In this interview, Mr Fumiaki Ono President of nms Holdings Corporation discusses his visionnary business model that ensures high-quality quality manufacturing all around Asia
Despite certain hints of economic growth in 2016, critics have said that Abenomics has fallen short of expectation. Structural reforms aimed at tackling the challenges posed by an aging population and decreasing workforce are meant to transform Japan. Experts say that automatization can be the answer to Japan’s problems. How has Abenomics impacted Japan, and most particularly your sector? How can the fourth industrial revolution be a solution to Japan’s decreasing workforce?
Abenomics is a key word within Japanese society and the ageing population and population decline is on every Japanese companies’ agenda to address. As part of our Human Resources division, we identify the integration of foreign workers into Japan's work force to be a key solution. Overseas Technical Technicians are permitted to train in Japan for a period of five years, they cannot be transferred to other factories outside of Japan but they can be trained in our Japanese based companies.
In November, a new regulation is due to be enforced which will allow trainees from countries such as Cambodia and Philippines to be sent overseas to train in Nursing Care and Agriculture. We wish to develop this side of the business to accommodate the new regulations.
If American Engineers were to come to Japan to learn the ‘monozukuri’ philosophy of craftsmanship, what do you think they would learn? What does Japanese ‘monozukuri’ have that its competitors like China and Korea do not?
Japanese manufacturers are respected for being at the highest level of their field, on a global scale. That together with their experience of their sectors high growth rate, makes them unique mentors for American students and individuals wishing to learn the art and craft of manufacturing, with opportunities to run Japanese companies based overseas.
The students would learn that Japanese companies, especially in the manufacturing service, endeavor to improve every day; by way of improving various innovations, finding ways to save energy and to make products more efficient. Of course, there are very talented people in the United States and China but Japan excels in standardization and team work - unilateral quality.
The EMS market is worth around $400 billion. Both nationally and abroad, your company faces tough market competition especially in Asia. What are the competitive advantages of nms? What makes nms holdings the partner of choice?
I spent three weeks in the United States at the end of the year 2000, to carry out research for the future direction of our company, with a focus on EMS, manufacturing and human resource services. I had the privilege of visiting several companies. My research showed that EMS; which formerly was not a priority within Japanese companies, was booming in US companies. My three weeks in the United States inspired me to start our current business and to rename the company to our current Human resources business brand name of Nippon Manufacturing Service, “nms”.
Our partner clients which are based overseas are Japanese companies, with Japanese manufacturing knowledge and expertise. Our reputation is further strengthened by being the partner of choice for higher Chinese Electronic companies. We have continued to have a good relationship with a US/Chinese EMS company who I visited as part of my research tour in the United States. We mutually benefit from a continued exchange of information and expertise and our staff are transferred to their Japanese based companies. We also work with an American/Canada company, who operate in EMS services, and we also transfer staff to their Japanese based companies.
Then, we acquired SHIMA Electronics in 2010; to focus on EMS and Chip Mount and TKR in 2011.
In 2014, we brought the Electric Power Switch Division from Panasonic.
We have continuously grown nms holdings by adding manufacturing services and expertise to our Human resources Service, and as result to my knowledge, we are the only company offering both Human resource services and EMS services in Japan and indeed the World.
Your company has subsidiaries and offices all around Asia, with bases in China, Hong Kong, Vietnam, Thailand, Cambodia, Malaysia and the Philippines. What are the competitive advantages that this extensive Asian network allows for? What future geographical market are you thinking to penetrate? To what extent can your corporation be considered as a “bridge” for Western companies that wish to penetrate the Asian market? Have you ever worked with a US corporation to help them penetrate the Asian marketplace?
We turned subsidiaries in Thailand and Vietnam into consolidated companies from the first quarter of the fiscal year ending March 2018. These three companies are planning to proceed with full-fledged business activities and becoming increasingly important. Therefore, we made the decision to include them in our consolidated subsidiaries.
In Thailand, we are providing human resource solution services to Japanese manufacturers developing business in the region. The extent of this is broad and the firm is working on expanding its customer base in various industries, such as automobile part/precision equipment manufacturers and logistics companies, in addition to automobile manufacturers.
In particular, business in Vietnam is developing favorably. The firm has been able to secure more than 1,000 workers in the six months since establishing an office in the country. The number of projects being undertaken – starting with automotive part assembly work – has been steadily increasing in terms of contract manufacturing. The firm is planning to increase its number of production personnel to 1,300 workers by the end of 2017 due to an increase in the production volume it is undertaking. The size of its business is steadily increasing.
The firm will work on the following as new efforts to expand the scope of its business in the future.
