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Building pillars for future business

Interview - September 26, 2023

Although the automotive sector has been Kosan’s primary market focus for the last 20 years, the firm is now looking to diversify its client portfolio.

NAOKI MATSUMOTO PRESIDENT OF MATSUMOTO KOSAN CO., LTD.
NAOKI MATSUMOTO | PRESIDENT OF MATSUMOTO KOSAN CO., LTD

We believe that Japan's manufacturing sector is living in a very exciting time. The disruptions in the supply chain caused by COVID have resulted in increased tensions between the US and China. Additionally, multinational companies are actively seeking to form a more reliable supply chain and diversify their pool of suppliers. Japan, renowned for its long-standing reputation of high reliability and advanced technology, forms a unique opportunity for Japanese manufacturers and suppliers like yourself. Do you agree that this is an exciting opportunity for Japan?

At the heart of Japanese monozukuri, which boasts a rich historical background, lies a commitment to achieving the highest levels of quality and reliability. Japan's unwavering dedication to producing one-of-a-kind, top-notch products has garnered significant global recognition, exemplified by the success of products like the iPhone. When global companies meticulously compare and evaluate products from Japan, China, and India, they consistently choose Japanese offerings for their exceptional quality and reliability.

 

Do you believe that now is more opportune for Japanese manufacturers to present themselves and showcase their abilities and reliability compared to five or ten years ago?

In my opinion, I agree that Japan is currently in an advantageous position to expand overseas, particularly when compared to three to five years ago. This is primarily attributed to the depreciation of the Japanese yen. Our current reports indicate that it has become more cost-effective to produce and manufacture in Japan, as imports have become cheaper due to the prevailing currency exchange rate. As a result, Japanese products are gaining traction in overseas markets, with people recognizing their strengths in terms of reliability and high quality. We are hopeful that this expansion will continue in the future.

 

When SMEs initially expand overseas, it is often in response to a client's request or to follow a client and establish local production for them. As a company grows within the local community, it gradually diversifies its client base beyond relying solely on one or two clients and Japanese manufacturers. Is that the case for your firm? Over the past ten years of operating in Thailand, have you successfully developed a more diverse customer base?

Initially, our decision to enter the Thai market was prompted by a request from a Japanese automotive manufacturer. However, they emphasized the importance of not relying solely on their business, driving us to establish our presence in the market independently. In the automotive industry, cars are manufactured using locally procured and manufactured components, forming a supply chain confined within the local region. Since the high-precision components we produce were not readily available in Thailand, our factory in Thailand began supplying these essential components to the local automotive industry, resulting in a highly positive response. As a result, our Thai factory and operations have achieved tremendous success.

 

Looking back on those ten years, what major lessons or reasons can you attribute to that prolonged success? As you look forward to the next ten years, what is your plan moving forward? Will you focus more on strengthening your presence in Thailand or expanding into nearby areas like Vietnam?

The prolonged success of our Thailand operation can also be attributed to the strong supply chain ecosystem in the region. Aside from our focus on developing high-quality and high-precision products, the manufacturing process requires a well-established network of suppliers. Within this supply chain infrastructure, notable Thai SMEs specialize in stamping, forging, heat treatment, coating, and blade cutting, all of which contribute to the overall strength of the network. As the driving force behind the creation of this infrastructure, we are contemplating expanding our presence to other ASEAN or Southeast Asian regions, starting from Thailand. We are also considering the establishment of a factory in Mexico, which has emerged as a prominent destination amid the ongoing decoupling between the United States and China.

 

Your slogan, "Shave the world, shave the future," emphasizes the aim of manufacturing products using a CNC-based lathe through one-shot processing instead of conventional dye or stamping applications. What are the limitations and advantages of this approach? Can it process all types of materials? How do you ensure quality control and guarantee precision while reducing the number of steps? Could you provide more insights into your expectations for this technology?

Our CNC lab has the capability to work with various nonferrous materials, such as aluminum, copper, titanium and even steel for the automotive industry. Additionally, we have successfully developed a method to incorporate a magnetic element into stainless steel, creating a new type of functional material. Unlike traditional approaches that involve multiple machines for cutting, curving, and shaping a product from cylindrical forms, our machining center is designed to perform all these processes in a single operation. By leveraging multiple accesses that operate simultaneously, we are able to curve and create the end product in one shot. This approach maximizes efficiency and allows us to optimize our limited factory space by eliminating other processes.

 

Could you provide an example or case study where a client approached you with a specific problem or request, and your one-shot technology successfully optimized it to such a degree that you would like to share with us as a prime demonstration of your capabilities?

