Though their overseas trading activities, K. Sakai & Co., Ltd. provides Japan’s world renown makers with the products required for top-class manufacturing.
Where do you believe that the competitiveness of Japan's industry comes from today?
Japan has been the leader in many technologies and products in the past and still is. Japanese companies are leaders in inventions and advancements in many products in the television, electronics and automobiles sectors, but many other countries have caught up.
It may be in niche markets, but Japan continues to lead in that sector. Technological advancements have come from Japan and is one of the areas where Japan will continue to lead.
I've heard from other presidents as well, and I'm curious about your comment on this, that in many cases, it's less of an innovation problem or a technology problem as much as it's a communication problem, both in terms of communicating your expertise to the market, and also understanding the needs that are coming from outside of Japan and being able to cater to those needs. As someone who has roots in both countries, how can you and your company help bridge that gap and facilitate a better understanding?
We expect high quality products at a competitive price. Being a trading company specializing in overseas trading, a significant portion of our business is importing products from overseas, mostly chemicals or steel components – bolts/nuts or cast iron parts.
Our customers are accustomed to such high quality standards. The final product is not only the contents themselves but also the packaging. If a drum is slightly dented or box is damaged, then the entire product will be considered defective. If an order of 100 items contains only 99 or 101 pieces, it is also considered defective and we may be required to physically count the items for the entire pallet, or container, in some cases returned.
Having been in business for 109 years, we at K. Sakai understand the local business culture in many countries, and act as a translator not only for language but the intricacies of Japanese business culture.
What does that mediation look like? I imagine that no one can really be happy, right?
Defects or returns are not fun for anyone. To prevent this we spend a lot of time with our suppliers in advance. We, along with our clients often spend days and sometimes weeks at their factories abroad to train the workers. Our local staff are also well versed and regularly communicate with our suppliers to ensure no surprises. In addition, in many cases our local staff inspect the goods prior to leaving the factory. Even then, things still happen.
When it comes to the defects, do you check it yourself to make sure there's no defect before giving it to the client, to your customers, here in Japan? Or is it the customer, the Japanese customer that checks it after?
Our local staff will inspect prior to shipment in many cases. When we don’t self inspect overseas, our customer will inspect when it arrives. Another often used method is to place the official order only after inspecting and approving a sample first. We have started to use web meetings to inspect remotely during COVID which also serves as a good inspection tool. Our local staff overseas is a key differentiator in quality control.
In the past, trading houses were responsible for two main points, first being the logistics, the second being the financing, but now they're expected to add value in new ways, including via co-creation or co-development, assisting in R&D and gaining access to new networks. Can you speak to us about how you've seen the role of traders evolve during your time in Japan?
You’re right. Our role has changed since we started nearly 110 years ago. Logistics and financing is still a big part of our business. The amount of information available online is increasing daily, which our clients relied on us previously.
However most of our suppliers in China or India are not located in big cities and real-time information is not readily available for rural areas. I’ve visited many companies overseas to find that our contacts were really not manufacturing. Here again we rely on our local subsidiaries and partners to tell us the real situation on the ground. Seeing is believing. Especially when compliance and adherence to SDGs are increasingly important.
When dealing with some customers in Japan, as you mentioned, the expectation is perfection, and it can be hard to meet that kind of expectation, especially given some of the major events of the last three years. Disruption to travel and logistics were widespread. Can you tell us how you navigated those disruptions in global logistics, and were still able to provide a satisfactory service to some of your clients who are a bit more particular?
Our staff on the ground in each of these countries have really helped. First of all, our customers find comfort that they can rely on us because we have people on the ground there. Prior to COVID, our local staff in these countries had visited our customers in Japan many times, so they know our people in China and India and they feel comfortable.
That helps, as well as the web meetings. We have regular web meetings with our suppliers abroad. Factory audits are also done via video conference. Without a bit of creativity and technology the impact of the pandemic would have been dramatically worse.
This last year has been a bit of a roller coaster for the yen in many respects, especially in terms of purchasing power. Can you tell us about the impact that that's had on your business in a little more detail?
Last year was an especially good year for us in terms of performance. Our business is diversified and have a good mix of imports and exports. If the yen depreciates, our exports become more competitive and vice versa.
We generally don't trade in commodity products. The large trading houses can do a better job in this market. Most of our products are specialty niche products. They are smaller quantity and ticket size, higher value-added products where people are not as adverse to price fluctuations.
