As a firm that manufactures plastic parts for applications such as OA equipment and cameras, the rise of EV has caught the attention of the Tokyo-based SME.
In the last 25-30 years, Japan has seen a rise in regional competitors who have replicated the Japanese monozukuri process but done so at a cheaper labor cost, pushing Japan out of mass industrial markets. However, we still see that many Japanese firms are leaders when it comes to niche B2B fields. How have Japanese firms been able to maintain this leadership despite the stiff price competition?
I feel that the reason behind the strength of Japanese monozukuri is tradition. The accumulation of tradition has led to the invention and development of things such as automobiles, cameras, clocks, and watches. I also feel that the Japanese characteristic is diligence, and this diligence has allowed Japanese people to pursue the art of craftsmanship and pass it down to the next generation.
Japan is the oldest society in the world with a rapidly shrinking population. There is a smaller pool of graduates coming in to receive knowledge on traditions and furthermore there is a shrinking domestic market. What are some of the challenges and opportunities this demographic shift is presenting for Colon, and how are you adapting to them?
Actually, from the beginning, it is difficult to recruit new employees into SMEs like ourselves. We do not focus only on new graduates from universities like traditional Japanese companies, and instead actively recruit high school graduates and mid-career personnel from any gender. We have staff from different countries as well. To pass down this craftsmanship or tradition, we ask our experienced engineers, such as the ones over the age of 60, to stay behind and keep working for the company so that they may pass down their knowledge and expertise. It seems it is normal in major companies that if the person decides to keep working after their retirement age, however, we try to keep the same salary after the age of 60 as we treasure their experience, knowledge and their contributions to our company deeply.
Japan still lags behind in the adoption of digital technologies and the Japanese government has created a digital agency to provide incentives for the adoption of cloud-based and IoT-based solutions. How do such digital tools enhance your business operations, and what other digital technologies are you looking to integrate here at Colon?
This is a difficult question since DX is not a big component of our business operations.
However, in the manufacturing process, we are promoting automation and mechanization of human work. We are also taking on the challenge of quality assurance using cameras. With the cooperation of our customers, we are trying to assure the assembly process by incorporating camera-based image checks.
The production control system was also updated and it eliminated duplicate paperwork.
Thanks to an IT-related business partner, during the COVID pandemic, we quickly adopted web conferencing and regularly communicated with factories, including those overseas, to check progress and share information. Internet environments have been established with this partner to enable remote work to be prepared for emergencies, not only for the COVID Pandemic.
You mentioned the digital agency established by the former administrative government, and I believe that is the correct move since the Japanese government and administration are behind in their use of digital technologies. In fact, many departments still use paper, copiers, and even fax machines. That should be changed as soon as possible. In our company, all transactions made are online based, and it has been that way for over 10 years now.
The former Suga administration has gone on record saying that Japan must go carbon neutral by 2050, and the Japanese industry has been particularly ambitious when it comes to setting carbon neutral targets. As a company, you process plastic parts, so can you tell us a little bit about the efforts and initiatives that you are taking in order to contribute to a more sustainable society?
Our customer, especially automobile customers, has strict and consolidated carbon neutral targets, and to add to that, they are sending us criteria for us to reduce our carbon footprint by around 3-5%. Therefore, as you can see, there is a definite numerical value that we need to achieve by the end of the year. I will say however that we are one of the early adopters in taking action toward carbon neutrality, and in 2015, we added solar panels to our Yamanashi factory roof, then to Thailand factories in 2020.
Being a plastic molding company, we saw a need to change our older machinery to more modern ones. That has decreased the environmental impact our company. By updating our machinery, we were able to reduce our electricity usage by 30%. From 2017 to 2022, we updated 20 pieces of machinery and invested.
We are also recycling unused plastic parts, defective products, and samples in the factory. It may seem like a small step, but it is important to make goods parts as much as we can, not only for cost, but also saving material and energy.
Colon’s plastic products are utilized in a variety of different applications. Could you tell us which application you are currently focusing on and if there are any new applications that you are looking to expand into?
The big one right now is automotive. Currently, we provide components for engine parts, but with the emergence of EVs, we are now shifting ourselves to produce more exterior parts. We are expecting growth in the sector. With the electrification of automobiles, all companies are now trying to elongate the distance that these vehicles can run. Using lighter materials is important, and we see the plastic as a viable alternative in helping these vehicles cover much more distance.
How have you been able to adapt your different manufacturing and development processes to suit your customer’s needs?
