Founded in 1967, New Registon specializes in high-performance grinding wheels for cutting, grinding, and polishing metals. We spoke to president Kenji Yamauchi to learn more about how New Registon has garnered a global reputation for depressed center grinding wheels of the highest quality.
Since World War 2, Japan has had an excellent reputation for its attention to detail, and its kaizen philosophy of always trying to improve products. Today, in 2022, companies need to evolve and adapt to market demands which are changing worldwide day by day. As a company that specialises in grinding and polishing, as well as various other applications of whetstones, can you tell us your interpretation of monozukuri? What for you are the advantages of Japanese monozukuri over your competitors from countries such as South Korea and China?
The meaning of monozukuri is a difficult question to answer. Our company has been a family business, as my father was the founder more than 50 years ago. I myself used to work in a bank before I joined my father at this company. My older brother succeeded my father as president, and I succeeded him, so I am the third member of my family who has been president. For me, monozukuri can be summarized by the word kodawari, which means paying attention to details and sticking to the details. I think this ethos is deeply rooted in Japanese culture. For example, when you look at carpenters, Japanese carpenters pay particular care to the details of the corners and the edges. This culture has been ingrained in Japanese craftsmanship. This is the basis of monozukuri. We take pride in our products and do not want to sell products that are sub-par or incomplete. Producing high-quality products is a key aspect of Japanese monozukuri.
Some commentators claim that Japan’s population changes are putting monozukuri in jeopardy. Currently 28% of Japan’s population is over the age of 65, and simultaneously, Japan has a fertility rate of 1.37. This means that by 2060, Japan’s population is expected to drop below 100 million. What challenges and what opportunities is this population change presenting for your company?
One of the biggest challenges that Japanese SMEs are facing is passing the business on to the next generation. I myself am 69 years old. It is difficult to find people who will be able to succeed me. In the past, we had unique relationships with financial institutions and banks, which required SMEs to have personal collateral in order to borrow money. Therefore, if a company goes bankrupt, all of their assets are taken away. We do not want to pass on those risks to our children. As a result of this, many SME owners have hesitated in passing on their business to their children, and in the past ten years, many businesses have been sold. That has been a big challenge for Japanese SMEs. In regards to Japan’s declining population, a lot of businesses are concerned that Japanese industries will not be able to expand in the future. Furthermore, many SME shares are owned by their families. If I pass away, my stocks will be passed on to my family. However, they will be required to pay the inheritance tax which is a lot of money. This has also contributed to the hesitancy of some SME owners to pass on their businesses to their families. Many fathers are bothered about whether to let their children succeed them, unless they really want to work in the company. My son worked in a large company, but decided to join our company.
In the last two years, Covid-19 has caused many disruptions to many industries. For example, in the automotive field, and then China’s policy of zero tolerance to Covid-19 has also created huge disruptions to companies across all industries worldwide. On the other hand, there have been some positives as companies have taken the opportunity to expand their sales through e-commerce. What was the impact of Covid-19 on your company, and what adjustments did you make to your business model as a result?
In the two years before the impact of Covid-19, sales in our industry had dropped by 20%. However, now our sales are at 95% of what our normal sales numbers were before that drop. Most of our business is B2B, so supplying our products is very important. Our products are quite small. Our grinding wheels for example are priced at around JPY 200 per wheel. The accumulation of these small product sales are our total sales. In the B2B business you have the manufacturer and the wholesaler, as well as the distributor and the end user. Within this structure, our product proportion for the wholesaler is less than 1%, but for us, these products are 100%. Therefore, it is our mission to improve confidence in our company, and to ensure that we meet our supply demands. At this moment, we have 30% of the domestic share in our industry. However, it is very important to appeal to the other 70% of users of these products, in order to increase our market share. That has been our focus for the past two years.
You have developed a number of products and technologies to attract the attention of the end user so that you can increase your market share. For example, the Blue Cerac has a four-times better grinding durability. Can you highlight what you think to be your most important technology, and what gives you a competitive advantage as a company specializing in cutting, grinding and polishing?
As I have mentioned, we operate as a B2B business. Our sales people often visit our end users as well as the distributors of our products. This helps us to maintain our share of the market. By listening to the feedback from our end users, our salespeople are able to directly identify any problems related to our products. This allows us to continue improving our products which keeps our customers satisfied. Our industry is a mature industry. While some people may say that only the price matters, we try to add value to our products so that the end users will find them easier to use when compared to our competitors. In the grinding wheel industry, there is a big gap between the engineers and the end user in regard to information. It has been difficult in the past for engineers to obtain the feedback from the end users. However, we have addressed this issue by sending our salespeople to discuss our products with the end user. This has helped us to improve the quality of our products, and it gives us a competitive advantage in this industry.
