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How Nippon Concept Corporation is Helping Transform Logistics

Interview - June 3, 2024

The company's innovative strategies, commitment to sustainability, and strategic partnerships are propelling it towards becoming a top-tier player in the global logistics industry.

TAKAYOSHI MATSUMOTO, PRESIDENT OF NIPPON CONCEPT CORPORATION
TAKAYOSHI MATSUMOTO | PRESIDENT OF NIPPON CONCEPT CORPORATION

Your company achieved a remarkable revenue of JPY 23 billion in 2022, setting a new record. Additionally, your operating income increased to JPY 1.4 billion, accounting for over 70% of the previous year's figure. However, the first quarter of 2023 has presented different challenges. The enforcement of tighter monetary policies due to inflation and rising interest rates, coupled with declining consumer demand, has resulted in a weaker performance compared to 2022. What are your expectations for 2023? Furthermore, considering the outstanding performance of last year, what were the main contributing factors behind these record numbers?

Our company primarily focuses on providing safe transportation of dangerous goods. However, we are involved in various other businesses, including forwarding, warehousing, shipping, and acting as an agent for ocean carriers. We specialize in ISO-tank containers and own approximately 10,000 tanks. Depending on currency exchange rates, we purchase 200-400 tanks annually. Since the prices are denominated in US dollars, we closely monitor tank prices each year and compare offerings from different builders before making purchasing decisions. It is challenging to answer your question directly, as we only have a limited number of containers carrying chemicals from Japan for international shipping.

During the COVID-19 pandemic, we had to remain indoors for approximately three years, prioritizing safety in Japan. However, we were pleased to observe an increase in ocean freight due to the recovery of the Chinese economy last year. Ocean carriers witnessed a profit surge of about 300% compared to two years prior. Our company also benefited from this growth when our clients experienced favorable business conditions.

Despite the profitable conditions, we couldn't generate any profit ourselves, which limited our container purchases. Currency exchange rates significantly impact our purchasing capacity. However, due to the rapid increase in ocean freight, our company achieved good profits. Recognizing that the situation can change, we are currently focusing on securing new import and export deals. Patience is key this year. When preparing the 2023 budget, I aimed to expand our business. Although our shipping volume may decrease, this expansion will enable us to achieve similar profits as last year.

 

One of the significant changes brought about by the pandemic is the global supply chain and logistics disruptions, leading companies to rethink their approach to logistics costs. Previously, logistics was considered a necessary expense, and company executives focused on minimizing this cost. However, with the increasing diversification and localization of supply chains, logistics has now transformed into a strategic decision. Company boards expect executives to establish robust logistics chains and frameworks. Considering this shift, how do you envision the future evolution of the role of logistics within companies? Furthermore, what impact has this change had on your business?

We are fortunate to own our tanks and are not dependent on external sources for rentals or procurement. As a result, we can promptly supply tanks to our clients whenever required. Our customers often face uncertainties regarding the timing of their contracts with foreign countries. Sometimes, they unexpectedly need 30 to 50 tanks. Owning our tanks enables us to fulfill our clients' needs promptly and efficiently. We currently operate eight depots across Japan, located in Tokyo, Chiba, Nagoya, Yokkaichi, Kobe(2), Tokuyama, Mizushima, and Niigata. With this extensive network, we can provide supply services anywhere and at any time. Many companies throughout Japan prefer our services, thanks to the strong and longstanding relationships we have built with our customers. Our clients trust the safety of our tanks and are confident in their ability to prevent contamination or leakage due to our rigorous quality standards. Unlike many of our competitors, we offer comprehensive support and services to our customers.

Although we have eight depots strategically located in Japan, we currently lack a presence on Kyushu Island. If our customers express a desire for a new depot in Kyushu, we are prepared to accommodate their needs. However, the transportation of products to our Tokuyama site, located near Kyushu Island, is limited when using trucks, intercoastal shipping, or rail transportation. We are actively transitioning from tank lorry to tank containers since tank lorry can only handle 10 tons of liquid, whereas our tank containers can carry up to 20 tons. This shift offers improved cost efficiency. Additionally, we can utilize rail or intercoastal shipping, employing small container vessels, to transport goods from Tokyo to Kyushu, Osaka, and Kobe. Given our proximity to the sea, intercoastal shipping with small vessels provides convenient and cost-effective options, allowing us to reduce transportation costs. It is worth noting that we do not consider these expenses as distribution costs, as they differ significantly from the operations of companies like Amazon or Nissin.

