Since its foundations in 1937, Sigma Corporation has been an important manufacturer in precision parts for transport machines, in addition to providing security and inspection devices. In this interview, President and CEO Toshitaka Shitanaka discusses Sigma Corporation’s history of success, stemming from the company’s strict adherence to its philosophy that allows them to produce quality products.
Traditionally, the Japanese manufacturing spirit, known as monozukuri, has been about seeking product perfection through craftsmanship with an extreme attention to detail. Nowadays, however, we know it now also involves responding to varied customer requests and providing that added value in the final product delivered. Could you please give us your take on monozukuri and what for you is the essence of monozukuri?
The Japanese monozukuri is manifested in the actual implementation of the manufacturing process. Therefore, I will be highlighting Japan's monozukuri to portray its complete essence. The true spirit of monozukuri is providing an optimized production to attain and deliver high-quality, sustainable products that meet the needs of customers. It goes beyond the literal translation of "mono" meaning things and "zukuri" referring to production. Tools and equipment are necessary for realizing this, and it is a process that has evolved through time. Japan did not have any kind of domestic car production; however, it later adopted America's car manufacturing process. More than that, Japan elevated those techniques and methods to a remarkable level of craftsmanship. Almost a third of automobiles manufactured worldwide are from Japan. Similarly, we display our due regard for monozukuri by investing our efforts to exhaust the possible solutions with better equipment, dies and production sites. Emerging companies also improve their skills, equipment and machines to compete in the niche field. We were able to achieve the balance between demand and supply from equipment or machine manufacturing companies and our end-users. We took on the role as an intermediary company by purchasing equipment and utilizing those to develop quality products for our end-users.
The more than 15,000 tier-two suppliers exist in Japan, all SMEs or chushokigyos, have dominant market shares in certain components. Can you tell us why Japanese SMEs are very successful in niche technologies?
Sigma is among the 100 global niche top companies selected by the Ministry of Economy, Trade and Industry (METI). The volume of car production has decreased in the past several years, which led to the understanding that tier-one and tier-two equipment, die or machinery companies will inevitably leave Japan to pursue success in foreign countries. We went back to the origin of monozukuri and embedded it into our machinery by incorporating inspection devices and robotics. We, thus, took the traditional monozukuri to a higher level and made our equipment applicable to foreign countries as well. Moreover, Sigma believes that hitozukuri, people excellence, also plays a great part in optimizing the processes. Therefore, we are not only paying attention to manufacturing processes but also boosting our human capital.
Japan has a shrinking and aging population; it is expected to have less than 100 million by 2050. The latest statistics show that Japan needs 6.5 million new foreign workers to sustain development. In 2019, your company was awarded for your ability to use foreign labor resources to better your company. Could you tell us more about how you are recruiting new staff, especially from overseas locations to help in your efforts?
Our corporate slogan is "Unlimited potential for people and technology." Since we have been faced with this difficulty many years ago, we put forward the policy of diversification, which means that there is no segregation of gender, level of expertise or nationality. We welcome anyone interested in joining us in our journey. The newly added value price for our products and company has stemmed from creating new, requisite equipment and technology as well as new staff with a unique vision that can open further opportunities. We adopted this policy 20 years ago, and 10% of our employees are foreign. Coming from different backgrounds, they have diverse perspectives, which help us promote our business in foreign countries.
As of now, we have 12 foreign employees who are engineers and specialists working overseas. The first one we recruited from China retired in 1995 showing that foreign recruitment is not something new for us. Although we are a small local company in Hiroshima, we seek to have a broader perspective of stabilizing our human capital. Our foreign expansion will be starting from recruiting foreign workers in Japan.
Our main factory in Hiroshima holds the core features of our R&D production and gathering information that allows our company to work 24/7 and 365 days a year with a fully automated production site. There are five major principles for Sigma's monozukuri. First, we develop one-of-a-kind and highly efficient equipment in-house. If we get the equipment through an OEM to be installed at our sites, Chinese or Korean manufacturers can easily replicate them. Secondly, using robotics for inspection and automatization. Most companies have several inspection stages, and the third principle outlines simplifying and automating the inspection flow. Japan is widely known for high-quality production in any industry. Still, inspection elevates products for the total satisfaction of our end-users. Fourth, the management and maintenance or periodical inspection by personnel are equally important, along with IoT and AI. Lastly, shortening the lead time for production is needed. We are helping companies that have been in the niche field for a long time to go beyond the boundaries in order to optimize and improve their existing equipment and machinery.
As our slogan emphasizes, Sigma is continuously striving to create new value. Research and development is indispensable throughout our production process. We use super header technology to achieve single-micron accuracy. These different kinds of molding technology combined with forging technology provide the best designs and highly efficient manufacturing. The product line-up can be enhanced by further combining molding, cutting and grinding technologies with electrical technologies to reach a variety of customers. We refer to the products that we release to our customers as “merit products” - products that merit the customers. The proposal-type products are the products and solutions complemented by forming and forging technologies. We recommend these to our customers with an emphasis on patented technology. In our functional products, we outline the assembly of different molding types. Lastly, the system products relate to the amalgamation of various technologies, systems, robotics, lasers, and inspection devices. Our topnotch products include security and laser inspection devices.