Recently ceramic abrasives were developed and begun to produce ceramic types of grinding wheels. We found a European company to procure this ceramic material, and this allowed us to sell new ceramic types of grinding wheels. We didn’t sell that product as it was, then we attached a supplementary pad to it which enhanced the performance of the product. This was brought about with the aid of the feedback from our end users. It is our mission to satisfy our customers, and we are currently in the process of applying this product to many fields.
You mentioned that you worked with a European partner to procure the ceramic materials that you needed for your products. Moving forward in the future, are you looking for similar international co-creation partners, and if so what kind of partners are you seeking?
It is very important to keep our options open for potential partners. However, we don’t know all the abrasive makers in the world, and it can be difficult to find a company that we can develop a strong chemistry with. Our core technology is to develop abrasives that are based on the end users’ usage. It is very important to deep-dive into that technology to ensure the high standard of our manufacturing. For example, some Chinese companies used to produce a similar grinding wheel to our Super Red grinding wheel. However, their grinding wheels were very hard. The end user wanted something softer, so we needed to change the code for the hardness. We had the technology to produce something more elastic such as our Super Green series, so we were able to produce a new product. It is important that we keep proposing and manufacturing the most appropriate solutions to meet the needs of our customers.
When it comes to grinding wheels, the end users of grinding wheels often complain about the hardness of the wheels. However, for our Super Green series, we have not received any complaints. Our technology allows us to use secondary processing on our grinding wheels, which means that we can produce unique grinding wheels and add value to our products.
Speaking about your original technology, I would like to ask you about your electroplating technology especially for the Metaridge Burr, which consists of artificial diamonds embedded into a base metal and allows for a hard abrasive grinding force to be applied. What are the advantages of the Metaridge Burr over more conventional burrs, and how does your electroplating technology allow for it to be more user friendly?
I think that the durability and the grinding performance of the Metaridge Burr are better than conventional burrs. We added the diamond abrasive grains to the polishing wheels using our own technology. Before entering this industry, I always wondered why burrs were in this shape, and not sharper, or in another shape. This of course depends on the customers’ needs. My dream is to establish an order made customized manufacturing process where our customers can send us the data by CAD for the shapes that they require. The data could then be entered into the manufacturing machines which would allow us to produce the exact edge that the customer wants. This would help us to develop a better connection with our customers. We sell many of our grinding wheels to the casting industry. When we spoke with our end users in that industry, they asked if we also sold burrs. That was what led us to start producing burrs. I believe that it is very important to maintain this type of sales cycle.
I would like to ask you about your international business. We know that you had the operation in Thailand which has since shut down. However, you are exporting internationally to many countries such as China, Saudi Arabia, Italy, the United States and many more. Moving forward, which particular countries or regions are you focusing on? Where do you see the most potential for your products internationally?
We are a manufacturer who makes efforts to develop and realize the abrasives that our customers require. In this industry it is very difficult to compete with countries like China which can produce at cheaper costs. However, our end users require high-quality products that are more user-friendly. Therefore, there are many opportunities for us in this niche field, as our products have earned very good reputations in overseas markets. Our goal is not to pursue mass production at a cheaper cost. Rather, we want to continue selling high quality products in our niche field. We are not planning to establish plants overseas. We got to be the only manufacturer in the depressed-center wheels industry that produces products 100% domestically. That is our strength, so we would like to continue our operations in this manner.
Mr. Yamauchi, I have one last question for you. Imagine if we came back to interview you on the very last day of your presidency. What dreams and goals would you like to have accomplished for the company by then?
We have an information system where we store our customers’ data. There are tens of thousands of pieces of data stored on this system. Although the unit price of our product is very small, the accumulation of these prices and the use of the data stored in our system will increase our sales growth in the future. These wheels are consumption goods. They are needed for continual use and then they must be replaced, unlike cars for example, which are not replaced as often. I would like to increase our customer base, which will be possible through the positive feedback that we receive from our current customers and the high-quality reputation of our products. I believe this will lead to future sales growth. We are currently in the middle of this process. I want to continue establishing strong connections with our customers through the use of our information system. These are the goals that I would like to achieve in the future.