With non-ferrous metal materials and products, Sasano Max has worked with many different companies across a wide range of industries since its establishment in 1947.
Over the last 25-30 years Japan has seen the rise of regional manufacturing competitors from countries like Korea, China and Taiwan who’ve replicated Japanese monozukuri processes by taking advantage of cheaper labor costs and pushing Japan out of mass industrial markets. However, Japan is still a leader when it comes to niche B2B fields. As a trading company specializing in non-ferrous metals, how have Japanese firms been able to maintain this leadership despite the stiff price competition?
The strength of Japanese monozukuri lies in the quality of the products produced by the manufacturers in Japan, particularly speaking about the QCD, providing high quality products at an appropriate cost, with the appropriate delivery period. We are a trading company, and our role is to support these manufacturing companies so they can focus on elevating their product levels.
We know in Japan there are many different manufacturing firms, many large firms but also very small SMEs who do not have the capabilities themselves to export their own products. What role do trading companies such as Sasano Max play in supporting the Japanese industry today?
The answer may be somewhat similar to what I answered in the first question, but our role as a trader is to support the manufacturing of our clients. In order to do so, we stay strictly behind the scenes and provide our full service so they can focus on their manufacturing.
Speaking of the quality and QCD, we have our internal division testing devices to certify that the product that we offer is above a certain level. We can provide high quality materials and products to support the manufacturing of our clients.
Cost wise, of course, if something is at a high price, it is oftentimes high quality, but the price range and the quality range differs depending on the client, so we provide the most appropriate solutions. As for delivery, with covid especially, we’ve seen this logistical disruption, and it's important as a trading firm to ensure the stable supply of materials and products, so manufacturers can continue to do their work.
Last year, the Japanese yen saw one of its largest depreciations against the US dollar. This, of course, was making it very difficult for Japanese firms here to get raw materials imported. On the other hand, it was a great opportunity for Japan to become cheaper for clients overseas. Can you tell us how you lived through that devaluation?
As a trading firm, we do both imports and exports, but there hasn't been a big impact of the depreciation of the yen in terms of exports, especially. In terms of importing, since the price of imported materials has risen, our domestic customers started to prefer using domestically procured products because they are cheaper.
We started working more with domestically produced materials. That has been a big shift. However, in terms of exports, since we export products that are used over the long term, for example automotive components that require around six months of testing before they’re actually sold, the yen depreciation is too short-term to impact our business model.
Another major factor for the disruptions in global shipping and logistics was, of course, China's zero covid policy, which saw mass lockdowns across China's main urban areas. Many companies saw severely disrupted supply chains. However, China has recently ended the zero covid policy, and is beginning to open up. As a firm with two bases of operations in China, what impact did the zero covid policy have on your business, and how were you able to adapt to that situation?
There's been a big impact of covid on our business. However, we did our best at mitigating this impact, but delivery has been through the area most hard hit, and with the locked down ports not operating, we weren't able to ship out the products from China.
However, we tried to replace it with air freight, which was not happening frequently, but we were able to secure some space for bringing in products to Japan. Since we have our overseas base in China, we can directly talk with those manufacturers in China about the production.
Although they were in the lockdown, we tried to secure their stocks as much as possible and keep it in our warehouse so we could deliver when it was needed to our Japanese clients, and not stop their production lines. However, this zero-covid policy in China happened so suddenly that we weren't able to prepare that well, but we tried to mitigate the impact as much as possible.
With products that include exhaust gas recirculation, pipes and coolers, Sasano Max works with many different companies across a wide range of industries such as automobiles, semiconductors, electrical machinery and building materials. Is there an industry that you're currently focusing on, and are there any other new industries that you're looking to further expand into?
Our main focus currently is semiconductors and automotive, and we want to keep these two areas as a pillar. However, the big future potential lies in mobility, I believe. That is, for example, EV cars and also aircraft and drones. We are a licensed trader for aircraft parts, but we would like to fully utilize our know-how and experience in supplying the mobility field.
We obviously know there is a major transformation going on with the switch to EVs, and as a result of this, we are seeing the emergence of newer, lighter materials such as aluminum, magnesium and CFRP as a way to offset the weight of the lithium-ion battery. What are some of the effects that this change in materials has had on your business?
With the switch to EVs, and these types of light, high functional materials, Japanese manufacturers are good at producing them, and there is a longstanding history in the development of high spec and high performance specialized functional material in Japan. Those companies have high compounding technology for producing new types of alloys.
As a trader, we can play a key role in introducing these types of new high functional materials to customers who are looking to try them out. However, there are also areas where they have been replaced with a simple material, such as the aluminum used to make cases.
As a trading company, there aren't many roles to play in just the procurement and delivery of material, so we are also working as an assembler, adding special value by combining components and adding further features to it so we can bear a part of the production cost, and deliver it to our clients.
When consumers think about next generation vehicles, they think of a Tesla. They think of autonomous driving cars. That's basically the consumer's idea of mobility, but as you said, it's going to be much more than that. It will involve the automotive sector being absorbed into mobility. Mobility will include not only EVs but drones, aircraft, and a whole host of different service-related transportation that is personalized for each type of person. Could you give us your take on this mobility future that we're going to enter into, and as a trading company, what opportunity is that presenting your firm with?