 

In Japan, where the population is aging, preserving the expertise held by older workers and attracting younger individuals to engage in hands-on work poses a significant challenge. Could you please elaborate on the measures you are implementing to safeguard your company's resilience and sustain your human resources?

Addressing the human resources issue in Japan is of utmost importance to our organization. Despite our upcoming 30th anniversary as a company in 2024, the average age of our workforce is projected to be around 30 years. To combat this trend, we have undertaken various initiatives to attract and retain talent.

One of our strategies involves proactively engaging with high schools and universities to showcase the global reach and significance of our business. By highlighting factors such as competitive salaries, flexible working hours, employee well-being, and comprehensive insurance coverage, we aim to capture the interest of students. As a result, many students are drawn to our company, and we subsequently recruit them to work at our plant. It is noteworthy that our company is publicly listed, which further enhances our credibility and reputation.

Prior to hiring, we subject every student to a rigorous examination to evaluate their suitability for employment, determine their appropriate salary level, and establish their working hours. Additionally, we provide dormitory facilities for young individuals coming from Osaka, Kobe, and Tokyo. Recognizing that these individuals are relatively young, we strive to reassure their parents by ensuring their well-being and providing a nurturing environment. We also take the opportunity to educate them about post-graduation responsibilities and guide them on the path to success after completing their studies in high school or university.

 

The global shipping and logistics industry is grappling with a significant challenge: a shortage of personnel. To address this issue, many ports and loading/unloading facilities worldwide have turned to automation, employing robots and machines. In your specific case, do you believe that this type of automation can be implemented? Is your company exploring automation technologies?

Indeed, we are actively considering the adoption of automation technologies. The need for change has prompted us to delve deeper into this area. Leveraging the power of information technology (IT) and integrating robotic systems are among our top priorities. Recognizing the importance of acquiring expertise in this field, we have sought assistance from both governmental institutions and private enterprises. Our aim is to enhance our knowledge and understanding of IT, irrespective of the associated costs. We firmly believe that investing in these advancements is essential to revolutionizing our industry and shaping a prosperous future.

 

Your commitment to establishing a green logistics system is commendable. A recent development in line with this commitment is the establishment of your new subsidiary, Nichicon Overseas Gas Tank Chemical Co. This subsidiary specializes in the recovery and recycling of fluorocarbons and refrigerants. Could you provide us with more details about this new company and the driving force behind its creation? Additionally, what advantages will it bring, and how does it fit into the overall structure of the group company?

To actively contribute to creating a greener environment in Japan, we have successfully transitioned all eight of our depots from using conventional fossil fuels to solar energy. While the prime minister's announcement of achieving carbon neutrality by 2050 is a laudable goal, we believe waiting is not an option. As we are unable to rely on bank financing, we are utilizing our own profits to spearhead this transition. Profits earned during the significant increase in ocean freight have been instrumental in funding our shift to solar power, ensuring our company operates in an environmentally friendly manner.

For the past five years, our office has been actively engaged in the gas tank business with the same team of experienced sales professionals. Gas tanks pose unique challenges compared to liquid tanks, as visual inspection is not as straightforward when it comes to detecting issues like leakage or heat. Recognizing the complexities involved in effectively operating and managing gas tanks, I made the strategic decision to establish the new company. We acquired land facilities specifically dedicated to operating gas tanks in Niigata, Kobe, and Chiba, and we are now actively promoting sales through our newly formed subsidiary.

This new subsidiary, Nichicon Overseas Gas Tank Chemical Co., plays a pivotal role in our group company structure by focusing exclusively on gas tank operations. Its establishment allows us to concentrate our efforts on improving the management and safety of gas tanks while fostering sales growth in this area. Furthermore, it aligns with our overarching objective of providing a comprehensive green logistics system, ensuring that our operations contribute positively to the environment.