Nowadays, many Japanese companies work together with universities or foreign companies in combining their respective technologies to create new products. For example, Toyo Corp is working with Keio University and Caltech University in California to develop products for industrial automation. In your case, what kind of co-creation partner do you look for?
Yes, most definitely. We are looking for partners in the academic circles, R&D researchers or other companies. There are no boundaries for this endeavor. We are now collaborating with Silicon Valley, Hiroshima University, Tsukuba University, Tokyo University and other companies to jointly develop new products. Our laser inspection device is a result of a collaboration.
In addition to hitozukuri, keeping our production manual up-to-date is essential. Most companies put up their ISO or other quality standards on their homepage, but to what extent do they abide by those standards? I think coexisting and working jointly with locally-recruited staff promote better results. People are important. The 5S or 6S methodologies that are widely adopted by Japanese companies can be formulated in many ways. However, these share the same values in any country, even in India or China. In China, we only have one Japanese engineer, even so, we have been awarded the certificate of “Environmentally Advanced Company” for the past six years. When the occasional government inspection of our production sites happens, we are always ready and capable of showing our best quality standards. As it happens, the Chinese local government uses our plant as a flagship project as it is a good example of an excellent benchmark in terms of sanitation, environmental friendliness and overall performance.
We have an in-house project called “The God of Toilet” that originated from a Japanese fairytale, indicating enhanced cleanliness and immaculateness of working areas. We have implemented this project here in Japan and China as well. Despite the lack of clean places in China, we were surprised that we share the same outlook on cleanliness. They take the responsibility of keeping their workspaces neat and clean. We made it standardized and made it a part of our company rules which our Chinese employees willingly accepted. That is just one example of a successful cross-cultural collaboration. The progressive training and education of our employees are crucial. There are three viewpoints related to this which come from the person, the senior management and the outside world. The person has to have the spirit to keep on learning, possess a basic knowledge of the technologies and good physical health. After that, a person adopts the technology and techniques at any stage of the educational process. Finally, having the heart to do things is vital. The company’s philosophy is not only practiced in Japan but also in our foreign locations like India and China. These are printed out and given to our employees to promote unity and give each one a sense of belonging. Of course, it is more than what appears on paper. It is the actual application and implementation.
Can you tell us more about your company’s milestones?
My grandfather established the company in 1937. At the time, Korea was known as the seaport for constructing marine war machines so my grandfather started the company for military purposes. He passed away at the age of 57 and my father at 60. I became the president in 1989 when I was only 33. I became the chairman this year. Here are some milestones of the company throughout the years. In 1996, we started the security division. In 1998, we introduced plastic molding technology. In 2005, we introduced laser inspection device technology. In 2006, we received the Ministry of Economy, Trade and Industry (METI) award for 300 Excellent Monozukuri Companies. We opened a location in China in 2007 and established India Sigma in 2013 when the contracts were signed. The actual operation of the India plant was in 2017. The company was awarded Top 100 Global Niche Company in Japan by METI in 2014. A new plant in China was opened in 2016. During Prime Minister Abe's term in 2019, METI praised the company's advanced core human resources. The laser inspection device that could detect defects or scratches on parts was standardized in 2019. All awards the company received were for their environmental initiatives and fostering human capital initiatives. Last year, the company was awarded 'Excellence of Safety in the Working Environment' by the Hiroshima Laborer Bureau.
This is the brief history of our company. The company used to be known as Toyo Kogyo under the Mazda corporation and we produced parts. When I took charge, my idea for the company was to be able to introduce new technologies and not depend so much on the top niche. These pictures were taken when I first joined the company. Here is the plant and these are the forged products. There are so many different components of steel manufacturing and I wanted to simplify and standardize our manufacturing process. When I became CEO, I adapted new principles for the global market. Sigma stands for the family name Shitanaka, challenges for the global market, and great men. I slightly changed the company name and made amendments to the company philosophy. On the first day of my presidency, I went to the plant and saw the old company name Toyo Kogyo on the nameplates. The company name has been changed to Sigma. The head of the production division was angry about it and said that "The son cannot do as well as his father." Toyo Kogyo years later became Mazda. A big change I implemented was the change in how the company viewed things. I wanted the company to be future-oriented. To achieve that, we needed to develop our own technologies and products and work with Original Equipment Manufacturers (OEM) companies and create products for the future. This was an important milestone and the first change we needed to gradually transition to a global and future-oriented company. The second thing we had to do was optimize our different technologies. We have many different types of bolting, forging, laser, laser inspection and security devices technology. This is the next challenge I want to take on and our strategy as a global niche company.
