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Pioneering B2B Excellence in Japanese Manufacturing

Interview - June 27, 2023

Nitto Electric is a niche-focused SME, driving innovation in industrial parts manufacturing, and has a vision for sustainable growth in food, water, energy, and disaster prevention sectors.

TAIYO ABE, PRESIDENT OF NITTO ELECTRIC CO., LTD
TAIYO ABE | PRESIDENT OF NITTO ELECTRIC CO., LTD

It's a very well-documented transformation in Japan's industrial sector, from being producers of finished goods to being producers of components. You just mentioned your goal to have a dominant position as a subcontractor and be a good representative of this new wave of B2B excellence in Japan. To begin, please introduce us to how you believe your firm fits this category. What do you believe to be your core strengths or competencies that will lead you to that goal?

Japan has a rich manufacturing history, and as an island nation, has walked its own path of development. We are a typical Japanese small and medium enterprise, producing a variety of products designed by major corporations.

Nitto was established by my predecessor, who altered the work 33 times. After all these successes and failures, our predecessor decided to focus on plastic molded parts. It's not that we wanted to create innovation in the plastic field, but it's more that Hitachi, Fujitsu and major components makers told me this area would boom, so they asked us, "Can you manufacture plastic parts?" We decided to take on the challenge and we started producing plastic parts.

The spirit of our company aligns with the common Japanese spirit in that it is not only seeking profitability but rather seeking to make someone happy or satisfy someone's needs to make them happy. We have established our factory right by our customers' factory and produced products only for them before.

It's not that the main goal was to diversify ourselves, but by generally responding to the client's needs and requests, we were able to diversify from plastic parts and automotive parts to new areas. Before, each department was independent and competing with the other, but now we need to collaborate with the change in society. Our strength is that we can manufacture anything.


From your point of view, where does the competitiveness of the Japanese chusho kigyo (SME) come from today, if not in quality or technology?

If you have a chance to work with Japanese people, you may have seen someone bowing on the phone while talking to a customer. This is not a joke or flattery, but rather a habit of expressing gratitude, even if the other person is not present. The strength and essence of Japanese corporate competitiveness lie in the courtesy of caring for invisible consumers to please them a little, focusing on the details of parts and equipment, and maintaining and improving product quality and quality assurance, including after-sales service.

Gaining satisfaction from those around one is a unique culture that enhances one's value, and when coupled with consideration for others, it has allowed small- and medium-sized enterprises to specialize in small-scale and niche industries that have the advantage of more flexible and tailored services than those of large companies.

In Japan, plastic pet bottles, for example, have two different materials that can be recycled, and printed with dashed lines for easy detachment. This printing processing incurs additional costs to the supplier but is actively applied. Music CDs’ plastic cases can be another example. Overseas they are tightly secured with strong tape, so it takes time for one to open without the use of tools such as scissors, whereas in Japan they have the processing so it is easy to open with just pulling out from the cut.

In my American childhood, pens were typically only one type of Bic brand because pens have no meaning apart from writing. In contrast, Japan had a very expansive customization and a large variety of pens with different colors and shapes, with hundreds of varieties. It may be a bit redundant, but that's the Japanese preference. One of the reasons for focusing on the little details and bringing them to life is to make as many people happy as possible.

In this way, small and medium-sized enterprises also have a major role in making better products through making small suggestions in product development.


Japanese headquarters


I'd like to hear more about the synergies between both the group members and the departments, and the collaboration that can take place across those departments.

We recently started collaboration within our group at Nitto Electric. This is to provide a space to learn each other's techniques by utilizing our limited personnel. This has been giving a positive effect on our company. For example, we have broad aluminium die-casting technology and plastic injection-molding technology. By combining the two, we can get a new synergy effect, although not revolutionary. We can now have new ideas and improvements, which is the biggest challenge in the Japanese manufacturing industry for improvement and productivity improvement can be continued.

Although manufacturing processes for aluminium die-casting and plastic injection molding are similar, the structure of the molds used for each are slightly different. By combining this detailed know-how and experiences, we can respond to even new types of materials, and know-how to create the appropriate new molds.

