Misumaru Sangyo has over 60 years of manufacturing experience and is recognized as one of the highest quality service and product manufacturers in Japan. The company has adopted the art of craftsmanship from its founding company by creating a fusion of Japanese craftsmanship, excellent service, complimented by Chinese low cost operations and high volume manufacturing capacities. We spoke with CEO, Takao Morizane, to learn more about the company and its products, including Woodtique, an ultra-thin real wood veneer for walls, ceilings and other surfaces.
In the last 25 years Japanese manufacturers have been put under pressure from regional competitors in China, South Korea, and Taiwan, who have replicated the Japanese monozukuri processes, but done so at a cheaper labor cost, providing the world with cheaper yet lower quality products. How would you define monozukuri and how do you implement it in your production processes?
My definition of monozukuri is the accumulation of improvements in quality, usage and use in the right direction, from the user's point of view. At present, our company group is mainly active in the industrial packaging industry. It may be just my subjective view, but for the past 20 years, this industry has spent a lot of resources, in terms of people, materials and money, on unnecessary "quality improvements" that are not necessary for actual use and that most consumers do not care about. Twenty years ago, the level of quality of industrial packaging distributed worldwide was 80 points for Japan, 80 points for Europe and 70 points for the USA. Nowadays, it is 90 points made in Japan, 80 points made in Europe and 70 points made in the USA, and the trend in Japan is to demand 95 points.
In Japan, the trend is to demand a 95-point product. I would be happy to join this trend if the value of the product is increased by means of spoilage prevention in order to reduce food loss, but in Japan, this is done by "excessive quality requirements" that the consumer, the original customer, does not care about. For example, misprinting that can only be detected by a detector, surface scratches or differences in colour that can only be noticed after being told. The current situation is that manufacturers have to spend a lot of money and manpower to look for "defective" products. But what about the situation in Europe and the USA?
I would like to introduce an interesting case. About 15 years ago, we received an order for futon compression bags for the US market and manufactured them at our factory in Shanghai. The president of the company who placed the order visited our factory to check the manufacturing process. We inspected the products according to our own standards, which are based on Japanese common sense. According to those standards, we found minute stains, pains and subtly faded printed letters, and rejected the products. We thought that the customer would naturally praise our quality control system, but the result was really surprising. He complained about our quality control. He said that a compression bag is defective if it does not fulfill its intended function. There is no room for disagreement, but our quality control rejects surface dirt, stains and subtle fading of printing, which have nothing to do with the quality of the product, and which no one cares about. According to him, our quality control is just to satisfy ourselves that we are producing a high quality product, which leads to a lot of product loss and thus increases the selling price of the product. Our responsibility is to deliver the right quality product at the right price to the consumer, he said passionately. He added that he wanted us to stop this crazy inspection and reduce the price.
It was then that I realized that my stereotypes were not internationally accepted. There was also this example. We received an order for compression bags from an Italian customer. We sent a sample to the customer and asked if it was acceptable. He replied: "Don't bother asking me about such minute differences in color that can only be measured with a machine. What do you think the Japanese are thinking? This experience has led me to believe that misdirected manufacturing, for example in mobile phones, electronic products and even solar power, has failed to gain a share of the world market and has fallen behind other countries such as China, in spite of its advanced technology. On the other hand, I believe that the automotive and robotics industries are on the right track and are winning the global competition.
With the rise in COVID-19 cases, a lot of packaging manufacturers have seen this as an opportunity because more people are shopping online. As a flexible packaging manufacturer, how are you adapting to this new trend towards e-commerce and online shopping?
Ten years ago we brought one of these drawstring bags to a trade show in the USA, but it didn't work at the time because they didn't know how to use it. When we demonstrated how to use it, they said it was fantastic. The Japanese are very familiar with this product, but not so much in the US. We were able to sell the product in about 100 Toys R Us shops, but we only sold 10 to 20 units a month. However, if someone from Toys "R" Us had done a demonstration, we would have sold 200-300 units. This shows that the Japanese and American perspectives are different. In recent years, this product has been selling well, selling $4 million a year. The product is selling well, but we don't expect it to continue for a long time. In five years we will have to move to a new product.
Last year, due to the coronavirus, we were not able to produce any products in our factory in China. In the meantime, a competitor in China took the job that we were supposed to take. They said they could replicate this product for half the price, but of course the quality was not even comparable to ours. We were able to make a profit with this product for eight years, but we did not intend to stick with it for long. We didn't want to stick with it for too long, because our competitors would start making reproductions. That's why we set up Woodtique. Initially, we could not pass the higher fire safety requirements and it took us more than a year to get the highest Grade A. Two years ago, we were going to have a customer from the USA who wanted to sell this product. Two years ago, we were going to welcome a customer from the USA who wanted to sell this product, but the coronavirus put a stop to that. But finally, in August of this year, we were able to attend a trade show in Las Vegas to show this product.
You are targeting 60% of your sales from overseas markets, what was your company’s midterm strategy leading up to 2018. Did you achieve those targets and what new targets have you set for your overseas sales?
So far, we have achieved 34% and in terms of revenue we have achieved 55%. In the Japanese packaging industry, the return on investment is usually very low. On average, it is around 3-4%. Thus, it is so low that the yield cannot be used for the next investment plan. Our target is 10% for the domestic market and 20% for the international market. So far, we have achieved an average of more than 20% in the international markets. For sales in the US, we are trying to achieve that target with new products.