One example involves the controlled valve for transmission, a critical safety component in the automotive industry. The valve supplier initially produced the product in-house and invested approximately JPY 1 billion into factory production. While they managed to independently manufacture the controlled valves for some time, they encountered technical difficulties that hindered their production capabilities. However, the supplier still needed to fulfill their obligations to Toyota. This is where Matsumoto Kosan, akin to the historical kakekomidera temples that provided refuge to women, entered the picture. They approached us, seeking a solution.

In response, we developed a prototype that accurately replicated the controlled valve with utmost precision. The remarkable aspect is that we achieved this feat with a mere JPY 2 million investment, which amounted to just 1/10 of the production cost. This particular case exemplifies how our technology offers an incredibly efficient and cost-effective solution.

On numerous occasions, we have served as an emergency refuge for many manufacturers in need. One such instance occurred 20 years ago when a French company manufacturing an air conditioning component locally faced technical challenges that impeded its production capabilities, so they sought a Japanese company that could help. We promptly and effortlessly replicated the required component in response to their request. Since then, we have consistently supplied the product from our facility in Chichibu to France for the past two decades.



Although the automotive sector has been your primary market focus over the last 20 years, you have been diversifying the types of clients you offer your service to more industrial, telecommunications or lifestyle sectors in the past decade. Is there a particular new market you are putting more energy into or consider the most promising?

I have three major future pillars in mind, the first being the automotive industry, which is currently experiencing a monumental once-in-a-century transformation toward electric and fuel-cell cars. This transformation necessitates renewing all components and parts, creating a demand for new materials and components. It is imperative that we establish a strong presence in the market by providing innovative products that align with this surge. Additionally, one of our directions involves focusing on Elon Musk's ventures.

The second pillar revolves around the advancement of generative AI, which necessitates the development of new components in this field. Given the declining Japanese population, automation and robotics have become vital in factory operations, requiring the production of complex robot components. Fortunately, we possess the necessary technology to fulfill these requirements, and our focus lies in identifying the optimal applications for our capabilities.

One of our focus areas is the telecommunications industry, where the demand for complex and intricate components is prevalent.

 

Do you perceive Japan's population decline as more of an opportunity or more of a challenge, given the multitude of requests for new complex and precise high-quality components in emerging sectors, such as infrastructure, coupled with the difficulty of retaining senior engineers in a rural region in Japan to transfer their expertise to younger generations?

Our company's uniqueness is that our employees' average age is 33 years old, and in manufacturing is, even more, younger, 30 years old on average, while Japan’s industrial average age is 43 years. It is mainly mentioned that passing knowledge down from the older generation to the younger generation is a problem. However, we have a talented pool of technicians working in our company who have acquired and will continue to acquire technology, thus creating a brand for ourselves and a reputation as a highly technical group that can provide solutions in many industries. 

One notable aspect of our company is the youthful average age of our employees, standing at 33 years old, and even younger at 30 years old on average in the manufacturing field. While the challenge of knowledge transfer from older to younger generations has been emphasized, it is important to recognize that our company has talented technicians. These individuals have already acquired and will continue to acquire technological expertise, enabling us to establish our own brand and reputation as a highly skilled team capable of providing solutions across multiple industries.

Furthermore, over the past 10 years, we have been hiring female employees and today, women make up 48% of our staff count and they play an important role in the company every day. We believe that Japanese firms still have trouble balancing out the male-female employee ratio, but we want to be pioneers and change that.

 

Can you give us an example of how you ensure consistency and quality, whether manufacturing in Japan or overseas operations like Thailand?

Ideally, our business operations should be consolidated within the Thailand factory. However, we have stationed Japanese engineers there to ensure impeccable quality assurance. Their presence guarantees the production of high-quality products equivalent to those manufactured in Japan. Adopting this approach ensures unwavering consistency and fulfills our commitment to delivering exceptional products, regardless of the manufacturing location.

 

Do you also seek to establish partnerships with local, multinational, or Japanese companies and immerse yourself within similar communities in various markets?

We are indeed interested in forging alliances with Japanese, international, and local companies. Specifically, in Mexico, we aim to collaborate with local entities, enabling us to operate globally while firmly rooted in the local market.

 

If we were to fast forward to 2030, marking the 60th year since your company's establishment, and have this interview over again. What goals or personal ambitions as the President would you like to have achieved by that date?

Considering the rapid population decline in the Chichibu area, where our company is located, it becomes even more crucial to maintain our appeal as an attractive company and remain an employment option for the younger generation. Surviving in this environment necessitates actively contributing to and being an integral part of the local community.

Furthermore, to become a company that even elementary students aspire to work for, it is essential to prioritize the happiness and well-being of our current employees by providing comprehensive welfare benefits. In line with this vision, we are currently exploring the creation of an MKK garden—an inviting space surrounded by greenery—where employees can gather in a relaxed atmosphere. This facility will be equipped with sports amenities and a sauna, further enhancing their well-being.

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