Supporting monozukuri through trading

Over the last 25 to 30 years, Japan has seen the rise of regional manufacturing competitors who have replicated the Japanese Monozukuri process but doing so at a cheaper labor cost, pushing Japanese out of mass industrial markets. However, we still see many Japanese firms remain leaders in niche B2B fields. As a general machinery trading company, how have Japanese firms been able to maintain their leadership despite this stiff price competition?    

In 1963, our company was founded as Fine Kuroda Services Corp., currently known as Kuroda Seiko, and we started to deal with their products. After that, Kanematsu Gosho (present name is Kanematsu Corporation), a trading company, invested in our company in 1967. We were newly created as Kanematsu Gosho Machine Tool Sales Corp., which was the starting point and establishment of our Monozukuri trading company. Since then, Kanematsu Gosho began to export machine tools and products of some manufacturers like Okuma and Makino to overseas markets, while we expanded our domestic sales.

In 2000, we merged Kanematsu Industrial Machinery Corp. and Kanematsu Machinery Corp.. And in 2004 we started an environment-related business, and imported silicon ingots from Europe to Japanese companies operating solar power generation. In order to not only import materials and sell them to Japanese companies, but also add value to silicon, we established a company called KGK Soltec. Later, we liquidated this company due to the rise of Chinese companies with low labor costs in that field.

Today, we operate uniquely as a comprehensive machinery functional trading company, combining machine tools, industrial machinery, and environment-related businesses with engineering functions.

As a trading company, what is the competitive edge of Japanese products?

Originally, Japanese machine tools business started by importing its products from European countries. After that, Japanese manufacturers began to produce their own machine tools. In the beginning, in order for these Japanese manufactures to bring up, we had their machines in stock, and made installment sales as there were no leasing companies. Today's Japanese machine tools are excellent products, both in accuracy and rigidity.

In the last two years, during the pandemic, global shipping and logistics has been challenged. In addition to a near tripling of oil prices, 77% of international ports were delayed last year, which was further exacerbated by China's zero-COVID policy as well as the ongoing crisis in Ukraine. How have these disruptions in global shipping and logistics affected Kanematsu KGK?

For a while, after the pandemic began in December of 2019, we had a backlog of orders and managed to keep our business going. The most difficult point in delivering machines and equipment was our communication with European manufacturers. Travel to Japan was restricted. Japanese customers were unable to visit the manufacturers’ factories for pre-shipment inspection, and unable to attend the trade shows. However, we made full use of digital technology to satisfy the customers’ needs and the deliveries of its products. By such a technical ingenuity, we were able to minimize negative influence upon our sales and revenue despite with the pandemic.

The major problem we are still now facing is the shortage of semiconductors. In the past, the normal lead times for general machinery and machine tools were 3-4 months. But now, depending on machine tools or industrial machines, we have to wait a year or more. It was my first experience of such a difficulty in my 40 years of involvement in this industry.

Japan is known to be slow in adopting digital technologies, ranking 28th in IMD's Digital Competitiveness ranking. However, you have created a DX promotion headquarters as part of your KGK Beyond 2024 Midterm Plan. Can you tell us more about your DX initiatives? What other digital technologies are you looking to implement into your business?

When I became the president of our company in 2020, I established a framework called the DX promotion team. We decided to divide it into defense DX and attack DX. Defense DX is to improve efficiency internally and within our organization. It started with the goal of going paperless and to other efforts related to computerization. We are able to reduce the number of assigned staffs in manual operations by using computers. Before the pandemic, the main method of the communication with customers was to have face-to-face meetings, and even now, after the pandemic, such an interaction is still necessary to build a solid relationship of trust. In addition to that, we have started some ideas and attack DX such as inside sales, marketing strategies, and other sales activities.

Kanematsu Electronics Ltd. and Kanematsu Communications Ltd. are companies under the same Kanematsu Group. Both companies are involved in the introduction and recommendation of hardware and software used by Kanematsu Group. Currently, Kanematsu Communications is No.1 in selling smartphones and mobile phones in Japan.

