Founded in 1981, SHiZCON had long focused on factory automation devices for the automobile sector centered in the Shizuoka Prefecture, where its head office is located. But recently the company opened a sales office in Yokohama to serve the medical, food, semiconductor, and other sectors, which is its latest step towards diversification into various other fields. And with a view to expanding outside of Asia, Kazuhito Unno, the company’s president and CEO, is living up to his own motto to live life with no regrets.
More than 9,000 trading firms currently operate in Japan, including Shizcon, however, you are also a manufacturer. How do you combine these two sides of your business?
We started off as a trading company specializing in the field of factory automation, so we have extensive knowledge in this field. Whenever our customers ask us what we can provide for them, we outline the possible solutions. One of our main strengths is that we continuously provide technical support along with our sales. For example, if our clients want to know whether there is a crack in the machinery, we have a special device that can verify whether everything is working well. As for the manufacturing side, we started three years after our establishment in 1984-85 in response to our customers’ requests for specific product designs; we wanted to cater to their needs while adding value to our company.
We are also strong in conducting overseas sales through our overseas department, which is located at our headquarters. We started in Singapore, then moved into South Korea, where I have visited around 300 companies, and then went to Taiwan. Following this we entered and were pioneers in new markets such as: Thailand, Indonesia, Vietnam, Malaysia, Philippines, India, and Mexico. Travelling around the world talking to potential customers, I have come to realise that although there may be language barriers, there is a common understanding when it comes to business. In fact, we are looking into expanding into the North American market, though this plan has been put on hold due to the Covid-19 pandemic.
Companies collaborate with their customers both for raw materials procurement and in bringing new products to market. How do your technologies allow your customers to collaborate both with upstream and downstream partners?
It is hard to answer your question about the smart factory concept directly. As a trading firm, we act as the intermediary connecting manufacturers to end users. We deal with many famous brands like Mitsubishi, Idec, Panasonic, and Fuji Electric, as well as niche companies, and we listen to our customers’ needs and propose the best, most optimal solutions.
Customers often buy products that are over-specced because salespeople offer and recommend excessive, high specifications because it will either increase safety or, of course, because salespeople’s commissions will grow the more margin they get. In contrast, we provide the optimal solution that is appropriate to the specs that are required. That is our company’s strength.
The modularization of automated production lines causes compatibility issues when manufacturers want to change specific aspects of their processes. How do you overcome this challenge? How do you allow customers to optimize their technologies while ensuring that everything works seamlessly?
First, it is important to listen carefully to clients’ needs. What is the machinery’s purpose? Is it for the inspection or production of certain engine parts or something simpler like a rubber or oil seal? And how many such parts should be processed in a certain period? Based on all the requirements that the salesperson reports back, we investigate what the optimal option would be.
Since we have our own production facility, we have the technology and expertise to combine several components. For example, if we contact Mitsubishi Electric and ask them if they could do a certain job, they may say no to the overall proposal but yes to a certain part of it. In that case, we would use the part they can produce, and we would produce the rest, or we would work together with other companies to combine the required technologies.
Thanks to our manufacturing ability, we can create unique custom-made suggestions. It's easy to combine parts from the same manufacturer, but with the responsiveness of our manufacturing plants and outsourced companies, we can create original equipment and manufacturing systems that combine parts from different manufacturers. Large companies hesitate to combine parts because it takes time and effort, but by combining parts to make their own machine, we can provide originality and strength.
What type of company is Shizcon helping transform their operations? Is there a particular industry you are looking to target in the future?
Since there are many automotive companies in Shizuoka, most of our work is in this sector. However, we also want to diversify and work with the medical, food, and other industries. We are looking into industries that are less affected by the economy’s performance, such as food and medical. We recently opened our Yokohama sales office and that will be vital in expanding and diversifying our business.
Automobile companies are the main players in Shizuoka, but not in Yokohama. In the Kanto area, including Yokohama and Tokyo, Nissan is the only major automobile company, with Tokyo-based food and pharmaceuticals, as well as a wide variety of other types of businesses. All big decisions are made here and we are targeting these industries. To carry out projects all over the country, it is important to communicate with the customer's headquarters. Recently, we have become interested in semiconductors that are concentrated in Kyushu. For example, Kumamoto City seems to be focusing on semiconductor manufacturing together with the Japanese government as a facility provider of TSMC and we are looking to offer our services here.
Huge changes are taking place in the automotive industry with the shift to electric vehicles (EVs), fuel cell vehicles (FCVs), and CASE vehicles, which are connected, autonomous, and shared as well as electric. How have you adapted your business to these changes?
As you said, there have been major changes in the automotive industry. Comparing the amount of carbon dioxide emitted during an EV car’s lifecycle with that of internal combustion engine vehicle (ICEV), an EVs effect on lowering carbon dioxide emissions in Japan is not as pronounced as that of other countries. This is because, unlike Europe, Japan uses very little green energy to generate electricity, and since Japan has almost ended reliance on nuclear power generation after the Tohoku big earthquake on March 11th 2011, fossil fuels are still widely prevalent and used to generate electricity.
With the global trend towards electrification, ICEV-centric businesses are declining, but at the same time there are new business opportunities for those doing business in the areas of batteries, sensors, brakes and anti-collision systems. These are areas where we can expand, so we don't feel the threat of these changes.