We want to be a bridge as a proposal-type company. For example, we can make a proposal on cutting or grinding parts to Mazda. Such product solutions will not be only limited to Mazda but we can offer them to other markets or clients as well such as Toyota or other foreign automobile manufacturers. We want to be a proposal-oriented global company that could introduce high-precision parts for any client in the world. We can monopolize this field and showcase the best features of both our manufacturing and R&D to become not just a proposal company but also a manufacturing company with products that cater to different fields and customers. Proposing can be complex because of all our different technologies in forging, molding, cutting and grinding, but this allows the company to deal with different kinds of raw materials. Our company can produce a finished polished product or introduce new materials or manufacturing process. Sigma will cater to whatever the customers need. A good example is the wiper shaft. It was adopted for the first generation of Toyota Beats. Sigma’s global market share for the wiper shaft is 16%. This means that the product is also used by other manufacturing companies apart from Toyota. The goal is to become a Top Global Niche Company.
We have several products apart from the wiper shafts in our lineup that can serve as proposal products that can fill the needs of many automobile manufacturers. The strength of our company is combining design, manufacturing and managerial sales. We are a company that is able to produce unique products that others cannot. This product is one of its kind and is called an analyzer. It can detect very small defects even small holes up to 0.1 mm accuracy. Customers widely used this laser detection device. As you can see on the slide there are so many. The analyzer helps detect scratches and flaws on final products. Over 400 units of laser analyzers have been sold. Currently, Chinese global manufacturing companies have started using laser analyzers including Korean Hyundai.
What are your international strategies?
We are a small-scale company so we cannot capture the whole world. This is why we particularly targeted expansion in China and India. The number of manufacturing companies in these countries is now rising. China has about 20 million cars. India is almost twice as large with about 40 million cars. These are very promising markets for us. We believe that the number of cars exceeds the official numbers. The market in just these two countries makes up 45% of the whole automobile production. If we succeed in these countries, we can capture the world market. Although we might be optimistic about entering these markets, we are also aware that China and India are not the friendliest countries due to political reasons. We have to learn how to deal with each other and try to avoid misunderstandings.
If we talk about friendly countries for Japan, there is Europe and North America. What role do these regions play in your company?
Unfortunately, we are very limited when it comes to manpower. Before entering these regions, we want to enter the Korean market first. We are not discriminating against Europe or North America. We just want to work within our limitations and focus on what our company can do right now. We will offer all types of molding technologies or technologies related to part manufacturing, refurbishing and surface maintenance.
Which particular products would you like to highlight to the international audience as a global niche company?
The laser detection device is what we specifically have for expos. It can potentially introduce the analyzer. It looks very good and most customers want to find out about its features. Product parts on the other hand can be tiny and it can be difficult to explain and showcase their quality and function in these events. We are a Business-to-Business (B2B) company. There is not much need for us to manufacture a lot of our products. Take for example our wiper shafts. The wiper motor manufacturing companies are the ones who will supply it to end-users. Technologies on the left side are the more conventional ones used in molding or forging. These are more advanced technologies where it involves optics, robotics, AI inspections, wireless security monitoring systems and programming IT-related products.
We are optimistic for the future. Our major customers are in the automobile industry whom we have been providing a wide range of motor-related products like wiper shafts. Heat treatment is essential because of the heat created in making such products. A water pump is also important along with heat treatment. We cannot stop the shift from combustion to EV happening in the automobile industry. Still, there are many components inside and outside the car that will be needed for the new generations of cars. We want to be there for that. The demands of the customers are ever-changing. There are new car models every year and the life cycles of cars are also changing. This year, we are focused on motor-related car products and heat treatment-related products. Next year, it might change. Five years ago, statistics showed that transmission-related products make up to 60% of the overall turnover of the company sales. Currently, this product's turnover is only 34%. On the other hand, China and India are increasing and currently makeup 20% of the company's turnover. We try to keep up and adapt to the changes in market demands. Sigma’s global sale is JPY 6.4 billion including India and China. Thirty percent of which comes from China. The global expansion is focused on the appraisal of foreign markets, especially with products like laser detection analyzer.
If we come back in five years, what dreams do you have for the company and what goals would you like to have accomplished by then?
Since becoming the chairman, my son has moved into our company. My goal is to help and train him to become the next-generation CEO. I don't want to put pressure on him. I would like for him to be able to enjoy life and not to worry too much. Everything will be okay. The company goal of being a Top Global 100 company and our IPO-related activities for the next five years are already under the care of my son. Something we taught in our company is to have a life calendar in fifty years. For some, fifty years is a lifetime. All employees including myself, input our personal lives and goals in this calendar. The first thing I set in the calendar is the date when I die which sets my deadline. Every target before that is my goal as a human being. This is important when it comes to educating within the company and fostering human capital. Education is just a small part of life. We devote a certain part of our lives to education which is normally at the initial stage of our lives. After our education and training, we live. The most important thing is being able to live your life as you work for the company. We want to integrate these values of having a personal lifestyle and goals in the workplace. It helps to understand the people we work with every day, what their goals are and how they compare with ours.