Founded in 1947, Kashiwa has been safeguarding seas since and we explore their journey rooted in marine heritage
I want to begin by getting your take on the premise of this report. It's our view that Japan's manufacturing sector is living in a very exciting time. Supply chain disruptions caused by COVID, US-China attention, and international firms looking for new suppliers to have a more reliable supply chain. Here enters Japan, a country known for decades for its very advanced technology, high quality, and highly reliable and trustworthy business partners. Now, with the very weak yen, they've never been more cost-competitive. It’s our opinion that this is a very exciting opportunity for Japanese firms to take advantage of this macroeconomic environment. Do you agree with this premise, and if so, why? And if not, why not?
I agree with your view in general, but it differs by industry. The environment varies depending on the industry. Typically, for our company, we don't acquire new customers often because we already have deals with many partners and companies, shipyards and shipowners, including overseas companies. The situation for us is that we have to buy some items from overseas markets, and our suppliers also have to buy things from overseas markets. This will cause an increase in costs, especially for materials like steel and stainless steel, where the costs are increasing.
We're just coming out of a very difficult three-year period for your core market, which, as we understand, is maritime shipping, inbound and outbound shipping. 77% of international ports reported either severe or very severe delays during the pandemic period. Can you talk about the impact this had on your day-to-day business operations and how you got the company through that?
Due to such unstable logistics which affected many manufacturers, as you may know well, we had difficulty to obtain the items such as semiconductors, PCLs, and other electronic parts, and supply to our customers when they demanded, very hard to manage it, however, the availability of those items is coming back to normal recently.
You mean, do you feel that things have more or less normalized now, or are you still in a state where procurement is a big managerial challenge?
Yes, now it's getting closer to normal.
Are there any new markets you've identified as being interesting or having potential for your products and services?
There are no specific plans to go into any new markets or industries. However, within our existing industry, maritime transportation or ships, there are emerging needs like transporting EVs and/or LIB, which would create new opportunities for us to provide suitable products. We conducted the extinguishing test for EV/LIB fire last autumn at the car safety certificate authority in Japan, together with other stakeholders, and the result was very successful by our foam fire extinguishing system*. This is a conventional product, however, it has proved its effectiveness, again. Additionally, we are moving away from carbon and adopting new fuels like methanol/ethanol or ammonia; we can no longer use heavy oil, so much as before. So, we have to adapt to this trend with our R&D and design engineering resources, as well.
*The test report is disclosed on the company’s website.
How are you ensuring a safe system with fewer workers, or are you pursuing automation solutions to ensure immediate and safe responses in case of emergencies?
The loading and unloading are taken care of by different companies, so we can't comment on that. Regarding fire detection, our Technical Center, core engineering base in the northern area in Ibaraki-pref., is trying to find by research the technology of the ways to detect the starting point of a fire occurring, such as using high-spec cameras in high-risk locations on board and monitoring them from a control center. Similar to what other companies are doing for land transportation, we are cooperating with other companies in the maritime industry to improve such monitoring.
Being an SME operating in the maritime industry, one of the most contributing sectors to Japan’s development after the modernization of the tractor, you must face difficulties in recruiting new staff and preserving your technical expertise to pass it on to future generations. How has Japan's super-aged population impacted your day-to-day operations?
Regarding HR, our company doesn't currently see any significant challenges. However, the neighboring industries, such as shipbuilders, are facing difficulties in hiring people, especially when their plants are located in rural areas instead of cities. This has led to a decrease in their workforce, impacting their productivity. For example, they used to build 10 ships, but now they can only manage seven due to the shortage of skilled workers. Some of our group companies are also experiencing challenges in hiring, particularly when it comes to IT professionals or on-site workers, as those roles involve demanding tasks.
Fortunately, we have a dedicated HR person in our company, who has contributed to keep hiring the right people for our needs. But, as an engineering company, we are required to follow the trend of digital transformation (DX), and this poses a different challenge for us. As we embrace DX, there's a risk of losing in the transition of some basic knowledge and technical expertise inherited among our employees. We need to carefully consider the balance between automation and preserving our valuable technical know-how, which is relatively machinery engineering-oriented. Ensuring effective technological inheritance is a challenge we are currently addressing.
You transitioned to a holding company structure last year. I'd like to know, first, why you chose to make this change to a holding company structure and what benefits it brings. Secondly, could you elaborate on some of the advantages or synergies you can create?
