Since its foundation in 1946, Chikami Miltec has continued to be an integrated provider of functional raw materials, supporting key industries such as paper and non-woven fabric manufacturing, machinery and construction and civil engineering.
We would like to use your company to challenge the misperception that Japanese firms have lost their innovative or quality edge in the eyes of the West. With that in mind, can you please share with us from your point of view, what you believe to be the core strengths or competencies of Japanese manufacturers that set them apart from their regional manufacturing rivals?
First of all, I’m not in a position to analyze or evaluate the Japanese industry as a whole, instead, I will talk from my own personal view. With that in mind, I feel that the traditional Japanese characteristics focus on details and aim for high quality as well as preciseness. This mentality has long been associated with the Japanese, which I feel is currently changing a bit. We are all on the same starting block competing with other neighboring countries in terms of mass production since mass production itself focuses more on quantity and cost rather than quality. In that sense, I think that Japanese companies are at a big disadvantage. Having said that, in arenas like retail, where there is a greater tendency towards mass consumption with lower prices, we may be at a disadvantage, but in terms of B2B companies, the focus is more on quality and long-term flexibility. Here we are still strong. In this sense, Japanese companies are still able to compete in these B2B fields.
Japan has a very unique industrial structure, and more than 90% of companies here are SMEs. Many of them don’t have the means to facilitate the movement of their goods themselves, whether that be overseas, or sometimes even within Japan. A trader has a very important part to play in that ecosystem. Could you elaborate a little more on your role in facilitating the movement of goods among Japanese SMEs?
Japanese major trading firms have supported the industry in terms of finance as well as doing business translation, however, smaller sized traders have a totally different job in supporting SMEs that don’t have selling or marketing capabilities. Japan as an island nation has created a sense of interdependence based on trust and uniformity. Companies have evolved in collaboration or cooperation where each company has a slightly different function. Everyone can cooperate in creating diverse products with less investment by role sharing.
Historically Japanese SMEs have learned that having different roles is more efficient in production. This unique Japanese industrial structure has been instigated by the Japanese mindset as well as Japan’s geographic background.
The role that we play in the Japanese industrial structure is that we provide information on materials, logistics, and inventory to Japanese SMEs. These three combine to create the services we provide to companies that simply do not have to have the capacity themselves.
Growing together was a key point you mentioned, and it seems that Japanese SMEs are very good at evolving concurrently to respond to new challenges or changes. I think the biggest social challenge facing Japan today is the shrinking population. How is Japan’s aging and shrinking population impacting your business, and how are you able to support your clients through this kind of challenge?
This population issue is such a convoluted one that I cannot give you a simple answer. Having said that, as you say, the lack of human resources and the shrinking market is becoming an issue. From a macroscopic perspective, speaking domestically, the production force is shrinking as well as the market demand. There is a correlation. Speaking domestically there’s a good balance of supply and demand, however, this conclusion doesn’t mean that we want to remain within Japan and shrink along with the population. We are focusing outwards so we can expand our market overseas.
I have a more optimistic view; on a global scale, the Earth’s population is increasing. There is a potential pool of people that could be our customers. Indonesia, India, and Africa all have booming populations, and regardless of the degree of development, those countries' houses would be potential customers. From a microscopic view, this issue could be a threat, but from a longer, more macroscopic view I don’t think it will be.
Entering into these other markets and offering your services overseas comes with an entirely different set of challenges, I’m sure.
The biggest and most fundamental hindrance is language. In terms of an anthropological view, I feel that Japanese men are now becoming less aggressive, very hesitant, and less likely to take on challenges. I think this is a grave issue for Japan. On the flip side of that, Japanese women are becoming tougher and more outspoken.
Is your company interested in developing or hiring foreign personnel as part of your strategy?
Employing foreigners tends to focus on employing them as an employee and then contemplating how to make them part of the company. I’m more focused on collaborating with foreign personnel who are independent and have their own way of business.