Japanese aluminium die-casting mostly uses ADC 12, but it has not reached a level competitive in the global market. For instance, ADC 1 is often used for the US market and corrosion-resistant silicon materials are required for Europe, and when dealing with new materials, experience with completely different materials often proves to be useful. We can provide new solutions for new materials.

Our company produces plastic products with not only injection molding but also extrusion molding, and we also design and produce FRP (reinforced plastics) different from them. We have experience and skills for each one, but it is not easy to combine them and create innovative products. However, at the time when customers have requests, our advantage is that we make positive proposals such as, "This might work".

 

You mentioned that there are not enough people in the workforce, which can be a big challenge, especially for SMEs like yourself in Japan, located in more rural areas. The maintenance of human resources and the training of young people are required. First, you have ageing engineers who will have to retire, and then you have young people who are leaving for cities like Tokyo. Can you tell us more about how you're maintaining your expertise? What impact does this ageing population and urbanization have on your company?

Yes, we are struggling to secure more manpower. We formed a consortium to welcome overseas trainees to each of our factories and have welcomed technical interns and foreign laborers as our labor force. The consortium currently targets only our company but there is great potential to develop this into a bigger business. For now, the Japanese market may not be very attractive to foreign workers, due to the exchange rate of currencies, but it is still relatively easier to gather than the local labor force.

We are also hosting a cross-training program with the factories of our same group companies in Vietnam. They do not immigrate to Japan, but they come here to learn and bring an exchange. We have related companies in China, Taiwan, and the US, and by interacting with them, our employees can broaden their perspectives and understand the movement of the world the most. We are not managing it. We leave overseas on their own and this is a strategy for small and medium companies to survive.

In addition to importing labor from overseas and recruiting engineers from related companies, effort must also be invested in creating work environments in which women and elderly people can work. To that end, we are investing particularly in videos to preserve workers’ skills and to improve harsh working conditions to make them easier for women and elderly people. In the production system of Japan so far, it is difficult for any company to continue for the next 10 years.

 

We're very interested in your work for water purification and treatment as one of these new areas you've entered. I'd like to know in a little more detail about the motivation behind entering this field and the role it will play in your business structure going forward.

In Japan, the water treatment business is usually in small sizes due to many small demands, and large companies mainly produce home septic tanks. We have accepted the production request for a large water treatment tank which requires a smaller number of them but a larger site and have started production. Even though it is difficult to handle, there is still a need for it. We are making a tank with a diameter of 2.5 meters that can be transported by a standard truck in Japan, so it can be delivered from factories that are located far away from urban centers all over Japan. This is fitting with our way of life, being a niche industry that is hard for large companies to enter into, and being a meaningful job that is needed by society.

Recently, we established a production base in Vietnam due to their need for large water treatment tanks, making use of our own techniques. Some countries don’t need wastewater treatment methods like septic tanks, but these are popular in regions with severe water pollution. Most products are buried underground, so it is difficult to increase the price of products, and it is not a cost-effective industry. Therefore, large companies don't necessarily actively produce overseas, so overseas production by small and mid-sized companies that can be more flexible is needed.



Could you tell us more about your experience going overseas, and your initiatives to further grow your international presence?

We are not considering overseas expansion for profit. The Japanese market is shrinking and the working population is declining. However, since our current company has been run by the effort of its employees, we also prioritize remaining an unbending business. Even so, it is not necessarily true that there are no new businesses in Japan under such circumstances.

For example, even if a part is only ordered once a year, it may have a value that is not possible to think of when mass-producing. Many business opportunities exist for products that are consumed in large quantities, but there are also business opportunities for products that are only needed in small quantities. There is always value in what is needed, and it is our idea to proactively take orders, especially for products that require more work.

If needed in Vietnam and other countries, I will expand overseas. But the most important point is the personnel. If there are people who can carry out the business, it is worth taking on the challenge. Investment capital is also important, but if people with the passion to do what they want are there, I am convinced that it is the basis of success. That is of course including me.

Generally, I feel that most Japanese people enjoy temporary overseas life but would eventually like to go back to Japan. On the other hand, many Asian non-Japanese people reside in other countries for a longer time, and I recognize that for Japanese enterprises, the biggest issue for small and medium-sized enterprises is personnel regarding their overseas strategy.

