Established in 2011, Toyo Trading has been demonstrating its know-how in conventional rubber products, providing overseas manufacturing, while striving to reshape some conventional perceptions.
Over the past twenty years, we have seen Japanese firms facing very stiff price competition from neighbours with lower production costs. Nevertheless, when it comes to certain niche B2B industrial segments, we still find Japan dominating either in terms of technology or market share. As a firm that is linked to both Japan and to China, from your perspective, what do you think allows these Japanese companies to remain competitive despite this stiff price competition?
Our company has been strongly rooted in Chinese manufacturing. We are constantly trying to improve the quality of our Chinese manufacturing and make it comparable to "Made in Japan". In the past, Chinese manufacturing had a negative image of being nothing more than copying, imitation, and subcontracting. However, things are now changing as new technologies and new developments are introduced into the Chinese market. In order to maintain this high level of quality, there are three things we insist on in our operations.
The first is communication. Until now, there has been a communication problem between the Chinese and Japanese. That is, Japanese people do not put what they want to say into concrete words and are sometimes very vague. In Japanese culture, we are supposed to read this ambiguity and offer more than what is said. However, in China, ambiguity is not an acceptable way to treat people. The level of application of "production management" and "manufacturing management" on the Japanese side often does not match the operational management of the Chinese factories. The root cause of this is often a difference in the mindset and thinking of the workers, so it is necessary to understand the cultural differences. In order to ensure that the necessary management details for production are strictly documented, understood, and implemented, we hold monthly quality meetings to summarize the points to be reviewed and improved. We believe that this continuous communication is important for the development of value-added products.
The second is a hands-on approach. Chinese people tend to act very quickly and immediately deal with issues that are "now" and "in front of them". In our work in China, we encounter various kinds of problems, and I am impressed by the speed with which Chinese people act to solve such problems. On the other hand, this tendency can have a negative impact during the consideration stage of manufacturing, so management itself walks onsite with its own feet, discerns necessary information from the real voices and live information onsite, and quickly analyzes the live information by constantly updating it. This "hands-on" approach enables speedy decision-making.
Third is our on-site inspection tours for our clients. Our inspection tours are held once a year, allowing us to actually visit local factories with our customers to confirm the attractiveness of our products and technologies. It is important for customers to calmly consider and make a decision based on their business type and business conditions, so that they can confirm the merits and demerits of their transactions. We are able to make a strong appeal to our clients by utilizing our extensive experience in negotiations, transactions, and handling defective products.
It is quite interesting that your firm has this intimate knowledge of both Japan and China. It is true that in China since 2020 and the advent of the coronavirus, we have seen very big logistics disruptions. Throughout the pandemic in 2020 and 2021, most of them were linked to actual logistics such as shipping, with transportation being delayed due to manpower shortages. Now that the pandemic has subsided in some countries, China is still experiencing some disruptions linked to the government’s zero-Covid policy, which is leading to repeated shutdowns and lockdowns. How did your firm manage this time of uncertainty, and what is your reaction right now to the logistics disruptions occurring in China?
The Chinese government's zero-corona policy has greatly affected our business in China.
We have experienced delays in our production schedule and delivery dates due to the inability to procure raw materials in time. We have also experienced supply chain delays, logistics blockages, and cargo transport stoppages. This could cause the manufacturer's production line to stop for a day. It is extremely important to meet delivery deadlines, and we collect the best information and use the best means to do so. Based on our experience, we are ordering raw materials and starting production earlier than before. We have also taken measures such as delivering larger quantities in certain bulk quantities and making arrangements earlier than the delivery date.
Your company was created in 2011, just eleven years ago. Could you please run us through the history of your business in the eleven years since your establishment? Why did you decide in November 2011 to start to do your trading when there are already various rubber manufacturers and trading firms both in Japan and China?
The Chinese economy surpassed Japan in GDP size in 2010, becoming the second largest economy in the world. In the midst of these developments, China's manufacturing industry is also responding to the historic opportunity for next-generation industrial innovation. In response to this historical opportunity for next-generation industrial innovation, China's manufacturing industry is shifting from mass production to higher quality and efficiency. I decided to start my own business because I was attracted to the idea of working in trade, making use of my Japanese and Chinese language skills.
You mentioned earlier how your company is rooted in China, but you are ensuring “Made in Japan” quality. Can you elaborate a little more about that business model and how you bring that to your clients?
Our greatest strength is to provide high-quality products in small lots and in a short time. We ship our products in 20ft or 40ft containers on a regular monthly basis. This consolidation scheme was established about 10 years ago. At the time, it was the earliest buyer consolidation scheme and served as a one-stop service for multiple customers.
Today, we have multiple customers in Japan, and we ship the products of each company together, thereby reducing not only ocean freight costs but also customs clearance costs and other costs. Recently, the prices of our products have been rising due to soaring raw material prices and higher transportation costs. We minimize these logistics costs so that we can offer high-quality products at competitive prices. Nevertheless, there are always policy changes in FTAs, so we pay attention to new information and try to analyze the best possible solutions.