Nippon Concept staff members


Could you please explain the nature of the relationship between your firm and MOL (Mitsui O.S.K. Lines)? What synergies have you developed, and how do you mutually support each other's global business objectives?

Initially, MOL had limited knowledge about tank containers, which led to their surprise at Nichicon's growth in this sector. Given that MOL had already divested its sole tank container business, they were actively seeking a new container business opportunity. During our discussions, I emphasized the importance of expanding our international logistics capabilities, particularly in regions such as the USA and Europe. At that time, MOL possessed an extensive network of branches worldwide as part of their container business operations. Recognizing the potential benefits, I proposed leveraging MOL's liner business, which would allow us to tap into their existing connections and conserve resources. However, MOL had already sold their container business, which presented a challenge for us. As a solution, we established MOL Logistics (MLG) as a subsidiary of MOL, focusing on forwarding operations with branches in the USA, Europe, and the Far East. Consequently, we made the strategic decision to transition our agent to MLG due to the ease of communication and shared philosophy. This transition acts as a shortcut for expanding our services globally, as only a few individuals in our company are proficient in English.

Furthermore, we established a new company called MOL Logistics Tank Container (MLGTC). While we remain the primary company, we are gradually shifting our operations away from our previous agent and towards MLGTC. This transition may take three to five years to complete. Nonetheless, as we approach our 30th anniversary, we continue to attract more clients. The specific timing of this transition is less critical, as our focus lies in patiently promoting our activities in each foreign country in collaboration with MOL Logistics.

 

To what extent can foreign partners or other international companies contribute to the global expansion of your services? Are you actively seeking partnerships with foreign companies and agencies?

The potential involvement of foreign partners or international companies in spreading our services depends on their activities and capabilities. We have already established a partnership with MOL Logistics, and we believe there is room for further collaboration. Given the presence of numerous competitors worldwide, our goal is to increase our operational share in the market. However, the extent of our partnership will depend on their willingness to meet our specific requirements. At this stage, we are awaiting their response.

It is important to exercise patience in our partnership with MOL Logistics as they currently lack knowledge about tank containers. We recognize the complexity involved in activities such as cleaning and maintenance repairs, which requires an extensive learning process spanning over a year or more. Even with a timeframe of two to three years, comprehensive training is necessary to ensure a successful collaboration.

 

The ongoing revival of the Japanese industry, coupled with factors like a depreciated yen and the relocation of manufacturing from China, presents notable opportunities. Many Japanese and international companies are returning their production or gembas to Japan, including notable players in the semiconductor field such as TSMC and Sony in Kumamoto. Additionally, Samsung has plans to establish a significant fabrication facility in Yokohama. As these industries require highly corrosive gases and materials, it is worth considering whether this presents an opportunity for our company. Are we anticipating increased demand from Japan due to the localization of production?

While these companies may not be familiar with our organization, we recognize the importance of promotional sales efforts. Therefore, we have been actively working on strengthening our credibility and expanding our business reach to these companies. To support this objective, we have established a new company with a specialized team focusing specifically on gas tanks, differentiating ourselves from competitors primarily focused on liquid tanks.

 

As the United States and China undergo a process of decoupling, there is a growing concern regarding the over-reliance of many multinational companies on China, which raises security issues. During our conversation with Nishitetsu, Mr. Hayashida highlighted the potential opportunity for Japan, particularly ports like Yokohama, to establish themselves as a new link between North America and Asia. How do you assess Japan's competitiveness as an Asia-Pacific shipping hub?

While it is true that there is a growing sentiment for decoupling between the US and China, it is important to recognize that both countries remain vital for each other. From Japan's perspective, China plays a crucial role in the supply chain, and its significance cannot be understated. It is in the best interest of Japan and the US to maintain a strong relationship with China, rather than pursuing decoupling. The Japanese government should exercise prudent judgment, striving to foster cooperation and prevent conflicts to ensure continued progress. Decoupling carries significant risks, and it is imperative to seek viable solutions that uphold stability.

