Already a logistics force to be reckoned with in Japan, multimodal transportation provider Seino Holdings is targeting Asian markets with its express transport, door-to-door parcel delivery, contract logistics and international logistics services via ground, air and marine transportation. President Yoshitaka Taguchi provides an in-depth look at the sector and how partnerships are enabling it to shape a solid global distribution network.
What is your view of the current economic climate at this time and how positive are you about the future?
I’d like to talk about the Japanese macroeconomic level situation on the whole, making a contrast between the current situation and the future situation. But when it comes to situations like the national debt, I may not have sufficient knowledge of this field, so I’ll focus my responses based on the fields that I am familiar with.
In order to talk about the macroeconomic issues that we are confronting right now, I believe that it’s important to talk about the issue of population, especially on a global scale. I believe you already know that Japan was one of the first countries—advanced nations—to enter the age of a voluminous reduction in population. What becomes key in this sense is the idea of shared business and how to share your business as well as how you operate your daily life. The epitome of this is the Uber system that started up in the United States. A system like this will become the prevalent trend in the future. For existing industries, this may have negative influences; however, for consumers this may result in positive influence to such that it’s an increase in income. Having this, I believe that in this industry it’s a question of how to ensure sound management. The same can be said for other existing industries.
In Japan there are approximately 60,000 truck transportation companies.
One million people are working in this industry. Not only is the population decreasing, but the number of companies is decreasing as well. The greatest issue that has to be addressed here is not one company that takes accountability forever, but how to take on alliances is the main question. If we want to deliver one thing to a building, for example, we have five pieces of luggage for one building; right now we use five different trucks to deliver the five separate pieces. But if we can form an alliance, we can put the five things into one truck, to deliver to one place. This means better and more efficient productivity. With such an alliance, we can expect productivity to improve. Until now people have been taking on everything by themselves, but now we are more focused on how to take on alliances and increase productivity.
I’m very doubtful about the TPP and how it’s going to turn out, but one thing I can mention about the entire business trend is that given the declining population amongst the advanced nations, I believe that the question of how to increase productivity and what kind of business model Japan will be pro-actively addressing is important.
I’m not very familiar with the macro trends, but then speaking from the perspective of my industries, this is the response that I can give you.
What steps do you believe need to be taken to further revitalize the economy of Japan?
I believe the question of how to increase productivity is always going to be there, especially how do you utilize IT, and also lifestyle changes—how to work—is going to be another question that needs to be addressed.
You already know about the demand chain, but the whole idea is that consumers can demand what they need at whatever time they want and whatever material that may be and it is important to make sure that this information is seamlessly shared.
Another question of how to work is one that I would like to raise. In Japan the mainstream idea is that people work at one entity. The future that we must see is a future where a variety of people at a variety of ages and a variety of backgrounds can work at multiple, different places, wherever they wish. In Japan you’ve been seeing towns disappearing. This is due to a significant reduction in the population. What this means for the residents is that there might have been 10 jobs there, but now there are five and in the future four. So this person obviously needs to find somewhere else to work. I believe that the solution to this is IT.
What have been the key elements that have led the company to the position it finds itself in today?
It was a new business model. Long transportation relied on the railways. Using trucks on the road was faster than the railroad. At that time it was a brand new idea. At that time the country didn’t have any licenses of that kind for long-haul transportation by truck. The founder asked the government to make the license by spending 21 days in the government office. That was interesting. If I’m thinking about money in the short term, I might give up if I can’t find any licenses from the government, but Mr Rihachi Taguchi, the founder, made a great opportunity for us and did great things for the country.
Our founder believed that this license would help. It was his mission. At that time, in the 1920s, the Japanese government had a strict license control policy. It was almost impossible to get a new license, but our founder just recognized the possibility and potential that it held. It’s called long-distance trucking—LTR. He visited the Ministry of Transportation many times and applied for a long-distance trucking license. In 1950, after the Second World War, there were still not many highways, with many unpaved roads. Government officials said that maybe it was impossible. Finally he succeeded in getting the license and started the business. It was called “Less than Truck Load”. Less than Truck Load started working on inventory in the UK and much of the United States. But in Europe only one company still exists, a German company, also in the United States. Growth through the company might be our business model. It might be our big engine for growth.
I think the founder was an excellent businessman. He could see the potential of the new market in Japan. He created the actual market.
The company’s share price alone has exceeded a 50% climb in value over the last four years. What is the vision for sustaining such growth over the long term and what growth strategies can you share with us?
I got some confidence in controlling the industry because of the decreasing population. As I said, we have 60,000 trucking companies in Japan. Some companies are struggling to hire drivers even though they are providing good services to clients, but they cannot hire anyone. They decide to quit the business. That is a surprise over numbers, compared to demand so far. Right now it might become balanced because a proper price might be established in the Japanese market. Now we can control our profits more easily.
What competitive advantages are you able to offer over your competition?
Transportation-wise, we provide a good delivery time, all-hours delivery. We have three dimensions: time, cost, and safety. If we’re going to have a big advantage, and we do not have a big advantage with time and quality control of the cargo, then we need to reduce the price to the client. They want us to provide better time and quality control of the cargo. We can provide a good price on cargo for the client. Of course the client has two choices, good control of time and quality transportation, or a cheaper and perhaps less secure option. You get into a big problem with these clients when you sacrifice these kinds of things. If they choose the companies offering better services, we can keep our status in the industry.
In other words, our sales advantage is only in nationwide coverage. Other medium-sized competitors don’t have nationwide coverage – one region or prefecture only. But we have nationwide coverage and are always on time and we can accept any amount of cargo, even a pickup type. Just small-sized, regular things are ok, but at the end of December and March it’s an impossible business time. Other companies cannot deal with the sudden increase in cargo.
