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Kaga Sangyo. Taking an innovative approach to achieve success in manufacturing and aerospace

Interview - November 20, 2023

 From helmets to aerospace, Kaga Sangyo has been recognized at the local, national and international level for its relentless pursuit of excellence to provide for its customers.

OSAMU MIZOGUCHI, PRESIDENT OF KAGA SANGYO CO., LTD.
OSAMU MIZOGUCHI | PRESIDENT OF KAGA SANGYO CO., LTD.

Over the last 25-30 years Japan has seen the rise of regional manufacturing competitors from countries like China, Taiwan, and Korea who have replicated Japanese manufacturing processes, but done so at a cheaper labor cost, thus pushing Japan out of certain markets. However, we still see Japanese firms as leaders in niche, B2B fields. How have companies like yours maintained their leadership despite the stiff price competition?

It is hard in the current macroeconomic environment to withstand some of the competitiveness that is coming from those countries you mentioned. To put it simply, Japanese firms are struggling to penetrate other markets because of cost-reduction efforts from other local companies. There are many rivals that come up with cheaper solutions. We saw this coming and forecast this situation, therefore developing added-value priced products. We came up with a quality, cost, and delivery (QCD) formula that outmatched some of the more cost-competitive options out there.

We’ve created a unique situation here in the domestic market with around  170 suppliers joining us on our platform. This is creating in turn a better environment for the customers, and at the end of the day, the customers are the ones that are using our products. We’ve attempted to lay the foundation so that customers can come to us and recognize our great QCD benefits for them. This is how we work and we believe this is the only way for our firm to withstand this stiff price competition, basically combining our own manufacturing and engineering skills with the suppliers on our platform to create a winning solution for customers.

KAGA is focused on costs as well of course, but we are also focused on supporting our customers with our technical solutions. We conduct technological innovations for our customers to provide better products and better services. We are being cost-competitive, but at the same time, we are adding value to our business.

 

It is our view that Japan is at a very exciting time for manufacturing. On one hand, we have had major supply chain disruptions in the last three years, caused by the COVID-19 pandemic as well as tension from the China-US decoupling situation. As a result, we are seeing many multinational groups try to diversify their supply chains with a focus on reliability. This is where Japan can enter; a country known for decades of high reliability, trustworthiness, and short lead times when it comes to production. Now, with a depreciated JPY, it is our view that there’s never been a more opportune moment for Japanese manufacturers to meet the pressing needs of this macroeconomic environment. Do you agree with this premise, and why or why not?

Most of the suppliers we are dealing with feel the same way as we do, and we feel right now is the right time to shed light on them. The wind is definitely blowing our way right now and we are optimistic about the situation. In fact, this situation is almost dragging many Japanese suppliers out of the shadows and allowing these firms to introduce themselves to the global stage. The procurement and supply chain situation are, in my opinion, quite attractive to some foreign customers out there. To summarize, basically, we agree wholeheartedly with your sentiment and as you alluded to, Japanese firms have been winning the trust of customers for decades now. Japanese companies have built a strong commitment to quality, reliability, and customer satisfaction.

 

Another aspect we wanted to talk about is the aging Japanese population. Japan is the oldest society in the world, and with low birth rates, and this demographic line is predicted to drop below 100 million by the year 2050. This is creating two issues, one is the labor crisis, and the other is the shrinking domestic market. As a company that specializes in after-market parts, to what extent must Japanese firms look overseas for new business opportunities to ensure their long-term success?

We are dealing with tier-1 suppliers who are supplying to manufacturing companies overseas but we would like to escalate these activities. The aerospace industry is experiencing a tremendous change right now, almost in the same vein as the automotive industry. The structure of aircraft is changing with more solutions, mobility, and electrical parts.

Of course, our company is closely following the trends that are happening in the sector, and we would like to promote our expertise and technology. Japanese aerospace companies have developed strong technical expertise in various fields such as material science, engineering, and manufacturing. We believe that we can take that foundation and bring it to overseas markets where there are customers.

 

One of the big changes in the aerospace industry is a change in materials. It is estimated that every 5-10 years the overall average weight of aircraft gets reduced by around 30%. The consumption of heavy ferrous metals such as steel is gradually being replaced by polymers and fibers such as carbon fiber reinforced polymer (CFRP). When you change from a metal product to a composite material there are changes in design, weight, and the bonding between other pieces. How are these new materials impacting your business? What solutions are you proposing to match this demand in the aerospace sector?

