Saturday, Oct 21, 2017
Transport | Asia-Pacific | Japan

Transportation & Logistics

Kamigumi’s smart terminals heading Stateside


1 year ago

Masami Kubo, Chairman & Representative Director, CEO, and Chairman of the Board of Kamigumi Co., Ltd.
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Masami Kubo

Chairman & Representative Director, CEO, and Chairman of the Board of Kamigumi Co., Ltd.

Integrated logistics service provider Kamigumi’s investment in smart terminals paid off, with a leap in revenues and further consolidation of its position as a trusted partner of some of the world’s biggest shippers. Having established itself in Asian and European markets, it is now bringing its port handling expertise to Mexico and the US. Chairman Masami Kubo provides the details, and also explains the diversity of other areas the company focuses on.

 

Kamigumi was founded in 1867 at the time of the opening the Port of Kobe. Next year will mark the 150th anniversary of the company. How would you assess Kamigumi’s contribution to Japan’s socio-economic growth and development so far?

Any company involved with ports is very endowed and closely linked with the industrial manufacturing activity of a nation – not only in Japan but everywhere in the world. Kamigumi has always been at the forefront of Japan’s trade and cargo industry, and as such we believe that our company has been instrumental to Japan’s socio-economical infrastructure, and has largely contributed to enhance Japanese industrial competitiveness and Japanese exports through international trade.

 

In order to position Kamigumi at the global and local levels, could you provide a couple of facts or figures to better understand the importance and uniqueness of Kamigumi?

The most important thing that can depict Kamigumi and explain our success is our corporate culture, which is based on trust. Trust is not something that can be gained within a day, or a few days or even a few weeks. It is the repetition of providing a correct and quality service to customers. My predecessors established real trust with clients. I have been challenged to maintain that trust and my successor is going to be tested with maintaining that trust as well when I pass down the torch. The most important thing for the culture of Kamigumi is making sure that this trust is being maintained.

Our people work on the frontlines. Their thoughts and their opinions are even more important than what our management thinks in maintaining this trust. Clients would ask things from our staff on the frontline, all of their services and needs are then met, so our staff understands what they need. Being able to fulfill the changing needs of our clients and allowing us as a company to be able to help them do this establishes even more trust and enhances our brand.

 

As Chairman of the Japan Harbor Transportation Association you have expressed your concern about the fact that the status of domestic harbors has been lowered in the light of international competition. What strategies should be followed to increase competitiveness of the Strategic International Container Ports in Japan?

The government’s policy is to have two strategic ports in Japan: Tokyo and Osaka. Their priority is how to increase the cargo handled in those two areas. However, the goal should be not just increasing the number of cargo in distribution, but actually bringing the products that we actually produce. Promoting Japanese industry and agriculture is crucial: more goods will turn to increased cargo. It’s a two-way approach.

I believe that the domestic market is not as active as it should be. Japanese companies are aware that the Asian market is growing very rapidly, so they are expanding into the Philippines, Indonesia, Malaysia or India. All of these companies have a strong distribution needs. They manufacture in the countries I mentioned and then send their products, to Japan or to other Asian countries, the US or Europe. Japanese ports are not able to handle this strong distribution need right now. In the Japan Harbor Transportation Association, we are working with the government to figure out how can we bring back this distribution capacity, and how can we involve our ports in order to revitalize our infrastructure as a whole.

I will give you a specific example: one Japanese company manufacturing goods in the Philippines that want to export to America. The goods do not go directly from the Philippines to America. They pass through Singapore for transshipment. It could come through Japan, but the transit time would be longer if it came to a Japanese port rather than to the Singaporean port. We cannot compete with Singapore in time, so there has to be some added value. When a Japanese company manufactures goods in a foreign market, the reason to choose a Japanese port for transshipment is because some added value should be brought. This is something we are working on as the business industry as a whole. Working together with the government to see what kind of policies and what kind of environment we can create and where this added value can be provided to justify using Japan for transshipment rather than places like Singapore.

 

In addition to your core business as an integrated logistics service provider, which can deal with any type of cargo, Kamigumi is also providing other services such as real estate, solar power generation, liquor distilling and retail and agricultural business. Even wooden-made roller coasters in Japan are mostly installed by Kamigumi. Beyond your core business as logistics services provider, where you see biggest growth opportunities?