However, the coronavirus has changed the world. I think, overall, it has made entering foreign markets easier. It seems the barrier to entry has been lowered, especially for companies that have already experienced overseas expansion. I look forward to seeing a more positive attitude from Japanese people, who tend to be very “Japan-centric”, and are willing to try out overseas postings, even if only temporarily, to build up their careers.

 

Could you please tell us more about the role of international collaboration in your development, and if you're open to or looking for new partners to help your growth in the overseas market?

Of course, we are always looking for partners. Whether it be a company, individual, government official, employee or anyone we can trust, we believe it is possible to deploy our technology and develop it when the right partner is found.

First of all, it is important to build a partnership with a local base. Depending on the country, they may understand Japanese ways of thinking and doing things, or they may not. By openly talking about what each party wants from the outset, it is possible to determine where their interests converge, as well as to discuss technology support and revenue distribution properly.

When setting up an organization, even if it is a Japanese company, we should adopt local practices as much as possible rather than imposing Japanese ideas. Since many hire local staff, differences in their thinking may lead to various problems in the future. Eating habits, religion, overwork, safety, family, traditions, etc. If possible, it is a good opportunity to convey our ideas if time is taken to understand and set goals with each individual.

I was able to find possibilities for the future of business, people, and the country in Vietnam. Although there are parts of the law that are unclear, if we can understand each other as human beings, business negotiations can go on as smoothly as in Japan.

The biggest problem, however, is the slow decision-making of Japanese companies. It would be better if we could make our own decisions, but in many cases, we must get approval from Japan, and this can take time and cause us to miss opportunities. If it can be trusted, it is important to make decisions on the ground as much as possible and to take responsibility for firm support from Japan in terms of management.

 

What does the future hold? Are you looking for new chances to partner with new collaborators, perhaps? You mentioned using Vietnam as a base to spread out in Southeast Asia.

What we need now is to be found by international companies. We should appeal ourselves as a company that has a wide range of technologies that can respond to customers’ needs as we are very flexible. We must also find ways to expose ourselves to the world that supports Japanese manufacturing from the bottom up.

Even though Japanese companies have good products, they often have poor sales. We can also see this in the food industry, where products with added value are behind because of a lack of transmission power. We still believe that there is a big potential in the global market. Especially in aging agriculture, it is necessary to find ways to add more value and export them overseas. We SMEs are required to act to make ourselves known to the world. We must put in the most effort towards this shortly.

Surprisingly, there are successful cases, like ramen. There are surprisingly various varieties, and it is the product of Japan’s distinct diversity. As each of them have fans from around the world, it has transformed into a very large global business. This also emphasizes the importance of appealing to global markets, including manufacturing.

Though the Japanese don't specialize in creating something completely new, they specialize in improvement and refinement. Improvements to make it better and even more delicious are the specialty of SMEs. Last year, we set up a Research and Development Center focusing on that purpose.

 

Let's say we come back to interview you again in three years for your company's 75th anniversary. What would you like to tell us about your goals and dreams for the company in that timeframe, and what would you like to have achieved by then?

First and foremost, we aim for the 100th anniversary of the company. We must clear the 2050 carbon-neutral target to continue ourselves for over 100 years. Business continuity is the essence of the company, and as company president, it is my responsibility to provide sustainable company operations to the employees and the customers.

For example, we have a newly joined employee, and I am responsible for paying him a salary if they work with us until he retires at 65. To do so, we must be flexible in adopting new businesses and conducting operations. My ultimate goal is to provide happiness and smiles to those in contact with our business.

This could be our customers or employees in Japan, Vietnam, and elsewhere in the world. Through our products and services, we want to create happiness and smiles, and it would be nice if it could center around the water field, which is my specialty.

We established an agricultural company, but we're not trying to make agriculture produce, but rather to create a system where you can do agriculture, not full-time, but part-time. We have many smart technologies like remote temperature control and remote monitoring, that we want to apply in smart agriculture.

We are very much focused on the four key sectors - food, water, energy and disaster prevention. Especially in disaster prevention, FRP technology in Japan has invented capsule hotels, so if we can make capsule hotels in containers and ship them to a disaster-affected area anywhere in the world, this technology could be a good Japanese strength and a contribution to the world.


Interview conducted by Neale Oghigian & Sasha Lauture

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