This is a big business chance for us and we are definitely aiming to target that area. You summed up the movements in the aerospace industry pretty well in your question and we are seeing the same kinds of trends being followed in the automotive industry as well. When we talk about these lightweight materials, we are talking about ones that can withstand heat dissipation. During flight components get hot, so these materials need to withstand the amount of heat that is outputted.

While it hasn’t taken place in aerospace yet, there are rumblings of new energy sources such as hydrogen or electricity. There are a lot of talks and discussions regarding the engines and fuselages of aircraft. When this change happens there will be a need for a new supply chain, thus meaning new suppliers to find better matching solutions for the changing times. This could potentially be a huge opportunity for our firm.

 

Is hydrogen really a possibility, and if it is, when do you think it is going to happen?

Wherever the industry ends up going, our company is going to follow those trends. One of the biggest aircraft manufacturers is conducting full-scale R&D, however, what they are developing is top secret, so many of us in the industry aren’t exactly sure what direction they are going to go. It might be electricity or it might be hydrogen, nobody knows at this time, but I think these changes are going to be a little slow to take place.



Your company was founded in 1973 as a manufacturer of helmets. How did you go from a helmet manufacturer in 1973 to an aerospace detail parts manufacturer in 1975? What were the challenges you faced in these two very different sectors and going forward, what challenges do you anticipate facing in the future?

I think I have to credit this change to my father because he was the founding father of the company. He used to work for a company that dealt with plastics and introduced products to some heavy machinery companies like Mitsubishi or Kawasaki. He understood what hardhats were all about so he started his own company based on this idea. This was the first step, but soon enough a transition was made in the aerospace industry, introducing likewise products that are based on plastics.

In parallel with the growth of our aerospace business, we have positioned the helmet business as one of our most important businesses since our operation, and have made unceasing efforts to develop better products to protect our customers' bodies. As a result, in October 2018, our newly developed Osamet, a folding disaster prevention helmet, received the Good Design Award. We feel that this is proof that our business model and services, which we have been providing for 50 years, have been recognized by the national, regional, and local governments. As for Osamet, when we thought about what we could do as a helmet manufacturer in the aftermath of the earthquake that caused great damage, we decided to develop the Osamet development project to make helmets "compact" by utilizing our experience in the aerospace industry, problem-solving skills, and technological development capabilities. The Osamet development project was launched to make helmets "compact. The theme of the Osamet development was to make a helmet that could fit into an A4 size, yet lightweight and compliant with Japanese safety standards.

This commitment has something in common with the manufacture of aircraft parts, and we succeeded by taking advantage of our experience and development capabilities. In addition, winning a prestigious award has given us a great deal of confidence in our development capabilities, as we have now achieved a top-class share of the Japanese market for disaster prevention helmets, despite being developed by a small group of people.

 

Aircraft parts such as wings and panels do have gaps between them, and this can create a lot of stress or pressure during flight, therefore requiring plenty of maintenance to ensure the safety of passengers during flights. How does your sealant technology help to overcome the pressure that aircraft parts face during flights?

Since 1973 KAGA has built a wide network supplying products and parts to various industries, especially in the aerospace industry. We have delivered 35,000 parts by taking the best aspects of Japan’s automotive suppliers to create a comprehensive service provision, from planning up to delivery, integrating into aerospace parts manufacturing in Japan to supply aircraft. We have comprehensive capabilities for aerospace detail part manufacturing supported by a network of around 170 competitive Japanese SME providers.

Furthermore, KAGA aims to fulfill proactive creativity and customer satisfaction by developing new technical solutions. KAGA has developed a patented technology to remove air bubbles from sealants to solve problems with conventional sealant manufacturing. Basically, the technology is able to remove air during each manufacturing step. Our patented technology solutions support our customers to reduce manpower and material waste, help our customers to significantly improve their manufacturing, and enable them to secure uniformity in quality.

KAGA has also developed technology to cut complex 3D surface shims that fill the gap between the outer mold lines of composite components and the mating components. This maintains the strength of the airframe and avoids the generation of massive build stresses in assembly. Our patented technology solutions support our customers to drastically reduce assembly floor time. We also continue to support customers after initial deployment by implementing continuous improvements to manufacturing processes.

