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Sticking to objectives: OSP targets sustainable growth

Interview - October 23, 2021

Seal and label manufacturer, Osaka Sealing Printing (OSP), is developing solutions that add value to its customers’ products, with a particular focus on creating packaging that not only enhances visual appeal but environmental credentials, too. We sit down with president and CEO,  Tadashi Matsuguchi, to learn more about the company’s operations and ambitious plans for the future.

TADASHI MATSUGUCHI, PRESIDENT & CEO OF OSP GROUP
TADASHI MATSUGUCHI | PRESIDENT & CEO OF OSP GROUP

Japan has a reputation for high quality and attention to detail in manufacturing processes. As a company with one-third domestic share of the seal and label market here in Japan, can you give us your take on monozukuri, and what for you is the essence of monozukuri?

I would say that the strength of manufacturing companies that adhere to monozukuri comes primarily from innovation. Without innovation we cannot grow. However, innovation alone is not enough. Operations are very important in creating benefits. And then the final thing that's important is the branding because without branding you cannot get the support or credibility from the customer.

We have opened our self-label patent obtained in 1961to other players in the industry and as a result everyone in the industry knows about our innovations. Our operational strength and capabilities are what allows Japanese manufacturers to earn money and stay profitable but you still have to use good branding and marketing to convey the level of the quality of the products.

Originally, Japan didn't have a lot of raw materials, so we focused on adding value by creating good manufacturing processes. That led us to further innovation and operational capacity. After World War Two, we started in manufacturing by just replicating the processes of advanced countries. At that point we were not particularly skilled at improving our operations but as we developed as a nation we brought about significant innovations that improved our capabilities.

This is important because even if you have a patent, it will expire in 15 to 20 years so simply holding a patent alone isn’t enough in itself to guarantee a sustained profit. Before the patent expires, we must be prepared to create the next new technology. We believe this is the best way to generate profitability.

 

Can you tell us what Industry 4.0 technologies - such as automation, sensors and 3-D printing – you have introduced to your company and what benefits they bring to you?

The secret of generating profits at OSP (Osaka Sealing Printing), what we call ‘OSP magic’ is that we review all the business opportunities that don't bring about profits for us and mash them together to create something profitable. We are now getting 1.4 million orders per year which means 6000 orders per day whereas originally the orders for sealing or labels were very small.

And if you want to put a label or seal on a large-sized order then you would order the printing instead so orders for seals and labels are mainly for small lots of packages which is cheaper than printing. You can save the cost of printing, so for the small size packages all you need to do is to buy the standard purchases or the existing purchases and apply the labels. That is more cost effective compared to just printing on the packages.

So originally, small lots costing up to 30,000 yen made up to 70% of  our orders. So for example, one customer gives us an order for 10 different types of labels and then this customer typically wants them in different colors. For ten types, one in red, another one in yellow, one in black. And this customer might also require us to produce them in different shapes, one as a triangle, another a full circle, another a rectangle and this customer may ask us to produce them in different types of paper also. So that means we need to produce 10 different types of labels. In this situation, no profit can be generated.

However, if we receive 100 different orders, then we start having some orders that look very similar to each other. Then if we receive 6,000 different orders, then we may be able to categorize those orders by their colors or shapes. This is how we can turn many small lot orders into a large lot order and is called “OSP Magic” in the industry.

 

One of the few upsides of the covid pandemic is that e-commerce has grown significantly and it's expected that 90% of the US population will be shopping online by next year. Can you tell us how this shift towards e-commerce has affected your business and what products are you developing for e-commerce customers?

E-commerce is an important target for us and the demand for labeling in the field of logistics has increased a lot because of e-commerce. In particular, we are seeing a growing trend towards labels used for food and the delivery of foods. For example, when you buy a take-away McDonald’s meal the usual packaging is just a paper bag which you fold at the top. However, when using a delivery service there must be a sticker which seals the bag for security purposes – it shows that the bag was not opened during the delivery process. This kind of sticker application is selling very well at the moment.

We expect this kind of product to continue selling well for the foreseeable future, but also there is a growing trend towards reducing the contact between humans in bricks and mortar shops, especially with a move away from cash registers, and we are developing new products and solutions to accommodate he demand arising from this trend.

 

RFID (radio frequency identification) chips are one way in which goods can be tracked and verified more easily. Can you tell us how you're integrating RFID chips into your solutions and how this technology is affecting your ecommerce business?

Sales for RFID labels are growing every year. However, their cost has not yet come down to levels that many customers would be comfortable with. The demand seems very price elastic so the more we can reduce the cost, the more demand there will be. However the cost of the chips has recently increased, so it is very hard to strike the right balance between cost and value and this has affected the growth of penetration although it is still growing steadily.



You have five main business areas – sticker labels, carton packaging, film packaging, the promotion tool business, and of course the machinery business. Of these five, which are you most focused on and which brings in the most sales?

Among those five different divisions, the stickers and labels division is steadily growing, and we are constantly developing new products and solutions in this field. In recent years, we have developed a new product line called “Clear Thermal”, which has been adopted by major convenience stores. By showing the contents of the product, you can enhance the appeal and at the same time appeal to safety. Currently, we are also promoting overseas sales, and we plan to expand it widely in the future.We are trying to find new packaging solutions using those technologies. If we can make a success of those new packaging solutions then we believe that we will be able to expand the "Clear Thermal" technology overseas, which is already highly evaluated in Japan.

