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NACOL Accumulates Value Through Superior Manufacturing Systems

Interview - June 27, 2024

Japanese manufacturing firm NACOL is a producer of quality accumulators for energy storage through forging, hydraulics, and water pressure.

MR. TOMU SUGIMURA, PRESIDENT, AND REPRESENTATIVE DIRECTOR OF NACOL CO., LTD
MR. TOMU SUGIMURA | PRESIDENT, AND REPRESENTATIVE DIRECTOR OF NACOL CO., LTD

Could you give us a little introduction to your company? What are your main competencies and businesses that allow you to stand out among your competition?

On April 1st, 2024, we changed the company name. Currently, we have 77 employees situated in the Shizuoka area and 30 employees in Shanghai. Our main business is in the production of accumulators, and ever since last year, we started the development and sales of Water Pressure Products. My grandfather established the company in 1955, and accumulators were equipment used in shipbuilding. He worked for a shipbuilding company and was importing accumulators from overseas, so he then looked to nationalize production. This nationalized production became the main core business of our company.

Accumulators are high-pressure gas containers, and each country has different regulations on these containers. Not only do the products themselves need approval, but the factories also need to receive certification before production. This means that there are hurdles to entering this industry, and these hurdles are quite high.

In 2002, we established our subsidiary, and on April 1st, 2024, we changed our name to NACOL. In May 2024, we are merging our company, meaning we are acquiring. Our main customers are in heavy industries, but with the population decline and the shrinkage of the market, Japanese heavy industries do not have a bright future since industries like shipbuilding have shifted overseas. To have a new pillar of our business, we have acquired a medical-related company.

We have four factories in Shizuoka and two factories in Shanghai. We sell accumulators, with 50% of our clients coming from industrial machinery companies. This isn’t exclusively shipbuilding, either, with clients coming from various heavy machinery industries. Our clients tend to produce machinery such as die-cast and press machinery, along with shipbuilding and steel-making machinery.

It has been five years since we started the development of our Water Pressure Products design, and in 2023, we launched sales. It is not only accumulators we deal in, covering pumps and values as well as motors for water pressure.

 

Could you explain to us a little bit about what exactly an accumulator is?

An accumulator is a high-pressure container with a rubber bag inside. Nitrogen gas is stored in the container, and the rubber bag separates liquid from gas, meaning that the gas can be compressed. Using the characteristics of gas and liquid, we try to compile pressure inside the container.

Gas is inserted from the top, and at the rim is a rubber gasket. Once the gas is inserted, the rubber bag expands. Once the pressure of the liquid is enhanced, the gas contained inside is compressed, creating a state of stored energy. Imagine a battery, and you would be thinking along the right line. There are around 100 companies that specialize in accumulators globally.

 

Right now is a pivotal time for Japanese manufacturers. Policies like the US Inflation Reduction Act are forcing corporations to diversify their supply chains for reliability and to reduce country risks, with nations such as China. Japan is known for its reliability, advanced technology, and a weak JPY, so for the time being, Japan has never been a more cost-effective option. This means that Japanese firms have an opportunity to expand their existing global market shares. Do you agree with this sentiment, and in your opinion, what do you believe to be the advantages of Japanese companies in this current macroeconomic environment?

Our company policy and direction dictate that we aren’t influenced by external factors such as currency exchange rates or the ongoing US-China dispute. We can’t really accurately predict what is going to happen in the future due to these external factors, so for that reason, the company has elected to focus on our strengths and uniqueness, creating products that differentiate our company from the competition. Although there may be positive aspects like the currency exchange rate, we really want to focus only on ourselves, factors we can control, and our unique strengths. Having said that, the only external factor that we take into account is global trends.


What is your strength within the sphere of companies focusing on accumulators? What is the niche that your company caters to?

The most unique aspect of our accumulators is the design. The other 99 companies all have a common design, whereas ours stands out as unique. We are the only company that makes an accumulator with a lid that opens. The rubber bag is consumable, and businesses sell the consumables. The bag and the accumulator itself are separable.

Another unique aspect is that we make the rubber bag as one piece, and the quality is determined by the production process. Other companies usually make this bag from multiple small pieces. This approach is highly appreciated by end users, and our efforts have been recognized as some of the best accumulators in the industry.

 

There is an industry trend to move away from hydraulic fluid, and this is going alongside sustainability concerns that are causing companies to look for new materials and processes in order to reduce their carbon footprint. Your system of using tap water instead of hydraulic fluid was influenced by these concerns. What role do you see sustainability having in the manufacturing sector in the future?