Right now there is an increasing attention towards the Japanese agricultural industry, both in regulations and consumer interest. Agriculture is something we are already involved with and we believe this is where we will have the most growth. We actually bought a very large part of land just behind our headquarters, where we plan to start agricultural business. This is something we are very much looking forward to.

The Japanese consumers’ interest in organic products has been expanding and the same is happening internationally. We are already growing organic tomatoes in Oita prefecture. We are looking to meet customers’ demand in Japan by enlarging our organic vegetables business.

 

In Kamigumi you strive for providing of quality and highly valued distribution services by fully using the distribution know-how that you have cultivated since 1867 with current advanced IT technology. What are you most excited about regarding the outstanding innovations applied to the logistics sector?

Up until now, port terminals have always been designed with a focus on how to load and unload the fastest possible. The major difference between our terminals is that our focus is on how to make logistics simpler and more effective for our consumers. For instance, we have the first automated port gate that makes the process faster. We have also the latest computer software installed, so when a driver comes to load and unload the goods from the terminal, the driver can see in the smartphone if it is busy or not and when it is the best time to come. We are revolutionizing through a consumer-faced business, following a B2B focus rather than via the shipping lines on how to load and unload.

With regards to our future plans, we have come up with a concept called smart terminal. Not just our own terminal that we operate, but any terminal in Japan and even overseas. How can we provide the infrastructure to lay over each terminal to make it easier for our clients in their goods distribution? This is a concept that we would like to continue to expand upon. We are working on it right now and looking to expand it internationally as well.

 

We experienced that client focus when visiting your terminal, especially regarding the services you offer to vegetable importers. For example, you receive green bananas, ripen them and then distribute them to supermarkets.

That is just another example of thinking about the consumer. The whole idea is how to give the best banana at the best possible time to the consumer to make them have the best experience. When you look at it from the consumers’ experience perspective, you come up with new ideas on how to best serve them.

 

Kamigumi has branches or representative offices in Thailand, Vietnam, China, Singapore, Dubai, Indonesia, Malaysia… even in Mexico. What markets outside Japan are you currently experiencing the most growth in?

With regards to market share, China is of course the biggest but when you look on percentage growth basis, Thailand is the fastest growing market for us right now. One country we are putting most efforts on it is actually Myanmar; I have been personally there to meet with the government. We see plenty of opportunities there. The problem though is that there are still sanctions in place. When you are looking into partner companies, you have to be sure that the partner you are working with is not blacklisted by the United States International Security Basis. Working with companies on the blacklist means not being able to do business with the United States, which is a nerve-wrecking experience actually.

More than 100 Japanese suppliers of auto parts followed Toyota, Honda and Mazda’s assembling plants in Guanajuato, Mexico. Major Japanese logistics companies are rushing to strengthen their presence there too. Yusen Logistics has even launched construction on a new multipurpose logistics center. Kamigumi established a subsidiary in Querétaro, and has set up new business footholds in Mexico. How do you differentiate yourself and the services you offer from the ones offered by your Japanese competitors there?

Actually we have very long and well-established relationships with automobile industries and automobile manufacturers. We have been asked repeatedly to be in Mexico for many years, which we did not do. This time there was a specific request for us regarding a specific project from a car manufacturer. This is the reason we opened up a business in Mexico. Japanese automobile manufacturers in Mexico export the majority of cars produced there to the US.

Now we are being requested to have operations also in the United States. We are studying two possibilities to do this: either we invest in a local company that is already involved with this kind of operation, or we go through a joint-partnership agreement. We are actively looking to conclude a deal in America very soon. We want to use our unique business model in China with this specific automobile manufacturer in Mexico for the same manufacturer. I am not going to say any names, but it is the most difficult client in the automobile industry...

 

Currently, you are operating in the US with two alliance partners in Los Angeles after closing your operations in the 1990s. In case you conclude a deal in America soon and come back in the following months, would you consider opening an office in LA or also in other ports?