 

Your company positions itself as a one-stop service provider for everything from the initial design, to the stencil to the final production of the product. Your company has nearly a century of experience and you have a very large existing customer base. Can you tell us what makes you the go-to partner? What differentiates you from other similar providers?

Firstly, I will explain about the OSP production process. Like as the F1 machine enters the pit, each crew performs specialized tasks such as refueling, tire replacement, and window cleaning. It’s the same for us,  printing  process of  “base paper”, ”plate”, ”ink” and “blade type” gathers at the OSP printing  machines so we can put them out in a short time.

According to a survey by an industry newspaper, we take one-fifth of the average time it takes to set up. The printing machine operator is like an F1 driver.  In order to operate the printing press quickly, accurately and without waste, we have a system in which related departments cooperate to provide logistical support. Therefore, we are selected as a partner who can supply products to our customers in small lots and with short delivery time. This is the first reason.

One further reason is that we have a lot of natural disasters in Japan and sometimes supply chains get disrupted because of them. However, since we have a lot of facilities across the nation we are able to maintain our supply chain for customers, and can therefore supply them uninterrupted. Also, because there are about 100 in-house  professional designers who know well about packaging that differentiate us from our competitors.

 

The global packaging industry is set to continue to grow worldwide on account of emerging economies demanding more consumer goods. With this growing demand in mind, what are your sales targets and what strategies are you adopting to reach them?

You can find products that use our packaging all over the world. When the consumers choose a product I think they look at the three different factors. The first one is the value of the product itself. The second one is the ethical and corporate value of the product, and finally the third one is the value of the packaging. When those three values are recognized, then I think customers will choose that product.

The value of the packaging comes down to several characteristics such as ease of use, eco-friendliness and clarity of information, and when you combine these factors with the ethical value of the product and the core value of the product itself, that’s when the customer will decide to buy the product. So we would like to continue to work with brand owners to develop more valuable products and packaging solutions and we would like to expand this activity to the global market.

 

Can you tell us more about your R&D strategies and your ability to create biodegradable and environmentally friendly packages?

In the current printing method, solvent ink is often used with an emphasis on quality, but in consideration of the impact on the environment, we are proceeding with replacement with water-soluble ink.  Of course, the functional quality is maintained.

For the same reason, we are also developing water-soluble adhesives. When it comes to printing, every factory is looking for ways to eliminate energy-wasting and environmentally burdensome production processes.

Apart from those things, we are also focusing on the use of plastics. Sometimes you need plastics from the performance or functionality perspective and we think that we need to continue to use plastics in order to reduce food loss, for example, but there are a lot of other areas where we can replace plastics with other materials, so we are working on how to replace film with paper also. Our new product line “Paper Attention” is one of them. It is a product that can appeal to ethical customers.

 

You opened up an office in New York City in 1995 and in 2006, you expanded to China. You’re in Thailand and more recently in Cebu in the Philippines. Can you tell us more about the benefits of having these overseas locations and what the purposes of each location is?

The purpose of having a presence in those locations is that we wanted to build a pan-Pacific supply network around the Pacific Ocean with the hub in Japan and we would like to export Japanese-made products to those countries via the network. If we try to export our products to European countries then we might have some issues with transportation or shipment so we would like to focus on the Pacific Rim with the hub in Japan so that we can expand our packaging solutions to the world in that way first.

 

What countries or other regions in the Pan Pacific area are on your radar and what strategy would you adopt in order to penetrate them? Would you open up another factory, a sales office, engage in a joint venture or look for co-creation partners like you have in Taiwan?

Japan is facing a big problem regarding the declining population right now and we opened up an office in Australia recently and we are not only looking at their population trend, but we are looking at their cows, pigs and sheep. That is to say, we want to be involved in the food processing industry over there. We’d like to see what opportunities there are for us to incorporate a packaging solution in the local industry so we are looking for a partner like in Australia on the west coast of the USA.

Right now we are mainly sending our products to overseas markets, but there are a lot of wasteful costs. Since we have a very good FTA (free trade association) agreement, and by utilizing the mechanism of the bonded area, the transportation cost is limited now. However, once we find a partner in the local market and we source some good procurement channels, then we would like to start developing co-creation projects with local partners.

 

Your grandfather started this company almost 100 years ago and you are now the president of the company. Imagine we come back in 10 years’ time. What legacy would you like to leave for the next generation?

We are meeting a lot of challenges associated with Industry 4.0 and right now we have 16 machines for digital printing that are being operated around the clock. We recently started making designs using AI (artificial intelligence) and our target is to replace 50% of our designs with those generated by AI.

Furthermore, the speed of data transmission and communication is growing very fast. Right now we have 5G but it will soon be replaced by 6G. Then we will be able to communicate a massive amount of data at very high speed. When that time comes, users will want to retrieve data as fast as possible and they’ll want to be able to customize products so we would like to capitalize on that digital transformation.

In the past, AI was not valued so much but nowadays AI has proved to be superior to human beings in some fields. We have a more than 30% share of the labeling industry, so we should be able to create the smartest AI designing software in-house. We would like to develop that kind of AI and expand it to the global market in order to become a very competitive global supplier.

We are currently working on the concept of an unmanned, 24-hour smart factory.

When a customer buys a product at a convenience store, the cash register information is instantly shared and the label attached to the product is manufactured in our fully automatic factory. And it will be possible to deliver it the next day.  By incorporating our company into the supply chain, we aim to form a smooth and stable supply system.

We would like to further expand this mechanism to the global market and become a competitive global supplier.

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