.

At your core, your firm is an expert in the process and transformation of PVC. Today, due to environmental constraints there is a big trend of replacing plastic materials with alternatives. There are natural alternatives, for example, using bamboo in building construction or polypropylene in the chemical field. What are the advantages of PVC in today’s environmentally conscious world?

For that, we need to talk about our founding fathers because they were the ones who made the decision to handle PVC. Japan back in the 1940s and 1950s was a very different place and the country was trying to recover from the damage left by WWII. The whole country had to be rebuilt from the ashes of war, and frankly, at that time environmental concerns weren’t really a thing. At the time people were bringing things to Japan in order to make Japanese people’s lives easier, and PVC came as a German technology. Our founding fathers took that technology and brought it to Japan, adding PVC manufacturing capabilities to the country. There was a good response from the market and there were many looking for ways to utilize PVC material. This was the first generation of PVC in Japan and its use only expanded over time. As we know, nowadays the material is used in a wide variety of industries.

If we now talk about the environmental burden, the plastic itself is quite the problem in terms of environmental concerns. This wasn’t happening in the 40s and 50s, but now there are a lot of concerns. When you compare the composition of PVC against other plastics like PP or PET, 50% of the composition of PVC is salt, which equates to low oil consumption. For this reason, we can say that PVC is more environmentally friendly than other types of resins. Additionally, it can be recycled and it has a low carbon footprint. I think the founding fathers made a good decision in terms of the material selection to be handled and in my opinion, it is excellent material.

How are these material demands affecting your material R&D and product development?

Our R&D isn’t only related to PVC and we do have a lot of product lines out which have to have close attention paid to them in terms of the environmental burden. For that sake, we are getting the best of our R&D activities to make better product proposals for our customers.

To that end, our company is now utilizing waste materials and giving them a second life. Basically, we are taking the scrap material and giving it to sheet manufacturing companies, trying to persuade them to replace conventional materials with some of the waste materials, thus creating a circular economy and decreasing the environmental burden.

In August 2020 you purchased a Japanese firm called N. Kobayashi Co., Ltd, which manufactures leather goods including small leather wallets and accessories. Firstly, why did you decide to buy this company, and secondly, are you looking for similar types of acquisitions in the future?

The acquisition came about purely because they are dealing with different types of materials. Leather is totally different from PVC, yet surprisingly the processing technology is similar. Printing, cutting, and sewing pretty much describe what we do here too. Although it is a different segment of business we do see points of similarities so we felt it was a natural progression of the company and an easy decision to purchase. We are now able to utilize both companies’ technologies to complement each other, thus creating a very fruitful relationship.

For the future, if some companies have materials we don’t have as well as similar processing technologies, we definitely see an acquisition as plausible. I’m not going to give any specifics right now but we are definitely looking.

In 2008 your firm opened a branch in Shanghai, and you mentioned earlier how you might be interested in exporting your products overseas in the future. Are there any particular regions that you’ve identified as having the highest potential for your firm?

Most things we cannot reveal at this time, and that is because of a number of NDAs we have with our customers. I will say that we have a presence in some other countries through our export activities. We are not physically present in the US, but we do have export activities to the country. That country as you know is one with a great market so I would like to see us expand over there.

Furthermore, expansion is not foreseen by the company through cooperation and joint ventures. The expansion is rather going to come from the side of exports, exposing our products to more international markets.

Imagine we come back in 5 years and have this interview all over again. What goals or dreams would you like to have achieved by the time we come back for that new interview?

My answer is more on the self-centric side. Japan as a country right now is not in good shape and the economy has stagnated for several decades now. The future being drawn as a Japanese person is not that optimistic. There need to be more incentives and more support from the Japanese government to help citizens. As a president of a company in my 40s I would like to see more of this happening. I want to see more support from the government to help bring our economy back and help our birth rates rise again. We must all strive to make the best of our lives and always move forward.

Interview conducted by Antoine Azoulay & Ana Ruiz