Kanematsu KGK provides products to a wide variety of industries such as electrical, machinery, automotive, electronics, food and more. Which industry are you currently focusing on? Are there any new industries that you are looking to further expand into?

Our company is directly related to Monozukuri, whose strength of machine tools business till now has been die and mold, but we are currently focusing on other area, especially EV-related products in the automotive industry. For example, we are considering new mechanisms related to E-axles and new methods of production and machining. We are also working anode-cathode materials and separators for batteries and cells, because the necessity and demand of these items which are related to lithium-ion batteries for EV is increasing and growing. Our business will surely continue, even if solid-state batteries replace with them in the future.

One of our strengths in industrial machinery is textile machine. As well as non-woven fabrics used for face masks, we are trying to discover new materials. In the food industry, we opened a bakery in Myanmar, and supplied machines for sandwich makers and bakeries. We are trying to find new frameworks and have already come up with some new ideas, which we cannot disclose due to NDAs with our customers. You can look forward to much more interesting things to be added to what we already have.

The packaging sector is also our another hopeful and promising area, where the transition from plastic to paper is underway. We have a lot of equipment and machinery related to that sector. In order to develop future cars and vehicles that will not crash, we have to change the specifications and designs of interior materials. We have customers in that field, and we are also studying some new scheme. There are so many new interesting and hopeful things that we are waiting for near future.

As a result of the switch to EVs, we are seeing the emergence of newer and more lightweight materials being used to offset the weight of lithium-ion batteries. What are some of the effects that this change in materials has had on your business?

We deal with several machines and equipment in order for our customers to develop new materials. So sorry we cannot disclose any specific names of our customers, but we can add something to their exiting nonwoven material line to create a new material, and we expect more chances of such a case near future. CFRP is also one of woven materials. I believe that we can come up with new materials using materials which are much lighter but stronger than plastics. Our slogan is “For our sustainable future”.

You are involved in renewable energy and taking advantage of your global network, you have been providing optimal solutions to customers in this specific field, including solar power. Moreover, you have had projects in Thailand and Vietnam. Can you tell us a little more about your renewable energy projects and how you got involved in them?

Through the Joint Credit Mechanism (JCM) promoted by Japan’s Ministry of Environment, we have participated in global warming countermeasures plans with 22 partner countries. In the last three years, we have executed three JCM projects, firstly, in Thailand, and secondly, in Vietnam and Indonesia, where we have achieved about 53,000 tons of CO2 emission reduction per year by solar power, hydro-power generation and storage batteries. 

In addition, our parent company, Kanematsu Corporation, has already supplied equipment for wind power generation in Philippines.

What role do partnerships play in your business model? Are you currently looking for any partnerships in overseas markets?

We have been running our business in many regions and countries, including the US, Southeast Asia and China. I believe that local production for local consumption is one of most important elements of Monozukuri, so I would like to let local staffs become the president or CEO of our company’s local branches and local companies in future. In any countries we expand into, including any areas where we have been continuously doing our business, partnerships are essential. We believe that it is necessary for our company to look to local people in order to develop and grow up our business. Similarly, we hope to grow and develop our company through them.

Moving forward, what other countries or regions have you identified for further expansion? What strategies will you employ to do so?

We think that we have not been good at overseas expansion strategies. Nevertheless, I think the future key markets for our business are India, South Africa and probably Turkey. Firstly, we need to decide and find reliable partners in those countries before moving forward with our new business. In the past, we have set up something in a specific area and developed our business, especially on Monozukuri. However, in the future, I think that we need to find partners firstly, and then decide together what we are going to do. Since we have involved in the Monozukuri industry, we can secure some volume of sales once we do something there. But, it would be better to determine what we want to achieve before thinking how to develop business there. I think that is a theme or task for the next generation of president or CEO. Therefore, I need to successfully pass the baton to those next generation.

Imagine we come back in six years and have this interview all over again. What goals would you like to have accomplished by then?

Our company's midterm business plan, called KGK Beyond 2024, will end in March 2024. One of its themes is “to become a good company”, and that is a kind of dream and goal I would like to achieve by then.