Chikami offers a huge selection of products ranging from raw materials and functional products to industrial materials critical for civil engineering, to cleaning cards, cosmetics, and orthodontic appliances. What are some of the biggest advantages of carrying so many different types of products? Is there a particular type of business you’re putting an emphasis on going forward?
Your first question was why we are so diverse in the products we carry, and that simply comes down to our founder (and me in turn) being a very curious person and having many curiosities. You may say it is diverse, but we don’t actually consider it to be all that diverse. There is a connection among all our products and that is non-woven materials or paper. We do have plastic products as well, but those are produced using synthetic fiber.
We have accumulated history, information, and know-how on paper making, fiber, non-woven materials, and plastics. We have been able to extend our variations using our accumulated history.
Something we found really interesting when preparing for this interview was that beyond just your capacity as a distributor and wholesaler, you have used this expertise to launch some exciting original products of your own. From both a professional and personal view, what do you think are the key products that you’ve created on your own?
As an example, I would like to share the development story of our Geodrain, which is used in the civil engineering field for soft ground improvement. As a trading firm for paper manufacturing, we have procured multiple types of fiber from major Japanese companies and passed them down to manufacturers. A synthetic fiber maker Asahi Kasei is one of the suppliers, and they actually had a team focused on fiber material for construction. Unfortunately, that did not work out well, so one day the manager of the fiber and civil engineering department came down and talked to me about the fact that in their company they have experts in fiber and plastics, and in their subsidiary, they have experts in construction methods and technologies, however, they don’t have anyone who knows both. They asked Chikami Miltec to be the intermediary company in order to bridge the gap. I am actually a certified architect myself and have experience with this sort of thing. They were developing a prefabricated drain, and the purpose was to develop a device and construction method to reclaim land for Kansai Airport.
I was asked to go to Sweden and learn about this method, so I actually stayed at a university for two weeks there. Together with a Swedish professor, we did a trial and error experiment on the filters. We were looking for what kind of specification and function was required. I took that knowledge back to Japan, and in Kochi, I worked with local companies for 6 months to figure out the best orientation and shape for the product. With all of this development, we were able to produce Geodrain.
For the first time, I realized that major companies had experts in their fields, however, if there is no one who can bridge the gap, you cannot create or develop new things. I think this answers the essence of your question, and to me, it describes the role that we want to play in the industry. We want to exist as a connector, filling the gaps in order to create new value. It is easy to say, but very hard to do. The mediator needs to have extensive knowledge of both fields, then needs to have the capacity to analyze what’s missing and propose something new.
When I was flying into Sweden I was reading the academic papers of the professor I was to work with, but they were so technical that I couldn’t even understand half of them. For the first two days, a major Japanese trader provided an interpreter, and so I conversed through the interpreter with the professor. That interpreter could actually speak Korean, Japanese, Swedish, and English. Those first few days the professor would give his speech, the interpreter would interpret. I would listen, ask questions, and the interpreter would translate his response, but honestly his answers didn’t make any sense at all to me. The both of us couldn’t understand each other and it became frustrating for both of us. Suddenly, I started speaking English to him and we began to understand each other. I realized that the role of an interpreter is not to convert the language, instead they need to pass on the message. If an interpreter is not able to understand the message, then they will not be able to communicate what needs to be conveyed. It's not her fault, however, because she is not an expert in civil engineering.
I’d be very curious to hear more about how you’ve applied this experience or concept as a “connector” to your company. How have you grown into the “connector” you’ve just described?
We started as a wholesaler, and now we are working as a wholesaler working as an intermediary between upstream companies to downstream companies. Initially, we started off trading raw materials, but quickly we realized that there is a block after our downstream customers, meaning that there are agents who take care of sales. Those agents are actually selling the conventional products with enough margin of sales, and that has become a bottleneck in increasing our sales capacity. We realized it is important to open up new sales channels for our downstream customers so we can increase our sales as a whole. However, there is a limit to what we could do with increasing sales channels. In order to overcome this limitation it was important for us to participate in the development phase of a product. By working together with customers we can make more complex types of products and enlarge the sales outlet. Within that process, we started our own manufacturing.