We saw in our research that one of the industries that you cater to is the automotive industry, supplying car makers with rubber products. Of course, the automotive sector is currently going through a time of great transformation driven by environmental regulations. We are seeing that on top of the switch to EVs and hybrids, automotive makers are trying to make cars that are a lot more lightweight. As such, the consumption of heavy ferrous metals is decreasing, whereby lightweight material composite CFRP are increasing. How does your company cater to the changes currently occurring in the automotive industry?
We are still in the early stages of research and development for next-generation automobiles. We cannot disclose much information at this time, but we have developed a lithium-ion battery for motorcycles. In the future, we plan to develop lithium-ion batteries for automobiles as well. With the shift to EVs, rubber hoses used for blades will no longer be necessary. However, weather strip rubber parts that reduce noise, used as sealing material for doors and windows, will continue to be needed. EVs are very quiet because they have no engine components, and drivers and users have become more concerned about noise. Therefore, both heat resistance and weight reduction are major issues, and we are developing products using new materials to meet the noise reduction needs of EV vehicles.
During our research, we saw that the core of your firm is a company offering manufacturing services, connecting Japan to China. In 2020, you released the TTPEN product, and we know that you got it certified as a Class 16 product for stationary. Why did you decide to create the TTPEN?
The reason we started the stationery business, especially "TTPEN," was a request from a stationery manufacturer in Qingdao, who wanted to expand their sales channels in Japan.
The theme of our PB business is to be friendly to the "environment and the human body".
The "TTPEN" we developed for this purpose uses environmentally friendly ink that is harmless to the human body, so it can be used by children in a safe and environmentally friendly manner. It is harmless and safe even if a child accidentally ingests it when using TTPEN. We have already registered the trademark in Japan, and you can look forward to our future efforts to expand our business overseas.
Looking at the future, do you plan to expand your line-up of stationary products, or are you looking at other segments away from the traditional rubber components?
Yes, that is exactly what we are doing. We will continue to expand our stationery product lineup, and at the same time, we would like to expand into other segments as well. We would also like to start producing polyvinyl chloride (PVC) gloves for medical use. Japan is now a super-aging society, and personal protective equipment such as masks and gloves are becoming extremely important. In Japan, low quality "made in China" masks were once a problem during the Corona crisis. However, Chinese masks are still used in the Japanese medical industry, so we would like to enter this field as well and provide products of adequate quality. We would also like to provide other consumables in cooperation with Chinese companies.
What are the challenges and opportunities that Japan’s demographic situation is creating for your business?
Indeed, Japan's shrinking population poses a major threat to our business. Due to the shrinking market and lack of manpower, we are faced with the challenge of devising ways to improve the efficiency of our operations so that we can maximize our work with fewer people, or what we call "productivity improvement". While the birthrate is declining and the population is aging, the medical and nursing care fields will continue to evolve remarkably, so we have high expectations for the medical-related market and are developing new products. We are also considering moving our production bases not only to China but also to Southeast Asia, especially to Vietnam and Thailand. In terms of sales markets, in addition to Southeast Asia, we would like to expand into areas where we already have customers, such as the United States, Italy, Spain, and Germany.
Talking about new items, we saw that you announced that you would soon be exhibiting at the IPF Japan, which is one of the world’s premier exhibitions for rubber and plastic products. Can you tell us what particular technologies or products will you showcase at that exhibition?
We plan to exhibit rubber products for use in drink dispensers and convenience stores at this year's exhibition. We also plan to exhibit other plastic products that we would like to pursue. The purpose of our exhibit is to find new alliances and build new partnerships, so we will be We hope to work together with companies in our local area to develop new markets.
You mentioned that one of the goals of the exhibition is to find partnerships and collaborations, and you earlier spoke about how your TTPEN was developed in collaboration with a Chinese company that was looking to enter the Japanese market. What kind of partners are you looking at? Is there a particular profile that you are looking for, and why?
We are looking to enter the field of automotive lithium-ion batteries in Japan. For a partnership, we are looking for growth, collaboration, innovation, and an optimized processes for both parties. To achieve this, we need to strive for transparency, trust, communication, and shared goals with our partners. We believe that it is only by partnering together that we can create new value, something that cannot be done by one party alone.
How are you making your operations more environmentally friendly, not only from a product development perspective, but also from a production process angle?
Japan's current goal is to achieve carbon neutrality by 2050. We are also working to reduce greenhouse gas emissions. At our China Plant, we have introduced a "VOC system" that uses activated carbon in the equipment to purify volatile gases, thereby reducing volatile organic compounds. We are working to reduce volatile organic compounds.
Your company was established in 2011. Imagine that we return and interview you all over again in 2031 for your company’s 20th anniversary. Is there a certain personal goal or ambition that you would like to have achieved by that date, that you would like to share with us in that interview?
We have grown as a developer and manufacturer of key functional components that support automobiles, which are indispensable to our daily lives, as well as industrial machinery, rolling stock, ships, and home appliances. What we want to do now is to enter a new field, the EV automobile industry, and expand our production bases in Southeast Asia.
Now that we have a broader customer base, we want to take care of each customer and grow further. Please come back in 10 years and see how much we have grown as a company that has contributed to society.
Interview conducted by Antoine Azoulay & Paul Mannion