With the aging and declining population in Japan, shortage of labor has become a big issue and it will certainly become a bigger issue in the future. To adapt to the changes, for example, autonomously driven trucks or drones for delivery would probably be the common means offering products to people, especially in rural mountainous areas, so we as a trading firm want to understand and catch the market needs, and be a pioneer in providing and finding solutions by working together with institutions and companies which do research and development.
Historically, traders are responsible for handling distribution and financing. However, this is changing to include providing production and formulation services. How do you foresee the evolution of trading companies in Japan?
It is true that there is a trend within Japanese trading firms to not only have trading functions, but also manufacturing capabilities. However, we at Sasano Max are not very interested in having our own manufacturing facilities, since that would give us inflexibility in being able to adapt to the market.
If we had a production side, we would have to sell the products that we produced. By being only a trading mediator, we can find the best combinations out of all the possible options that society can offer at the time. We want to offer and provide the best matching solution to our clients, thus being able to supply the service at a cheaper cost in a very efficient way, so we would like to keep our strategy.
We know it's very hard at the moment for SMEs in Japan that are looking for very particular products for niche applications. This is because they often don't meet the minimum order quantity requirements set by large manufacturers. As you know, there are hundreds of companies around Asia that are in a similar position, so how does your firm help micro businesses and SMEs procure these very small prototypes, or smaller orders?
In Chinese manufacturing plants, it's very hard to meet the requirement of small lots, so we will send the order to Japanese or Taiwanese companies, which can make them in smaller lots, or customize and provide high mix, low volume. If the customer's needs are not met with the minimum lot requirement, we may purchase the minimum lot and sell the amount required to our clients and sell the rest to different clients, thus meeting the demands of multiple companies.
A similar issue to this is excess stock, something that often has to be thrown away at a cost for clients. As such, we see traders and supply chain management agents engaging in consignment services, whereby customers’ excess stock is sent to logistics centers and kept later for sales. How do you manage inventory when excess supply occurs?
We have different ways of managing our inventory. Sometimes our companies keep the stock and provide it to our customers when it's needed. We can also fully take care of our customers' inventory and make sure that there won't be any shortage, and it's done case by case to make it flexible.
You mentioned earlier in the interview about working with research institutions. We know many companies in Japan take advantage of these sorts of partnerships in order to cater their services to new markets, and they find it very key in the development of their business. Could you go into more detail about the role partnerships play in your business model, and are you currently looking for any partnerships overseas?
Our business model overseas is to supply our trading functions and work together with local companies - Japanese affiliated companies that are operating locally. These Japanese companies oftentimes have a request to use products that are locally manufactured, so we want to keep enlarging our network of local suppliers.
Either it could be a local company, or a Japanese affiliated company that is in the locality. We have our bases in China, the US and Thailand, so we want to be at the center of trading, and be the mediator between our clients and suppliers.
In November 2021, the US passed a $1.2 trillion infrastructure bill, and as such, demand for construction services, equipment and materials is expected to increase, with construction spending alone estimated to increase by 5.5% this year, in 2023. As you have a US presence, what opportunities does this infrastructure bill present for your firm, and how do you plan on taking advantage of them?
We have clients who manufacture heat exchangers that are used in construction machinery, so if the demand for construction machinery goes up in the US with this new policy, that would be a big push for our business in terms of the supplement of materials as well as components.
Regarding your US operations, we know they were established in 2014, in Kentucky. Next year will actually mark your 10-year anniversary in the United States. Can you tell us what lessons have you learned over the last 10 years of experience in the United States, and what do you believe is the potential for your company in that market going forward?
The biggest lesson we learned throughout our ten years in the United States was President Donald Trump imposing customs tax on Chinese products. The tax was around 20 to 30%. At that time, our business was procuring products from China and exporting them to our clients in the US. We were hit hard by this heavy customs tax on our products, and we lost a lot of our competitiveness, and we lost the export route of Chinese made products to the US.
What we learned was that we have to diversify our supply chain to the best of our ability, and find partners not only in China and Southeast Asia, but also countries in South America like Mexico, as it's closer to the US.
Of course, it’s important to have a channel between Japan and the local companies in the US, although the manufacturing level within the domestic area may not be that high, in terms of securing the supply chain, it is important that we have various channels of procurement.
In addition to the United States operation, we know you have two operations in China as well as one in Thailand. Moving forward, are there any other countries or regions you've identified for further expansion into, and what strategies will you employ? Will you be looking at opening more operational bases or joint ventures? Could you elaborate more on your international business strategy for us please?
Our customers are Japanese manufacturers operating in overseas markets, and these manufacturers are currently expanding more into Southeast Asian countries such as Vietnam, Indonesia. Mexico is one area that would be our priority, and also, India would follow. Since we are a trading firm, we don't need to have a manufacturing facility. It's not like a joint venture. Instead, we'll have our base directly.
Let's say we come back to interview you again in four years' time for your company’s 80th 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?
Currently, we are a company of about 20 billion yen turnover, and maybe four years would be too short a period if our target is to be a 25 billion yen company by fortifying our overseas expansion bases, and also expanding into new markets.
Initially, our business model was solely to trade metallic materials. However, when I became the present, my strategy was to increase the percentage of processed parts and component sales, and currently it has risen to 37% of our total business sales, but I want to take it up to 50%, so we can add unique value to our company and be trusted and relied upon by our customers.