Another thing is e-commerce solutions. We can provide any e-commerce applications to smart phones. Any solutions. Only major companies, big players, can provide that type of service right now.
What is your opinion on the developments and large M&As in the sector, with regard to APL having been bought by Kintetsu, and Toll Holdings being purchased by Japan Post? Has this affected Seino’s outlook?
I’d like to explain our status about large-scale acquisitions that you just mentioned. What they’re trying to offer is a one-stop transportation business. However, on the other hand, what we can offer goes beyond transportation and specifically through the forms of alliances with seemingly unrelated industries.
We like to contribute to our clients. They like to expand their business, their sales, and their profits. Transportation guides think about how are we going to provide a good delivery time, good management of packages, and a low cost.
The client might choose the market. Fortunately we have a good alliance with Zaibatsu in Asia, Malaysia, Thailand; as you know they have a big population and a big market there. They like to have Japanese products. They love to have Japanese products in their stores. If a client would like to sell his products to other countries, because the Japanese population is decreasing, he would like to expand his business all over the world. We provide a service to Asia right now. Clients like expanding their business to the Asian community.
We provide a one-stop service, good time control, good management of cargo; it’s all good for the clients. It is not a good solution for clients if we try to give that kind of service and there are kind of secret things about it. It’s just a matter of what kind of entrance you’re going to take in order to open up your business.
Seino also has a partnership with the Salim Group of Indonesia. Could you take us through this partnership and are you looking at establishing more partnerships in the future?
Mr Maruta established the partnership with DB Schenker (of Germany) and Salim and he can explain the background of those companies. In Germany, the main reason for expansion was to produce a manner of global networks. That was the background to our expansion there. Particularly in Indonesia we wanted to expand our business and truck transportation systems. I believe that our main advantage is that we have the know-how for truck transportation systems. We want to capitalize on this and expand to the Asian markets.
Just thinking about expansion in particular, and our global logistics just around this time, we have a joint company called the Saha Group. They’re thinking of expanding into truck transportation, but just in their mind. The timing just happened to line up for the two parties. With this as our base, we have two proposals that I’d like to make. The first one being with this kind of partnership we can have those channels for our customers. The second one is how we would like to share our know-how within our network. With this amount of know-how, I believe we are able to cater to something that matches each of the markets. I believe that we will be able to provide something satisfactory amongst our customers.
The US market is one that holds a great deal of growth potential and Seino has been operational there since the early ‘60s. What do your operations look like today and how are you looking to further grow your positioning and role in the US market?
We have two operations there. One is with DB Schenker, which is an alliance network that provides the company with a giant network. Another thing is, as you mentioned, we established our Japanese forwarder in 1962, which is a Japanese means, a kind of school. For the small clients, our survey company SSX provides Japanese kinds of details, very precise. It depends on the client’s needs, so we have two channels. The US market is already mature. We are going to invest a lot of money in the Asian market and make a good return. There is no leader in this future established market. By doing these things we will maintain our precise service for Japanese and other clients.
For the last two decades Germans have purchased all major freight operations in America. All of the US freight market became controlled by two German companies—Deutsche Post and Deutsche Bank. The disintegration of the freight industry had been preceded already. It’s not so easy to survive in this kind of business.
We need to have good relationships with US clients. We must have a good relationship with our partners, so we need to put any power, money or time into that market. We’d like to put our power towards the Asian market.
We had a subsidiary in the United States named Seino America Inc. and in the US the trucking industry is the same: small partners, just UPS and FedEx. These are from German companies. Only one way exists, Yellow Roadway and small FedEx. Just two companies, that’s it. Yellow and Roadway—the two largest companies in the US—merged together already. This is a monopoly situation much worse than other situations.
What are the steps that can be taken in terms of raising your profile and awareness of Seino in the US market today?
Our basic stance for Seino as a company, given that the United States is an extremely mature market, is expanding into Asia is our main goal. What we cannot retool, we’ll delegate to companies like DB Schenker, and whenever it comes to the United States, we’ll be able to take care of services in those areas as well.
What are your expectations of the Trans-Pacific Partnership’s potential affect on Seino’s core business?
If the TPP gets ratified, I believe that the agricultural sector of Japan will become very strong.
Speaking about the FDA, the Food and Drug Administration, as you may know, Japan is renowned for its safe, secure and accurate approach to this business. So I believe that our products will be highly received amongst foreign markets.
Often when you discuss the TPP, especially about agriculture, people say this could potentially lead to our rice prices falling, therefore our markets will lose against the competition. But the question that should be asked is when you think about what our children eat, do you want to feed them something that is cheap or do you want to feed them something that is safe?
As a result of the TPP, I believe that there will be a new brand established. There will be “managed by Japan” as opposed to “made in Japan.”
As you now sit as the fourth generation president of the company, what’s your vision for the future for Seino?
For my mission, I’d like to contribute to our country. I’d like to make our employees happy. This depends on our concepts for partners. I’m not such a strong and tough guy, so I feel a lot of stress. I’d like to contribute to our country and to our employees. I feel it is my responsibility. I feel a kind of stress about it. The good thing is that we have good employees, clients, alliance partners, and good ladies and gentlemen at the top level—these are my assets.
What is your final message for readers?
I strongly believe Japan will return to growth once more. We will make good partnerships all over the world.
I believe that our role and duty is to serve the global population, its citizens, and ensure that we’re able to co-exist in a business environment without having any issues with each other and also to further enhance development in the form of alliances.