What does the process look like for developing that network of suppliers? I'm especially interested to know that in regard to the Indian market, where you went five years ago in 2018. Can you tell us more about how you've managed to develop your network of manufacturers in India, and what role India will play for you going forward as part of your business?
India has always been an important market for us. I myself have lived in India for three years and many of our sales team visit 6+ times per year. We understand the culture well and have many close friends and partners. Even then, about 10 years ago, 90% of our imports were from China, and today since the inception of our India office, we’ve been able to increase our business with India and reduce our reliance on China to about 60%. No doubt China will still be a very important trading partner for us and for the global economy.
However, we're also looking for alternatives, and most of our customers are the same. One of the big markets, especially for chemicals, and also for steel components, will be India.
China’s geographical proximity to Japan give it a big advantage. From China, a vessel arrives in a few days versus it taking about three to four weeks from India. India has a very attractive labor force. Its young, intelligent labor force, and eagerness to compete in global markets, will bring about big change.
India is very strong in pharmaceuticals, and starting to develop in the electronic materials sector. These are K. Sakai’s strong businesses so we will be relying on them more and more. They also have a strong automotive sector, which brings many new opportunities to our Industrial Materials department for their steel components.
You've mentioned pharmaceuticals, but also electronic related chemicals as being a major area of growth in terms of procurement purchasing. Is that just in response to the needs of customers that you're seeing, or do you have a specific strategy to grow a particular part of your business, whether it be industrial materials like chemicals? How do you make your plan?
30-40% of our revenues is in the electronics chemicals business. Although it's becoming more commoditized, and is price sensitive, it is still a very important business for us. We will continue to play in this sector and evolve with the market.
We talked about the relationship between manufacturers in developing countries like India, for example, and the opportunity that exists for them to learn from the manufacturers of Japan. What role can you play, as a trading company, in facilitating that exchange of knowledge or technology?
It really depends on the product. If its an existing product which the manufacturer produces, we would obtain a sample and if it is approved, place the order. Of course as mentioned earlier, the quality of the packaging is just as important as the contents themselves.
If it is a new product for the manufacturer or they are new to the Japanese market, our technical sales team and in some cases the customer will go on-site for days or weeks to train the suppliers. This is a big cost and time investment but essential for the start of a long term relationship, many which are over 20 years.
Are there any types of product for which you're currently seeking new suppliers, or to create new connections?
We're always looking for new suppliers and new connections, so that we could better serve our customers. Also with the recent depreciation in yen, we are looking for export opportunities of Japanese products which were cost prohibitive in the past.
As someone who grew up in the West, in the United States, now living in Japan, what do you think is the biggest misperception that makers in the West have about Japan or Japanese products?
It used to be and many still believe that Japan is prohibitively expensive. Many Japanese manufacturing processes are automated, which means consistent quality and relatively reasonable labor costs. The same product may be manufactured in China may be more expensive as it is not automated and requires a longer lead-time to ship. The recent depreciation of the yen further reduces the dollar cost, making Japanese products more attractive overseas.
You mentioned before that next year is the 110th anniversary of the company, and we understand that your historical focus was industrial materials. Then you moved into chemicals and electronic chemicals. What do you see as the next step in your evolution? Where would you like to go from here? Do you have any plans to expand the scope of the type of products that you’re trading?
Many of the products that we've handled in the past are still with us today. For example, the Industrial Materials, steel components business still consist of about 30% of our business today.
It still will be a very important part of our business. The electronics chemicals business, the fine chemicals business still is and will be a big part of our business going forward. There are several new areas that we're focusing on now, including the advanced functional materials business, the drive carbon footprint reduction, carbon fiber as well as graphene, nanotech materials, food, and personal care is another business that we started a few years ago.
We have a dedicated team for that because there are many products which are not yet available in Japan. We also have access to many non-GMO products which are great substitutes to the artificial sweeteners and preservatives which the Japanese consume currently.
Let's imagine that we come back six years from now for your 115-year anniversary as a company and have this interview all over again. What would you tell us? What are your dreams for this company, and what goals do you want to accomplish by then?
One of our key goals is to continuously transform and innovate. I will tell you that we have successfully launched our new businesses such as Advanced Performance Materials and Food/Personal Care and strengthened our existing businesses. We will have increased our exports to China and India and will have started building our next frontier after India. So many exciting new things!
Internally I hope to make K. Sakai a better workplace. We are a long-time proponent of diversity in the workforce whether it be gender, ethnicity, or background. We value the experience and ideals each employee brings and believe this will ultimately lead to better customer service and satisfaction.
Looking forward to our meeting in six years!