Before the structural transition, Kashiwa Co., Ltd., which was recreated as Kashiwa Tech Co., Ltd., now, was positioned at the top, and there were different subsidiary companies. However, as it operated as a hierarchical organization with a mother-and-child dynamic, the mother company tended to become domineering, and communication between the mother-and-child companies wasn't as effective as designed when we started M&A. We wanted to promote a flatter organizational structure and ensure more efficient communication among all the companies. That's why we decided to establish Kashiwa Group Corporation, a holding company organization. This new structure views each company, including Kashiwa Tech, as an equal entity, fostering a sense of shared responsibility and teamwork. One of the primary reasons for this change was to enhance awareness among the members working within these companies and to increase the collective strength of the entire group.
Over the past decade, we anticipated a decline in the maritime sector and underwent an organizational transformation. We acquired both maritime and non-maritime companies, establishing a holding structure, with the holding company also serving as an investing entity.
May I inquire about the results of that experiment? You mentioned it has been 10 years since you adopted this new approach, incorporating different types of companies. Has this primarily been an investment strategy for your group, or have you experienced other advantages and synergies between the new companies you integrated?
One of the key aspects is organizational transformation, as mentioned earlier. We are working towards establishing three main pillars for our business, representing three different portfolios: maritime, precision machining, and a third one that we are still in the process of identifying. By diversifying our focus and not solely relying on one industry or putting all our investment into a single sector, we are effectively hedging risk.
While discussing your international business, you mentioned having locations in Korea, and you added Vietnam a little later. Additionally, you have a significant network of partners in terms of sales and service, across Asia, the EU, and the Americas. At this point, what is the primary focus of your current international expansion efforts?
So, since maritime business is a worldwide affair, we have been actively building a global network. Initially, it was more of an after-sales service oriented, where we provided new parts replacements and technical services when malfunctions or troubles in our system onboard occurred. However, now we are taking a more proactive approach towards worldwide customers and partners.
Currently, our focus is on Singapore, as it is a hub for many ship-managing companies. We aim to provide after-sales service to these companies and gain insights into their ship's inspection schedules. By exchanging information, we can anticipate what needs replacement and when making procurement and preparation more efficient. This approach helps us ensure that our customers don't have to go to other 3rd party suppliers for their needs, resulting in a win-win situation for both our partners and us in terms of efficiency and safety.
Moreover, in terms of safety, using our genuine parts, rather than relying on parts from other route companies, adds an extra layer of assurance for our customers. It helps maintain the integrity and reliability of our products installed onboard, creating a safer experience for those who use them.
Our members recently (mid-July) visited Singapore for more than a week, which has provided us an opportunity to collect a lot of partner’s and customer’s demands for quick response and delivery of the parts and service, as well as some technical inquiries. It was a good start for enhancing the after-sales service activities.
As you enter this new market and given your presence in Korea since 1999, you mentioned the challenge of becoming more proactive in providing after-sales services. Over the past nearly 25 years of international business, what are the most valuable lessons or key takeaways that you will bring to this new experience and venture?
Each overseas company has a different purpose to contribute to our business. For example, in South Korea, we created a company to gather market information from the shipbuilders when they were growing in the country. On the other hand, in Vietnam, the purpose was to manufacture our products like the control panels of fire-extinguishing systems at a lower cost, as we wanted to decrease the effect of higher/increasing procurement costs. When we acquired Seamate Inc., which already had a local base in Vietnam, they helped us to establish the in-house production facility to reduce the cost, in 2006.
Throughout our overseas ventures, we've learned that trust is the most crucial factor in building successful partnerships. Instead of partnering with large-scale companies that often experience personnel changes, we prefer working with family-owned enterprises, which tend to be operated by the same individuals for an extended period. Building trust in long-term relationships leads to mutual profitability and a more balanced give-and-take approach, not solely focused on profit in the short term.
As we wrap up, I have a final question that delves into a more personal aspect of your role as the president of the company. Having served in this position for over 20 years, let's imagine the last day of your presidency, just before passing the leadership to the next generation. At that moment, what dreams and goals would you like to have realized for the company? Please share with us your aspirations for the future in this new interview.
As the president, my message to the staff is focused on self-realization and personal growth. I want each member of our team to feel a genuine sense of satisfaction in being part of Kashiwa Group Company. While the company's growth is essential, I also value the individual journey of each staff member. When the time comes, I want to leave this company with the knowledge that the staff believes they have achieved something significant through being a part of our organization. I keep this in my mind when I manage Kashiwa every day.