Making connections through the sale of connectors

Could you give us your take on the rise and fall of Japanese electronics? Where is it standing today as it relates to B2B, and why is Japan so successful in that regard?

Last year marked our 50th anniversary since our foundation as a company in 1972. We have been able to continue our business in this industry for half a century. Our main focus has been and always will be connectors. As a trader, we have dealt with connectors for a considerable time. Since we were founded in Osaka, we have established meaningful relationships with famous electronic makers like Panasonic and Sanyo. When I entered this company 40 years ago, we used to deal with Panasonic's video decks. Now, we use DVDs or Blu-rays, but it was all videos at that time. Panasonic had its specifications for VHS, while Sony had its own for Beta. Panasonic won the specifications, and our good relationship with Panasonic allowed us to capitalize on that trend. Sometime in 1985, makers started producing digital cameras and also mobile phones, so we also handled components related to those products. Around that time, many companies began moving their production base from Japan to overseas locations. As a smaller-scale company, we decided to stop focusing on the B2C field at that time even though our revenue was around JPY 14 billion. We began to shift our focus to the B2B field, especially on industrial factory automation and semiconductor manufacturing equipment areas, which we are continuing until now.

The concept of shoshas is a bit unique to Japan, and there are not a lot of countries in the world that have shoshas of such great importance. Traditionally, shoshas in Japan were supposed to take care of the financing and distribution of certain projects. How do you foresee the role of shoshas like your company evolving within the next five to 10 years?

Throughout our 50 years in the trading business, we were able to distribute products in small lot, even in one lot. If we receive the order by four in the afternoon, we can ship that product on the same day. We have been doing this business for a long time. I understand that the role of traders is changing, but we will just continue what we have been doing for years going forward. What remains unchanged is us offering the service that is true to our hearts while providing information to our clients. Our warehouse in Neyagawa has substantial inventories which are ready for our clients. Moreover, our sales representatives in our 10 other sales offices across the nation are prepared to provide proposals for the clients. All of these offices have one or two female assistants who are able to cater to follow-up or after-sales services. I would like to persist in advancing this style of business.

Chairman: I totally agree with Mr. Naka. The trader stands between the buyers or customers and sellers or suppliers. We are in a position to understand the needs and provide solutions for both sides. When they match directly, then their needs are not connected or bridged well. We can provide solutions to the unique needs of the suppliers and customers, which I believe to be the role of the traders. To make that happen, we have our function for the logistics solutions and also the system for small-lot shipments. We are outstanding at dealing with connectors as electronic components and have a good relationship with connector makers. Actually, we have a relationship with three of the global top 10 companies that manufacture connectors: Molex, Japan Aviation Electronics Industry and Hirose. We directly buy products from them, and each of them has a minimum order of such as 10,000 units per lot depends on their product. However, when the customer wants only one, there is a gap between these two demands. Therefore, the role of the trader is to solve the differences in the demands.

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The other side of the coin is the issue of excess stock, where the manufacturers have more than what is needed. Many companies in Japan who are in a trading position provide a consignment service so that they can take that off client’s hands excess stock, store it and re-utilize it. Are you providing such a service? How are you adding value to your services such as that?

There are two kinds of inventories. The first is our own inventory handled by the sales team based on the information and forecast provided by the customers, and those are ultimately delivered to customers. The other kind is the stand-by inventory which our purchasing department is in charge of. If they are left in a warehouse, we make sure that we take care of them or dispose of them. In total, we have 13,000 items in our inventories.

When COVID started in January 2020, we started to see major repercussions on the world supply chains. There were not only shortages of specific components across the board but there were also disruptions in the logistics systems where ships were delayed and air cargo was stopped. These very big issues resulted in a lack of components. How did your firm manage through the pandemic?

At the beginning of the pandemic, we could not predict what was going to happen. However, due to the spread of teleworking, the demand for PCs exploded. And the demands for home electronics devices, games, data centers were stimulated by stay-at-home demand. Although we thought that the demand for connectors was going to decline over time, it surprisingly rose along with the demand for PCs and another electrical devices. We were able to serve our existing customers as well as the new customers because we have proactively maintained our inventories. We were successful in gaining new customers and substantial orders through our online channels. Due to the big cold wave that occurred in the US in January or February two years ago, many makers had a shortage of the resin used as the raw material for components or connectors. Although we were able to accumulate the inventories, we do not produce the components. As a result, we were not able to deliver the connectors that the customers demanded for a certain period of time. Until last summer, we continued to coordinate with our clients and negotiate with manufacturers regarding the shortage of connectors. Since then, we have been able to increase our inventories again. Thanks to the makers' capital investment, we recovered the logistics flow.

 What support to customer who enter the overseas markets do you provide?

We are always focused on supplying products and components that are needed by the customers on time and according to the volume that they require. At this moment, we are not able to fulfill the coordination role for clients who seek to enter the overseas market. Our only overseas office is in Hong Kong. In most cases, customers to whom we give support are already in the overseas markets, and we want to pursue other areas overseas moving forward. However, we are concentrating on trying to help customers who have a presence in overseas markets by using our inventories in Hong Kong.

As a trader, relationships with the manufacturers are key to your business. Are you looking to expand your portfolio of clients that you work with, not only domestic makers but also internationally?

We are currently concentrating on connectors, but we would like to increase our portfolio going forward. We want to improve our efforts to build relationships with European makers moving forward.

Imagine we come back to interview you again on your last day as the president and CEO. Is there a goal or an ambition that you would like to achieve before passing on the company to the next generation?

I would like to reach JPY 30 billion in revenue.

Chairman: In view of the advancement of electrification and smart technologies, I have infinite goals. We deal with connectors which are small components with a large area of application. I believe that this small component will lead us to an even brighter and better future, so I would like to promote this business to realize that. Internally, we have announced what we would like our company to be in the future. Our goal is to become the first-call company for connectors.