With OA equipment for example, we are targeting more of a mass market and we do our production in overseas facilities for cost purposes. Having said that, for more high-end, complex types of printing machinery that are expensive, we work together with the partner company and we keep this high-end production here in Japan.
For example, the customer only produces around 50-100 units per month of this high-end machinery, so in order to secure our profitability and to make our business sustainable, we have been discussing with them, creating a structure where we can have a good enough profit to continue. The customer used to produce about 30,000-40,000 units of cameras, however, now their numbers are decreasing as well as production is shifting overseas. I feel that we have created a good relationship with the partner company by providing camera parts from our domestic factory. We would like that relationship to continue. We have a production facility in China, and the parts produced there are provided to Japanese companies including companies active abroad.
Your company has operations in Thailand and China, which varies from Japan in terms of engineering skills as well as the quality of equipment. All of these combined can have an adverse effect on the final outcome of a product. How are you able to translate this Japanese monozukuri to your overseas production bases?
In Thailand, we have three Japanese staff members, including engineers. We also have direct dealings with Japanese-affiliated automobile manufacturers in Thailand, with the contact person for them being Japanese. We communicate with the locality their specifications, and we put a big emphasis on sharing our knowledge and techniques with our Thai employees.
People in Thailand are diligent and we feel they are good when given clear directions. Basically, execution is their strength. We feel as Japanese we can augment that strength by providing the research and development aspect. Thai people have a deep affiliation with the Japanese, and we feel we are operating very well in Thailand.
Are you looking to add more international clients to your portfolio?
If we receive any requests from foreign companies, we are happy to add those to our portfolio. However, with our current capabilities, we are not actively doing international marketing and sales operations. I also hope our factories in Thailand and China receive more chances to work with international clients since they have geographical advantages and are used to work internationally.
The past two years have presented some major challenges to shipping and logistics thanks to the COVID-19 pandemic. How have these disruptions in global shipping and logistics affected Colon and how did you overcome them?
Our Chinese factory provides products for Japanese-affiliated companies in China. We did not feel too much of an impact from the logistics delays. Saying that however, China poses a lot of geopolitical risks. Additionally, the prices in China have been steadily increasing year on year. Compare to Thailand, running factory in China is getting more challenging.
Could you elaborate on some of the products that you are currently working on?
Our company’s business model revolves around the idea of receiving designs from our customers and clients. For that reason, we do not have R&D for new products ourselves. We focus on the efficiency of production and how to elevate this efficiency in our production lines as well as minimize the manpower needed by utilizing machinery.
What role does role collaboration play in your business model? Are you currently looking for any partners domestically or in overseas markets?
Currently, we are not actively seeking new partnerships, however, before COVID, there were discussions on establishing a new factory in Southeast Asia. We were interested in Myanmar, however considering the political turmoil there right now, it is not the right move for us. Having said that we are open to new contacts for new partnerships.
As a company that supplies a lot of the larger domestic firms, what are your thoughts on the push to globalize by other SMEs, and what is your international strategy?
About 15 years ago, our customers made a decision to have their production bases overseas in order to lower their labor costs. Many affiliated SMEs went out of business as a result, and now we see the customers trying to find SMEs in Japan again in order to revitalize their business structure domestically. Their focus is more on high-end products produced domestically which would elevate the level of their products and increase their global competitiveness. This has resulted in more of a focus on niche high-end products which Japanese SMEs are trying to meet the standards of. The trend has turned from going overseas to coming back to the domestic market, and this is prevalent among many major companies.
Having said that, it is important to balance out business overseas. By that, I mean maintaining and opening possible future overseas production and sales channels. It would be a bad choice to close doors completely.
Could you elaborate more on your mid-term strategy?
We actually do not have a concrete mid-term plan since it is difficult business-wise to foresee future demands. It is important for us to analyze the mid-term plans of partners so that we can support those companies with their future plans when there is a need for production on our end.
We are doing well globally, and we have managed to increase the overall company’s profitability over the past three years. We want to continue to make ourselves as sustainable a company as possible.
Imagine that we come back in four years and have this interview all over again. What are your goals that you hope to have accomplished by then?
Thinking back to our 70th anniversary, what I told our employees was that I hope they continue our collective dream of reaching 100 years. My personal philosophy has always been to make this company an enjoyable place to work where employees can work with a smile. I hope when you come back not only have we achieved more profitability, but I hope we have achieved that with a smile on our faces.
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