In terms of our market focus, we are actively seeking to establish a logistical presence in France or Spain. Previous experiences with sub-agents in Antwerp and Barcelona did not meet our expectations in terms of service quality and supply capabilities. Therefore, we aim to identify reliable logistic hubs in strategic locations such as Antwerp, Southampton, or New York, despite the time differences involved. These locations would serve as crucial points to expand our services in the future.

Recently, we established an office in Houston, USA, although we acknowledge that it could have been more effective in driving sales. However, our goal is to extend our reach to New York, where we can target large chemical companies like BASF, which already has a presence there. They have expressed interest in our services and have requested us to present our offerings in New York. Their recognition of the safety standards we uphold has built trust in our services. By providing them with timely and reliable information, we have gained their confidence.

Additionally, we ensure the timely dissemination of information to our dedicated MOL agents in the Far East, specifically in Singapore, Taiwan, and Bangkok. This allows us to maintain effective communication and coordination with these important partners.

 

In today's digital era, logistics companies can leverage technology to enhance visibility and address important aspects such as container or cargo location tracking and monitoring of CO2 emissions. Could you please elaborate on how your company utilizes IT technologies to improve visibility in client services and contribute to environmental efforts?

At our company, we recognize the pressing need to reduce and ultimately eliminate CO2 emissions. To achieve this, we have implemented a comprehensive program that enables us to track the whereabouts of our tanks throughout their journey, whether they are stationed at a terminal or en route to a factory. This level of real-time information is crucial considering the size and weight of our tanks. Measuring 20 feet in length, 8.6 feet in height, and weighing 20 tons, they present unique challenges when it comes to logistics planning and optimization. However, we believe that by harnessing the power of technology, we can capitalize on any potential game-changing opportunities that may arise. Based on my experience, there is limited interest in handling such heavy loads or hazardous chemicals, making our specialized services all the more valuable.

To ensure efficient global operations, we entrust our company's management to oversee our operations worldwide. This approach has yielded positive results thus far, as we have maintained a commendable track record with no accidents or customer complaints. It is worth noting that even industry giants like Amazon and Nissin are also recognizing the benefits of consolidation in their operations, further highlighting the significance of our approach.

By embracing IT technologies and leveraging them effectively, we aim to enhance visibility, streamline operations, and contribute to our environmental goals. We remain committed to optimizing client services while championing sustainable practices in the logistics industry.

 

Imagine we come back in five years to have this interview all over again. What changes would you like to see by that time? What ambitions or goals would you like to have achieved?

In envisioning our next interview in five years, I aspire to witness significant transformations and accomplishments within our company. Our primary goal is to establish ourselves as a prominent global entity, striving to ascend from our current position as the 10th-ranked logistics company to being recognized among the top five worldwide. To achieve this, we intend to expand our services both domestically in Japan and internationally, catering to esteemed clients from Canada, the United States, France, and beyond. Our overarching objective is to deliver exceptional service while ensuring profitability for our clients. We have persistently endeavored to provide superior logistics solutions to the global market, and although we have already been in operation for three decades since our establishment in 1994, we acknowledge that more time is needed to fully realize our ambitions.

Reflecting on our humble beginnings, I recall the initial investment of approximately JPY 10 million, which enabled the purchase of four tanks. At that time, acquiring funds from Japanese banks proved challenging as they required extensive documentation and collateral, which I lacked. Nonetheless, those four original tanks still form an integral part of our fleet today, exemplifying our unwavering commitment to excellence and fostering trust among both financial institutions and our valued customers. With a firm belief in the vast array of opportunities that lie ahead, I continue to exert tremendous efforts in providing exceptional logistics services to the global community.

Looking ahead, I envision a future where our company flourishes as a renowned industry leader, leaving an indelible mark on the logistics landscape. We aspire to expand our reach, enhance our capabilities, and solidify our reputation as a trusted partner in logistics, poised to meet the evolving needs of our diverse clientele.

 

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