It is estimated that by 2030 there will be more EVs than ICEVs, but the latter will still exist. FCVs and hydrogen vehicles will also be prevalent, and we are still looking at what other changes might occur. We are already working on EV battery production machinery and have a lot of orders up until the spring of 2023.
You want 70% of your workforce to remain in your company for three or more years, yet Japan’s declining population means that the pool of talented young people from which to recruit from is smaller. What makes you an attractive company to work for?
Our recruitment is primarily focused on new graduates, and we have a dedicated recruiter who visits universities and specialised schools to recruit new talent. As for people who already have skills and experience, we rely on recruitment websites and magazines.
To reduce the amount of people leaving the company, a fine balance must be struck. You cannot keep them all on board, as that would mean that the company is too easy-going and there is no competition. In that sense, it is important that some people leave the company, but the majority remain. It is a question of striking a balance between kindness and strictness, and then maintaining that balance. In any case, each person must be motivated. Our uniqueness is that we give people far more freedom than any other company. For example, if a salesperson wants to work with a new product or deal with a new supplier or subcontractor, we basically say "yes, let’s give it a try."
Furthermore, we do not set a strict bottom line when it comes to sales prices. By giving them autonomy, each salesperson can grow and face new challenges and if we make a good profit, we give them a big bonus every March. Unfortunately, we couldn't give it this financial year because we couldn't achieve satisfactory sales due to the pandemic. But we see failure as a stepping stone to success. Employees are constantly learning through failure. Therefore, even if an employee fails, we will hold them responsible and allow them to use it as an opportunity to learn rather than criticize.
We have already had many overseas workers, including from Algeria, China, and Brazil. They just approach us, even if we do not advertize. We now have a Russian person coming in and have an interview with a Nepali candidate. We welcome trainees as well as white collar workers, and we use the Japanese government’s system to welcome factory workers. However, the scheme has been put on hold due to the Covid-19 pandemic.
How has the pandemic affected your company and what changes have you made to tackle these challenges?
Covid-19 has influenced us in many ways, but we see this unfortunate sequence of situations as an opportunity. Regarding factory automation, we were in a very difficult situation this season with plans not progressing and projects being canceled, but we are not the only one, it is the same across every industry. We will strengthen our relationships with our customers and strive to find good opportunities. We are striving to propose alternatives that reduce lead times and to procure semiconductors and related parts so that customers who are in trouble due to the inability to obtain various products will not have trouble procuring parts as much as possible. There is a considerable shortage of various parts worldwide, Sales for the next fiscal year are steadily increasing.
Are there any markets that you consider key to your international expansion?
When I visited Japanese companies such as AGC and Honda in Thailand in 2011, they asked me to make a control panel and I answered that it would be cheaper to make it in Thailand, but they still wanted the control panel to be produced in Japan. I told them that there would be no merit in exporting from Japan because the shipping cost would be high, but they still asked to make and export in Japan because of the quality of manufacturing here. In addition, Kawasaki Heavy Industries manufactures motorcycles there who required a factory automation solution which we provided. We also proposed and received an order for Brand's wiring-saving system called Anywire, but when we visited again a few months later, the local engineer could not implement it, so we were asked to come to the Thai site to install it and train the local staff. At that time, I realized that there are many needs that we can meet in the Thai market and on-site we decided to establish a factory in Thailand as a control panel manufacturer and a company that supports electrical systems.
However, we are not planning to build a new factory in other areas and expand further. Our overseas factory is only in Thailand, and I have realized that it is difficult to actually make a profit by establishing a corporation locally. It has finally been possible to eliminate the deficit, but it has been 10 years since we entered the market. I found it easier to rely on Japanese foreign workers for domestic production than to produce locally in these markets.
We have focused on Asia so far, but companies in Southeast Asia, India and China are always demanding cost reductions. It is impossible to make it cheaper than that, even if it is in the red, it will not go down. It is common sense that Asian business practices should keep costs as low as possible. Recently, I feel that it is difficult for Japanese companies to compete with companies in China, South Korea, Taiwan, and Southeast Asia in terms of cost because they cannot secure profits. In the future, we plan to work with a view to markets other than Asia, such as North America and Mexico.
There are many possibilities in the North American market, and since we already have several customers in the United States including Mexico, we are looking at the North American market and would like to further increase the number of customers and expand sales there. Unlike Asian customers, discounts are less important to North American customers. People in North America seem to think that strict adherence to delivery dates is more important than discounts. For us, we feel that it is better to do business with customers in North America, than to focus on those who require cost reduction.
However, there are no plans to set up offices or factories in North America. If we can make regular business trip visits from the head office in Japan to North America, have interviews, and exchange opinions in earnest, we believe that there will be no problem even in remote areas. Because of the pandemic, we should start communication remotely at first, but eventually we should visit our partners and clients to exchange opinions face-to-face and deepen our relationships.
It has become a convenient world for online chat, videophone, etc., but I think it is better to have direct face-to-face interactions rather than online. Even if the number of online meetings increases, I think it is important to continue face-to-face interviews in person.
Imagine we were to interview you again on the last day of your presidency. What goals and dreams would you like to have achieved by then?
There is an almost endless list of things that I must and want to do. Even if I accomplish one thing, I aim for the next goal and then the next, it’s never ending. But my most important goal is to make my employees as happy as possible so that the company can make a profit and contribute to society. I do my best in every project and my motto is to live my life without regrets. When I'm on my deathbed, I want to look back and say that I had a good life and accomplished a lot. There is still a lot of work I have to do.