Founded in 1937, Handa Heavy Industrial provides AI and IoT products and services for small and medium-sized businesses around the world, and is willing to actively promote cross-border transactions, not only locally in Japan.
What do you believe sets Japan and Handa Heavy apart from their regional manufacturing competitors?
It is very difficult to take into account all the companies in Japan and give a definitive answer to understand why some Japanese companies maintain the top share in many industries. In order to characterize Japanese companies on a wider scope, the reason for such success is their capability to deliver high-quality products more than their counterparts or other related firms overseas. Many Japanese manufacturing companies are also identified by their ability to employ high-mix-low-volume production, which is another great advantage that has enabled them to establish strongholds in niche B2B fields for many years. Furthermore, the operational skills of their engineers and other human assets enhance their already great standards. Human resources is the key force that catapults Japanese companies to achieve better quality and withstand challenges most firms are faced with, including price and quality.
What challenges and opportunities does Japan's decreasing demography present for your company?
Like other Japanese companies, we similarly have to overcome this social problem. One solution we found is the introduction of overseas or foreign human power. We have many people from India, Indonesia, China, Iran and Vietnam working at our factories. We used to only employ foreign workers to act as operators; however, we now recruit foreign staff with engineering and technical skills. Knowledgeable personnel with operational skills can become a full replacement and compensate for the lack of human resources in Japan. Automating our production line is another solution, which is not exclusive to Handa Heavy. Factory automation is an unavoidable direction for Japanese companies in this industry. Most companies are employing foreign employees and FA solutions to compensate for the lack of human capital.
We perfected our automation system by first automating our production lines on our own. We introduced image inspection systems, visualization systems and inventory control systems, which are all aimed at simplifying the work we do. Later on, when we discovered that other companies around us had the same needs, we started to introduce and promote similar system solutions that we have already used. They eventually became our clients.
Among your staff, 20% are foreigners. What has been your strategy to attract talented foreign personnel?
To employ foreign workers, we try to put forward some interesting approaches to the Gemba or manufacturing sites here in Japan. Frankly, in many cases, it is not so attractive for the labor force to come and work at a Gemba. Hence, we are incorporating new IoT technologies and factory automation systems that draw personnel who possess not only operating skill power but also engineering power and technical skills. They can be helpful to the company and Japanese society. Our effort to become the forerunner in independently implementing new technologies at our production sites is one of our selling points. We can set a good example for talents who want to join and work for us full-time.
It is not easy to recruit workers from overseas due to different cultures and languages as well as the hurdles that have to be dealt with for them to come to Japan. We hire several people from the same country or region because having a good working environment and creating a community can make their adjustment easier and can improve their productivity. We have been recruiting more personnel every year, building the bridge between Japan and other countries.
One of the systems and technologies you have created is the advanced image processing technology for complex defect inspection that uses AI machine learning to prevent false detections and very hard-to-detect defects. Could you give us an overview of how you have introduced IoT technologies into your operation and some of your new solutions for factory automation?
Our product lineup is abundant, and we have a variety of solutions that we initially employed in-house, which were later used by some other companies. The image inspection system is only the tip of the iceberg. Handa Heavy is a plus alpha company that has a long list of offered solutions, technologies as well as different cameras and devices. We are now working on developing industrial robots that should be ideally run by AI. It is a solution to simplify the work and make up for the shortage of labor at the production sites. These industrial robots are intended to complement and improve the production efficiency of our human assets or existing operators and engineers in the field. As it is still in the R&D stage, we do not yet have a prototype to show. It will be an autonomous AI-run robot system with human operations in a confined space that will serve as an image inspection system. This is a new concept of a robot system. I think it will take at least two years to make it happen. It took us three years to develop our image inspection system.
Your core business involves making forklift parts and hydraulic cylinders for construction and logistic equipment & machinery. Forklifts and various logistics & construction equipment are living in a time of great transformation. The switch to battery-run vehicles by more manufacturers to reduce carbon emissions is creating changes in the design of motor parts and materials utilized for these various products. What are some of the challenges and opportunities that electrification of these vehicles is presenting to your company?
While it is undeniable that there have been several changes in the industry due to the electrification of vehicles, we have not really felt its impact on our sales and structure. Nevertheless, autonomous driving will be a feature that is going to be introduced to all the parts and structures of forklifts and cylinders, such as the use of sensors. The production sites must change to the needs of the industry. These are the changes we are experiencing with which we probably need to comply.