The development of business in Vietnam is truly a good example of taking advantage of group synergy. The human resource solution and electronics manufacturing services businesses in our group have combined to manage factories that take full advantage of their respective areas of expertise with built-in optimization of production lines, technical education for production personnel and automation know-how for personnel/labor-saving in addition to the supply of human resources.
The number of inquiries and proposal requests from companies has also been increasing based on “China Plus One.” Therefore, we can expect business in Vietnam to grow rapidly. The next step is how to roll this out to other countries and regions. The nms Group would like to grow while developing activities rooted in each country and region with “human resource solutions + Japanese quality manufacturing.”
From FY2015 to FY2016, your net sales augmented by some 26%, going from 49 to 62 billion yen, as your operating income soared by 292%. What were the reasons behind this growth? What are your expectations for FY2017? I saw a mid-term strategy plan that showed you were aiming at 100 billion yen of sales by 2020. What is your strategy to reach those numbers by 2020?
Our biggest engine of growth was the acquisition of PST, which we brought from Panasonic and which gave us massive opportunity for sales. We have just signed our first alliance with Kanematsu (major trading house in Japan) , and Nittu (major distribution giant) and we aim to further our collaboration with these two companies by researching how we can process business with them in Asia, Europe and the United States.
In the Company’s results for first quarter of Fiscal 2017 consolidated cumulative total period, net sales in our Human Resources Solution Business and Electronics Manufacturing Services Business were supported by demand in Japan and overseas. In addition to an increase in sales, profit has also remained steady against the Company’s initial plan due to the results of the efforts to strengthen our constitution that we have implemented so far.
We switched to a holding company structure in April this year. Nippon Manufacturing Service Corporation took over operation of our human resource solution business (worker dispatch and contract manufacturing). This has made clearer the functions of our “holdings company” that is responsible for group business supervision and management and our four “operating companies” that are responsible for individual areas of business.
Taking advantage of this, we have been discussing what the nms Group wants to be and our mid-term vision with the management of each firm in our group since May. This is a process-oriented discussion in terms of what kind of corporate group we are aiming to be and how will we achieve that rather than a “mid-term plan” based on numerical figures.
The companies in the nms Group have a variety of foundations. This has meant that the opinions and ideas expressed have also been diverse. I have once again been able to feel the size of our latent potential. At the same time, I also have a feeling that it has become possible to see what may occur (what we may bring about) in the future to achieve an unprecedented growth trajectory.
Our business investments in Vietnam have been very successful. Business in Vietnam is rapidly growing, with enquires and offers being made from Japanese companies, who wish to avoid the risks of conducting business in China but still require the services of a company with Japan’s expertise. By 2020 we expect this business growth to have generated a total of ten billion yen.
As well as new investments, our existing businesses are continuing to progress well, including PST. One of the major manufacturers is withdrawing from the division, which has opened an opportunity for growth next year.
Taking into account all of these areas, we are confident that we will reach our target of 100 billion yen by 2020.
Your company was first established in 1985 under the name of Tesco Corporation, and started dispatching Japanese engineers in 2005. What were the main challenges that you faced in your 32 years of operation? And how did you overcome them? What developments do you wish to see for the next 30 years?
Japan's unemployment rate was much higher twenty years ago than it is now and companies knew that employees who left could be easily replaced, however, they recognized that in a world of Monozukuri, a high staff turnover, of perhaps every three to six months, does not generate an employee base of fully trained personnel, which leads to low productivity and competitive disadvantages. To counteract this, we instigated a system and committed to whatever cost was necessary to hire personnel, to build loyalty and long-standing employees.
Initially we hired employees to work in the factories and on production lines, but soon there was a demand for technicians, we developed into our Technician Dispatch service. This was how the human resource side of the business evolved and we saw that implementing a human resource business, together with the manufacturing business, would be key for our company’s growth.
We understood that there was a limited ceiling for the growth of HR and to continue this growth we acquired SHIMA Electronics in 2010; to focus on EMS and Chip Mount and TKR in 2011. In 2014, we brought the Electric Power Switch Division from Panasonic.
In the future, we will consider the acquisition proposals we have received, to add to our current business partners, and some of these services may also be part of M&A. We do not wish to procure everything ourselves, and having business partners including Kanematsu (major trading house in Japan) and Nittsu (major distribution giant), we can benefit from improved services which will contribute to our growth.
At present, our scale is like a Mouse, so our target of one hundred billion yen is just part of the process for us. By collaborating with appropriate partners, we aim to expand our business and expertise and to be like the Elephant, twenty years from now.
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