Before conventional shims were handmade, and this practice wasn’t very efficient at all. Of course, by doing this manually there were some contaminants appearing in the shims, so our company came up with a solution for the aerospace industry. After receiving the gap values, modeling and programming are done automatically based on the measured values, which are then sent to the machine that manufactures the shims for automatic processing. Ultimately there is no handmade element, therefore ensuring that everything meets the exact specifications of the customer. Everything is precise and this is a must when we talk about aircraft and ensuring the safety of passengers.

Conventionally, when shims were hand-produced the process was a very long one with a lot of remanufacturing, and now with our automated processes, we have been able to shave 25% off of assembly time, which is a significant amount. Since then we have improved our processes even further reaching a reduction of 92%.

 

Typically when we talk about niche technologies, companies like yours tend to have a reactive model, but it seems like what you are doing is a lot more active in the sense that not only do you identify the problem, but you create a solution that goes beyond what your clients expect. Is being more active rather than reactive part of your strategy?

This is our business model, and we subscribe to the philosophy of continual improvement. The ultimate goal is the satisfaction of the customers, and we look to walk the extra mile to go beyond that. Most Japanese manufacturing companies follow the same philosophy.

 

Finding partners is somewhat of a theme of many interviews we have conducted. What role do partnerships play in your business model and are you looking for any new partnerships in overseas markets?

We are in the process of this and we have already established a good network here domestically with around 170 supply partners. We try to demonstrate our best features and introduce those to the final users. The KAGA Network aims to serve as an integrated manufacturing and supply system that handles everything from procurement all the way to final quality checks.

Needless to say, the same success story should be applied to foreign markets, and we are already in the process of establishing this. We do have suppliers outside of Japan supplying raw materials to our Japanese suppliers. One example is the straps that are on our helmets, which are made in Vietnam by a Vietnamese manufacturer. We are also contacting manufacturers in Europe and the US to secure better resources. Right now for overseas business, we are focusing on dealing with Airbus and Boeing as well as other tier-1 suppliers. We need to find new suppliers to provide better solutions for our overseas customers.

 

Even though the market is very competitive, your company has managed to grow in a very international way. What would you say is your competitive edge when tackling such a wide market? How do you plan to grow globally and expand overseas?

There is no definitive area or region, basically, we are open to any kind of cooperation coming our way. We have quite a number of acquaintances already outside of Japan, but tier-1 companies are still in the stage of negotiations, however, we do feel it is just a matter of time to find our success in overseas markets. We will be applying the same strong points that have served us well domestically and utilize our network practices abroad.

We often try to put ourselves in those tier-1 companies’ shoes, and what we believe they are thinking about most is shortening lead times. They are thinking about scenarios where they have the product in their hand as soon as possible. Our already-established network allows them to do exactly this. and they can utilize our knowledge and network of local Japanese suppliers. Most Japanese suppliers already have technological advancements and solutions prepared to cater to any tier-1 company out there. Tier-1 companies don’t need to waste their time, and instead can just come to us, a single company and we will connect the dots for them.

 

In addition to the aviation field, we saw that you have clients in other industries including construction machinery and industrial equipment manufacturers. Looking at the future, what applications are you looking to diversify your products into?

If you look at the passage of time you can see our firm transitioned from helmet manufacturing to aerospace, and now we’ve moved even further, becoming a supply chain network company. The key word in each of our evolutions is diversification. Customers ask us to diversify, and we have followed into aerospace, construction, industrial, and semiconductor manufacturing industries. In the future, we will have more and more customers in various industries, not only in the aerospace industry.

In recent years, every industry must contribute to a sustainable society, and we have acquired SBT certification and are making company-wide efforts to reduce CO2 emissions. In the helmet business, which manufactures original products, we are working to realize a sustainable society by quickly adopting recycled materials and biomass materials. In aircraft and other businesses, the use of recycled materials is attracting attention, and we are working to prepare and gather information for this purpose. These are exciting times in which the needs of the times are ever-changing, and we need to adapt to them quickly.

 

Imagine that we come back on the very last day of your presidency and have this interview all over again. What goal or dream would you like to have achieved by the time you are ready to hand the company over to the next generation of KAGA Sangyo executives?

Global expansion is crucial and we want to find our company as an indispensable part of the global supply chain. Extending our network on a global scale is obviously a big part of this global expansion strategy. We’ve had a number of success stories here in the domestic market and we would like to continue to embrace those success stories. We are blessed with the connections we have and for the future we would like to continue to sustain this business model while stepping up with new engineering and R&D capabilities.

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