COVID has forced the hand of automation, especially in the logistics field, and there was a forced need to adapt to compensate for the lack of human capital. As a provider of parts, what has the impact of this development been for your company?
Autonomous warehouses have not seen so much development and exposure here in Japan, even if their efficiency is better than warehouse systems run by people. One of the reasons for that is because of the considerable initial cost. Also, if something goes wrong in the long run, the entire autonomous warehouse system has to be reconditioned, so it does not have that many clients in Japan. With COVID, however, more warehouses and storage facilities have been built in Japan, even in Western Nagoya. Since more customers have established warehouses during the pandemic, forklifts have been increasingly utilized. It has had a good effect on our business because our products have been serving the needs of the forklift industry.
Factor X is a comprehensive matching platform you have developed for connecting firms to each other for business alliances or for companies and human resources. Could you tell us more about the motivation to develop this service? Why should a company use Factor X rather than another conventional matching service or platform that we have seen?
Firstly, Factor X is cheaper than other conventional matching platforms. Most SMEs in Japan are experiencing serious difficulty in finding their clients or a market for their products. They may be good at producing good-quality products, but they find less success in doing so while marketing and selling their products. Our comprehensive matching platform not only matches the personnel, companies and corporate business partners but also introduces new IT skills that help SME companies to promote their products on a wider scale and determine their end-users.
Factor X does not only allow corporations but also individuals to be registered in the system, which partly solves the problem of the deficit in human resources. Japan’s population decline and the depreciation of the yen have been reaching their peaks in the last decades. Nevertheless, more than visitors, Japan is attracting more foreign employees. I had a meeting this morning because more people are interested in working full-time for Japanese companies. Factor X also acts as an employment platform that assists individual personnel find a final place of employment.
Many SMEs are struggling to find a market for their quality products and technologies. As such, many are looking overseas for co-creative opportunities and development partners from neighboring countries to gain a foothold in those markets. Have you ever looked overseas for collaborative partners, or is that something you are interested in pursuing?
Collaboration is not something new for us. Factor X was actually introduced as an outsourced program by a Vietnamese company that developed it. Handa only took over with the implementation. We recently closed our facility in Taiwan for raw material procurement because of the depreciation of the Japanese yen. It is very difficult to buy anything from Japan right now due to the Japanese yen being very low compared to the US dollar. Factor X is a success story in IT, and we welcome other opportunities to cooperate with other firms in other countries, especially if we can match our business.
The exchange rate between the Japanese yen and the US dollar has been heavily fluctuating. On the other hand, it is making the procurement of raw materials a lot more expensive than it used to be. On the other hand, it is also making exports from Japan to other countries substantially more competitive. Do you see this as a period of opportunity or a challenge? How is this micro-environment impacting your overseas ambitions?
We’ve tried to procure materials from Taiwan, but the depreciation of the yen made that hard. Even so, we are continuing to look for other countries to procure materials at cheaper rates. Although we do not have any concrete actions in play, we are thinking of taking advantage of the yen depreciation to make more exports.
Are there any particular regions or markets that you are considering?
Yes, we have some ongoing negotiations with China to see whether they can cooperate with us. We are also looking at East Asia, like Turkey. Perhaps in the far future, we can expand to the African region. They are challenging, yet they have a good potential for the economy.
Imagine we come back to interview you again on the last day of your presidency. Is there a goal or an ambition that you would like to have achieved before handing over the company to the next generation of executives?
I took over this company when my husband passed away eight years ago. It was a difficult transition because I was mostly a homemaker, not a businesswoman. I did not know how to manage the business as I did not have knowledge about management, procurement and sales. It was extremely challenging to switch from my former lifestyle to being the CEO, so the management initiatives were handled by my son. When he joined this company, he helped in many ways to take this company to the next level, given his technical skills and fresh managerial approach. He always reminded me not to take things for granted but to always think about the future of the enterprise and what should be done to improve sales and develop its position even further through a new approach. By working hand in hand with my son, we can say that we have reached our goals and accomplished several good things for the company. We are now thinking of the next midterm strategy plan. There is much more ahead of us, so we will continue to work hard to reach our new goals for the company. I am always grateful to the employees of this company who are with us today because they greatly helped me to properly manage this company. The employees who have worked here for many years and possess technical and managerial support have constantly offered significant support that has made this company what it is now. I deeply appreciate all our employees.
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