We soon realized however that although we have many ideas, not all of them are feasible, but by working together with our upstream partners as a raw material provider and developing new materials we can let them know what kind of demand there is at the downstream and we are able to further enlarge our product lineup. Through this process, we have been able to diversify our offering.
I do want to go back to Geodrain briefly and would like to know a bit more about the method itself in practical terms. We have met with many other companies that specialize in soft ground improvement, and have learned that while there are countless methods for soft ground improvement, it is often more about choosing the right method for the right situation. What are the distinguishing features of Geodrain? In what situations is it the optimum choice for ground improvement?
Before talking more about Geodrain I would first like to talk about the soft ground improvement method itself. By place the soil composition for the ground is different, so in order to do stabilization there are many methods depending on the ground. One example in house construction, where you apply pressure from the top, if there is a risk of settlement you can apply multiple piles into the harder ground beneath on which you can place the houses and buildings. Other methods can be applied if there is soft soil in the area between the harder ground and the surface. The soft soil can be solidified by cement mixing or grouting chemicals to resist the pressure of a light or midweight house. Depending on the purpose and what ground it is on you can apply different methods. There are actually a few hundred types and their costs are all different. You choose the method according to the budget, the function, and the location.
Our Geodrain is used for a vast area such as a warehouse or a parking lot, meaning it's more designed for dispersed weight. Cost-wise, this is most effective in terms of avoiding differential settlement of the clay layer. By using our Geodrain you can squeeze the water out from the cray to consolidate soft ground. Geodrain is the best in terms of cost performance for stabilizing a massive area such as harbors and airports by consolidation. This Geodrain method has been used in Kansai Airport, Haneda Airport, Kitakyushu Airport, Singapore’s Changi Airport, and even Bangkok’s Suvarnabhumi Airport in Asia.
This Geodrain method has become a standard in Japan, Vietnam, as well as many other countries around the world. How are you planning on further exporting your products and technologies? What is your international development strategy?
Rather than hiring foreign employees directly, we want to focus more on collaborating with foreign entities and personnel in different kinds of joint ventures. We actually have a shortage of employees who could work as the bridge between ourselves and foreign companies. Key personnel will be those who can collaborate, and foremost the person needs to speak English.
As for our next strategy, with the declining population of Japan, it is becoming even harder for us to recruit. Having a business model where we go directly to do the operations may be difficult. Until now, several engineering Japanese general constructors have a business model where they bring their own people, technology, and machinery to complete a project, using the locals as labor. Rather than joining this type of massive project, we want to create a new business model since we have good relations with Japanese companies that possess unique technologies. Working together with overseas general constructors may not be enough as those companies may not be experienced enough to handle the technologies. We can dispatch our staff and provide training programs, or even provide machinery and support. Basically, we would be receiving a licensing and technical support fee from them. Major American, European, and Japanese companies have not disclosed any of their technologies to locals, and what tends to happen is that those major companies take the technology and do the work by themselves in order to retain the technology. We need to change the business model to build win-win relationships with local companies.
In the conventional view, you may consider us as creating new competitors, however, we are actually trying to enlarge the market while at the same time in Japan, we want to continue to develop new types of technology efficiently with fewer people.
Imagine that we come back in 3 years' time and have this interview all over again. What are your goals and dreams for the next 3 years?
I’m not sure how I can answer your question adequately. In order to realize the vision I described earlier, we as a company must act as a connector, and it's important to find competent employees who can sustain the company through spirit and arduous effort. Having talent that can bridge gaps would be the key to our company’s growth. Many companies would like to hire creators and inventors of new products, however, our focus is more on the ability of employees to act as the connector. Through the repetition of this connection, we are able to create something new that is appropriate to our company, I believe.