Hydraulic technologies these days have been combined with electric technology within EVs. This environment requires high pressure and high amounts of energy in order to create clean energy. It means that this particular industry has requirements for hydraulics such as pneumatic air. Electric motors are being used increasingly, which is showing a demand for clean energy. This is where we got the idea to focus on water pressure as a solution for environmentally sound industries such as the medical, pharmaceutical, and food industries. Basically, the approach is to try and shift ourselves into newer markets, creating two pillars to our business: hydraulics and water pressure.

 

During our research, we saw that your WSM series had won an award. Can you foresee a future where your water pressure products overtake your hydraulic products to become the main pillar of your business?

Our strategy is to shift ourselves to become a water pressure system provider. If you look at the hydraulic market, there are many diverse applications, and things such as hydraulic pumps are dominated by major companies like Kawasaki Heavy Industry and Bosch. Accumulators are a very small niche component within this larger industry. Within the water pressure industry, not only do we want to provide the components, but we also become a comprehensive system provider.


Water Hydraulic Pump


Spool Type Solenoid Valve


With the Japanese demographic decline, the country is now facing problems not only with hiring enough manpower but also a declining domestic market. It is estimated that Japan will face a shortage of over 10 million workers by 2040. To what extent do you believe that Japanese companies need to begin to look abroad to find new markets or new talent to fill positions?

Since 2018, we have condensed the variety of accumulators in our lineup. Conventional uniqueness has a high variety and a low number of provisions. Still, in order to increase productivity, it has been important to reduce the number of offerings we provide in order to focus on the ones we have selected more closely. Over the past few years, we have reduced our lineup by 50%, and in March 2024, we completed the restructuring of our product portfolio.

This conversion out of high-mix-low-volume led to losing some customers, but we felt that this move was inevitable to progress our company forward. A second approach involved rebranding the company name and starting our new line of water pressure products. This is acting as an attractive point for new potential employees. Currently, the focus is solely domestic, with no definitive plans for overseas travel.

 

Are there any jurisdictions that you are currently working towards getting certified that you aren’t certified in already?

Half of the products we produce are exported overseas, so we already have certification in several countries. A recent one is from Australia with a design registration, and it is primarily used in mining. So specific products with specific needs already have certification acquired. 

About 10 years ago, we acquired certification in Russia and neighboring countries. However, as you probably know, exports and trade with Russia are currently on hold because of the conflict with Ukraine. We have already acquired a CE registration mark in Europe.

 

You mentioned that a high proportion of your products are exported abroad, and we understand that you have a base along with several factories in China as well. How do you balance quality assurance between both your Chinese and Japanese operations? Could you elaborate more on some of the advantages as well as challenges you have experienced having bases in two different countries?

We have allocated the production of certain components to China, whereas the main components, such as the body and the rubber bag, are produced here in Japan. In this respect, standardizing production is important in producing high-quality products steadily and is one of the standards that we implement.

 

It seems clear that you are able to leverage many advanced technologies, such as robotics, with ANC machine tools and your process for molding compound rubber. How do you ensure the accuracy and consistency of products throughout your integrated production lines?

The production strategy we want to enforce is digitalization, so we have converted our company strategy into a low-mix-high-production model. By producing specific products in higher quantities, we are able to enhance our technology. My grandfather nationalized the production of accumulators, and my father developed the structure that we utilize today. My generation has a very specific focus on reducing the number of different product lines we offer and creating uniform standardization to increase volume and productivity.

 

Your company has clients in a variety of sectors, including automotive and heavy industries, among many others. Are there any new sectors that you are looking to expand into besides the medical sector that you mentioned earlier? Are you seeking any overseas partnerships in order to achieve these goals?

As a domestic business, we want to be double-paid with our hydraulic and water pressure device businesses. I like to refer to this as going from heavy industry to light industry. Ideally, we want to have a good balance between both businesses.

For our hydraulic business, we have already established partnerships with overseas partners, however, we haven’t set up a network for water pressure just yet. For the first three years of our water pressure business, we plan on staying in Japan in order to create a system for installation and maintenance. Last year, we received contact from a Swiss cheese manufacturer regarding our water pressure equipment, but we had to refuse the offer since we haven’t provided maintenance yet. The future hope is to establish a global network of this light industry in more advanced nations such as those in Europe.

 

Imagine that we came back in 2035 and had this interview all over again. What goals or dreams do you hope to achieve by the time we come back for that new interview?

This goes back to the issue of population decline. Many Japanese companies are struggling to find successors, so I foresee a lot of reorganization of various industries through M&As. Our company is looking to continue our business in any form possible.

The company we recently acquired is an Osaka-based company that specializes in welding and sheet metal processing. We don’t currently have our own sheet metal technology, so this is seen as a good move for our company. The president of that company is retiring, and by merging the companies, we can mitigate some of the issues that come with the population decline.

 


For more information, visit their website at: https://www.nacol.co.jp/

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