Naxis is at the forefront of industry innovation aimed at improving sustainability in this field, pioneering environmentally friendly materials.
Now is a pivotal time for Japanese industry. Over the past three years, there have been severe supply chain disruptions due to COVID-19 and the US-China decoupling situation. As a result, many corporate groups are looking to diversify their suppliers for reliability. Known for their reliability, advanced technology and high-quality products, Japanese firms are in an interesting position. Due to the weak Japanese yen, many observers argue that this is a unique opportunity. Do you agree with this sentiment? Furthermore, what are the advantages of Japanese companies in this current economic macro environment?
Our company is not significantly affected by the depreciation of the Japanese yen. We have adopted a strategic business model that involves establishing local entities in each of the seven countries where we operate, using their respective local currencies. This approach effectively hedges our exposure to fluctuations in currency exchange rates.
In the apparel industry, we have not observed a trend of companies relocating their manufacturing operations back to Japan. The majority of production in the apparel industry, approximately 95% to 98%, continues to be carried out overseas. Even if there is a desire to bring manufacturing back to Japan, there are currently no companies or factories capable of meeting this demand. Instead, we have been receiving requests from our customers in Japan, the United States and Europe to diversify their supply chains away from China, primarily due to geopolitical concerns.
Sustainability is one of the major topics in the apparel sector. It is estimated that about 10,000 items go into landfills every five minutes from the fast fashion trend. Nippon Copack has a closed-loop recycling system. Similarly, you have environmentally friendly materials such as the Econax-cello, a packaging material made from wood pulp-derived viscose as an alternative to petroleum-based films. Can you tell us a little bit more about some of the environmentally friendly materials that you have developed?
Yes, we develop, manufacture, and sell Eco-Products that use FSC-certified paper and recycled materials and so on, but we recognize that we have only just scratched the surface of addressing sustainability.
The essence of sustainability involves more than simply offering environmentally friendly products. What we are focusing on as the essence of sustainability is how we can contribute to solving the problem of "excessive production” and “excess inventory” in the apparel industry.
Traditionally, lead times in this field have been quite long, with manufacturers producing numerous items and keeping them in stock without a clear understanding of actual demand or future trends. Additionally, if proper inventory management is not done at each store or warehouse, it can lead to excess inventory.
The RAIN RFID (UHF RFID) solution, which is one of our major products, is an effective way to prevent excessive production and excess inventory. By introducing the RAIN RFID solution and using it correctly, you will be able to understand inventory status in real-time. Furthermore, by properly managing inventory, you can increase the accuracy of demand forecasts and more realistically grasp the amount of inventory needed in the future.
Besides the RAIN RFID solution, we have the NRD (Naxis Relational Database), a web order placement system for auxiliary materials. In addition, we have iNAP (Implant NAxis Platform) which is an in-plant printing system. In the traditional business model, we would create tags and products after receiving orders and then deliver them to our customers. By using NRD and iNAP, we can install tag printing machinery within our clients' factories. Orders are still processed through NRD, but the actual production takes place on-site. To ensure top-quality results, we carefully select materials and configure the machinery to operate in multiple languages to suit different regions. This allows us to provide a comprehensive software solution service while maintaining consistent quality. Our initial focus for this project is centered around the ASEAN region, and this direction aligns with our commitment to contributing to reduce excess production by making the lead time shorter within the industry.
Who do you see as the real impetus for change? Where do you think the change should be led primarily? Is it industry-based companies such as yourself, end-consumers or even the government?
Regardless of the apparel industry, we believe that the shift toward sustainability must be a trinity of governments, companies, and consumers. The government is promoting the transition to a sustainable society, and companies are making efforts. Furthermore, this will only be possible if we gain the understanding of consumers, and all three parties are aligned.
RFID technology, a form of wireless communication that incorporates the use of electromagnetic couplings and allows you to uniquely identify objects, people and even animals, has seen rapid growth, especially in recent times. However, some of the challenges of this technology include reader collision where one tag from an RFID can interfere with another. Furthermore, materials like metal can impact the signal, and sometimes they are not as accurate as bar codes. How does your RFID technology help overcome some of these challenges outlined?