The decision to close the North American branch in Los Angeles in the 1990s was because, since we created that office under the leadership of the past chairman, it was always in the red. It had never been profitable. However, now we have this opportunity with the car industry but we want to make sure it goes well. I am very excited, and actually my employees are the ones most excited about re-entering the American market. We will probably re-open our office in LA, but the most important will be a new one we will open in Texas, as we are planning to use a Texan port as the main operations base for our US businesses.

 

In a message to your shareholders and investors, Fukai-san, Kamigumi’s President, highlighted the use of M&A to expand your business. To what extent are you considering M&A in your overseas expansion?

To be honest, in our industry there have been cases where M&As have been done, but at the end of the day, the goodwill value of the acquisition partner is usually much more than it is worth. So even when you acquire a company, while you are waiting for the synergy effects to happen, the goodwill value starts to deteriorate and in the end most of the M&As in the logistics industry are not successful. Over the past four years we have a dilemma in Kamigumi: we are interested and actively looking at M&A but we are only interested in having 100% acquisition targets. With this kind of perspective, it is hard to find the right partner. Plus, when you do find the right partner or a potential target, the price goes up. We are always in this dilemma. We want 100% control and we do not want to pay too much for goodwill.

 

Kamigumi is very active in environmental activities, sports and other community events. For instance, you actively participate in the protection, cleaning and planting trees in the Nagata-ku, forest of rabbits. How is Kamiguri accelerating its efforts in this regard?

The environment is something that we are very much involved with. We are making efforts to preserve the mountain regions around the Kobe area. Our corporate logo is the mark of a rabbit, because the rabbits inhabit in the forests of our city mountains. For instance, our warehouses are totally self-sustainable regarding electricity supply because we have installed solar panels on top of them. We are very conscious of our environmental footprint.

 

Kubo-san, you joined Kamigumi as employee in April 1963. In April 1991 you were promoted to General Manager and from then your career grew until you were elected Chairman. In regards to your vast experience in the company, what do you see as your greatest accomplishments?

The reason why I became president was because of the smart terminal we saw today. As an employee, I visited 33 countries, looking at their different ports and then I knew the kind of port terminal that would be successful. But when I pitched this idea, at the very beginning, the company was against it, because it was going to be an investment that if unsuccessful, would have taken the company towards bankruptcy. I was very passionate and I knew my basic pitch: if we do not do it, somebody else is going to do it. Another company will do it. Even though the investment was a major risk, I knew myself that it would definitely be successful. Finally, terminal 18 was built. We also we managed to build other 11 similar terminals all throughout Japan. Our sales revenue was $1.5 billion per year prior to that, but after this decision it went to $2.2 billion. Our sales, our revenues and profits increased substantially thanks to my push to have terminal 18 built. The big risk and the passion that I had, and eventual success, allowed myself to elevate to the position I am in today.

Personality-wise, I am the type of person who does not like just to maintain what has been already created. In fact, I was the last person in the company to be promoted to a management position because I was always on the frontline saying that things needed to be changed, always trying to make things better. That is the reason why our company is not only focused on logistics, but on other business as well. Every opportunity that comes, as long as we can provide a solution, we should do it. This was my philosophy since the start, and although this has hampered me going up the ladder at the beginning, I think this is the reason why I am where I am today.

Toshihiro Horiuchi (Director of Kamigumi): Beyond building our terminal, the biggest thing that our CEO did in my opinion was the relationship building with our biggest clients. All the top five ocean freight carriers are clients of Kamigumi: MSC, CMA CGM, Evergreen, Cosco, Maersk… all deals were introduced and closed by our CEO directly. He went directly to meet the CEOs of these carriers and close a deal. Since these carriers started to use our terminal in Kobe, our company has achieved great success.

Another important aspect of our success is the retailer-focused logistics. For the major logistics in Japan there are Sagawa and Kuroneko, which are very big and well-established companies. Up until now we were not involved in this industry, but with the CEO’s vision we have actively entered it, and it is something we are becoming very competitive in now; we have large clients in clothing industries where we take care of all the logistics both nationally and internationally.

 

In a nutshell, what would you like them to remember about Kamigumi?

We as a company are very involved with Europe and Asia, but one place we have not been involved with is North America. Now that we have made the decision to enter Mexico, we inevitably had to plan our coming back to the US market. We hope that readers can wait in anticipation for the distribution services we can provide and we hope we can become a valuable partner for US clients in the future. 



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