This is a travel compression bag, sold in the supermarkets. This is a digital print without the need for a gravure plate. For gravure printing, you will need something like this. It costs about $500 each. If you need six colors, you will need $3000. But with digital printing, you don't need those six gravure plates. With other printing methods, the loss rate is on average 7-8%, whereas with digital printing it is 0-1%. Photo-printed garment compression bags are cheaper.
What is your main competitive advantage as a company and what makes you different from your competitors?
About 20 years ago I visited China to explore new opportunities and at that time many Chinese people supported me. They told me that if something good is produced in China, the Chinese will not hesitate to sell those products to the world. They also told us that our products were so good that we should sell them to the world market.
This encouraged me to go out into the US and UK markets. As the owner of this business, I believe that we should continue to innovate our products and our business without interruption. While we continue to increase the value of our 'improvements' for the domestic market, there are not enough 'improvements' for the global market. We have to keep on innovating this company and we have to take in new technologies. One example is our "Woodtique". This product is made by slicing wood as thinly as possible and then applying it to a wall surface such as plasterboard to give it the same look and feel as an actual wooden board wall. It is also very thin and flexible and can be applied to curved or sharp surfaces. In addition, it can be applied to aluminum or other materials to give the same look and feel as a wooden board, but with a longer durability, and with the advantage of being quicker to install, more flexible and easier to transport than real wood. Don't forget that slicing very thinly means that more pieces can be taken from a single log than with any other product. This means that we are making the best possible use of wood, helping to protect the environment and reduce CO2 emissions. It also means that the product is thinner and lighter, which reduces the transport load and helps to reduce CO2 emissions from trucks and other vehicles.
About 6 years ago, I visited a company that dealt with this product. I visited the company about 6 years ago and immediately made the decision to become the sole overseas distributor of the product. I was convinced that this product would contribute to the preservation of the global environment.
We also want to use recycled materials as much as possible in the areas where they can be used. In the case of food packaging, we are not yet ready to use it, but it is a safe material and we would like to reduce the impact on the environment by using it, for example, in compression bags for travelling clothes. We also use check valves in our garment compression bags, which we have developed and own the intellectual property rights for, and whose performance is recognised worldwide. Until now, in our industry, the production lot of a product has been determined based on the logic of the manufacturer: the minimum lot of raw materials and the economic lot of printing. This meant that no matter how attractive a product was and how many customers wanted to produce it with their own designs, the actual demand and the production lot did not match, so the product was not produced or there was surplus stock. We are now using digital presses to produce products in the quantities required by our customers (on demand), making it as easy as possible to produce our own designs and reducing the amount of bad stock. The company will have a minimum of three pillars.
A company should have at least three, and ideally five, pillars. Even if we have several pillars and one of them does not work, we can still survive.
Can you explain to us what exactly these five pillars are?
We currently have the foundations for five pillars, two of which are yet to be launched. Over the next five years, we want to grow the projects in turn and bring them to maturity. In the process, if we find something good, we will actively negotiate to create something new together. We are always on the lookout for new things.
You have had a factory in Shanghai since 2002, an office in Chicago and Houston since 2008, and an office in Manchester since 2010. Which product line up are you focusing on and which particular markets?
In three years' time, I plan to move to the USA and build a factory. However, this will only happen after I have handed over my position to the next generation. For this purpose, four years ago, I bought a 280,000 m2 plot of land in Houston. The plant will first be equipped with B2C products such as wood chips and compression boxes. My goal is to manufacture products there and sell them in the USA and Europe. I have chosen to do this because in the Asian market, where the quality of Japanese products is appreciated, they cannot compete with Chinese products in terms of price. At the same time, the American and European markets appreciate the quality of our products and are willing to pay a higher price. At the same time we have plans to develop a distributor or sales agency in Germany. We have purchased a ranch in Houston with about 40 cows on it. As far as the land is concerned, I will use 7,000 m2 for the factory and the rest for the farm.
One of the features of our overseas development is that we have six overseas offices, four factories and two sales companies, none of which are run by Japanese people. Twenty-two years ago, I went to China to build a factory because I wanted to build a factory without Japanese people. But to achieve this, I had to find people I could trust. So I spent a year looking for that person in China. Then it took me two years to open a factory there. During that time I observed how he spent his money and how he passed problems for me. After that, I decided to trust him and gave him my bank book and seal, together with four million dollars. I entrusted him with everything. I thought there might be a problem if I then received an order from a Japanese company. I told him that if there was a disagreement between us, if it was about quality, he should follow my instructions, as I was familiar with the quality of Japanese companies. If the problem was about something else, like sales, factory management, company management, I said I would follow your instructions. Twenty years have passed since then and we have never had any disagreements.
Imagine we come back to interview you again in three years, what would you like to tell us? What are your dreams for the company and what would you like to have accomplished by then?
In three years from now I will leave Misumaru in Japan and move to the USA to build a factory. It will take about a year to build the factory. Then, in about five years from now, the factory in the USA will be ready and we will also have a distributor in Germany. My mission is to find a business manager. And I asked my manager in China to find the next CEO. He has already found the right person. I say the same thing to the business managers in the US. The next generation of them are still in their 30s and 40s. That means that if they start to run a subsidiary, they can serve in that position for about 20 years.