To be completely honest, many people tend to view RAIN RFID (UHF RFID) as something similar to Doraemon's magical pocket, capable of accomplishing anything. Recognizing our customers' thinking on the matter, we are actively working to enhance their understanding of the limitations and technical constraints associated with RAIN RFIDs. We believe it is crucial to consider the incorporation of barcodes and QR codes alongside RAIN RFID technology to evaluate the advantages and disadvantages of each combination and choose the most suitable option. RAIN RFID can either replace or complement barcodes. Essentially, any products with barcodes can use RAIN RFID.
Our primary focus now is on the widespread integration of RAIN RFID tags into various items.
In a way, our current phase is reminiscent of the early days of the Internet, particularly in Japan in 1995 when households first began adopting computers and connecting to the Internet. Back then, while people had internet access, they were not entirely sure how to make the most of it. It was only as internet usage spread globally that new services like Yahoo, Google, Facebook, and others emerged.
We see our current endeavor as comparable to that early stage of internet adoption. By spreading RAIN RFID tags into a wide range of products, we are creating an interconnected environment. This network of RAIN RFID tags will serve as a foundation, and we are actively preparing the stage for new players who specialize in software to identify and leverage the potential of this established RAIN RFID tag network. Our role is to create this essential network and await the entrance of innovative industry players who will further develop systems based on it.
I believe that RAIN RFID technology is still in its infancy, with its full range of advantages and disadvantages yet to be determined. This presents us with both potential business opportunities and significant challenges. In Japan, many companies aspire to dominate and set the standard in the RAIN RFID market. However, customers are not inclined to rely solely on one standard. Having multiple players in the field and avoiding excessive monopolization is crucial. RAIN RFID technology offers a high degree of flexibility.
Counterfeiting is a big problem, especially in the apparel industry. According to the US Chamber of Commerce, it is estimated that counterfeit products cost the world economy roughly USD 500 billion. RFID technology can help track good processes through the supply chain for real-time data such as inventory, location and movement which contributes to anti-counterfeiting efforts. What are some of the solutions you offer to help your clients protect their brands and better fight against the counterfeiting market?
Currently, the use of RAIN RFID technology for our domestic customers has not yet advanced to the point of effectively preventing counterfeits. However, a new trend is emerging among our European customers: the adoption of Digital Product Passport (DPP). These passports contain comprehensive information for traceability and provide insights into sustainability.
The concept extends throughout the entire product lifecycle, from inception to disposal, often referred to as 'cradle-to-grave' monitoring. In this context, the most promising application of RFID lies in the implementation of these product digital passports. We anticipate that RFID technology will experience significant growth in this area, ultimately leading to advancements in security and the prevention of counterfeiting.
Is finding international partnerships in regions such as Europe or the United States an area of interest for your firm?
I am actively exploring new partnership opportunities to drive the evolution of our business. In 2000, I took office as the fifth-generation president, inheriting a company with a conservative approach that highly valued 'made-in-Japan' products and primarily concentrated on the domestic market. However, considering recent global events such as the pandemic, I have placed greater emphasis on expanding our presence in the global market. We are committed to establishing a robust global supply chain to better cater to our international customers.
Going forward, which countries or regions do you believe are key to the growth of your firm? Could you elaborate more on your international business strategy?
While the markets in China and Vietnam are already thriving, our next target is India. We have communicated with a local partner, and established NAXIS Co., Trims India Pvt Ltd in August 2023. Additionally, we see significant growth potential in Bangladesh, much like India. Our intention is to prioritize these regions in our business expansion efforts.
If we were to come back in four years, where do you see the business? Do you have a personal goal as the president that you would like to have achieved by then?
We will be celebrating our 130th anniversary by then. Our primary focus remains on expanding our RAIN RFID network by spreading RAIN RFID tags into an increasing number of products. We will supply RAIN RFID tags to as many products as possible and transform from “Japan's number one apparel auxiliary materials company” to “an information transmission infrastructure company.”
Interview conducted by Karune Walker & Paul Mannion