A Japanese trading company that specializes in importing aerospace products, Nakano offers expertise that makes its clients’ lives a whole lot easier.
Where do you believe the strength or competitiveness of Japan’s industry comes from today?
I believe that the environment plays a big role. As Japan does not have many natural resources, the processing and manufacturing of items, and their subsequent sale, are very important for Japan. Of course, over the years this situation has not changed for Japan. In the 1970s, Japan had a large share of the consumer market. Shortly after that, Japanese firms began to produce items and products outside of Japan, especially in other Asian countries such as China, South Korea and Taiwan, where production costs were lower. We Japanese were quite naive and shared our technologies with the other Asian countries. However, that has changed, with Japanese firms now protecting their core technologies and only using them in Japan. Japanese companies have started to change their approach. However, the situation regarding natural resources has remained the same.
An interesting topic we have seen in this report is how traders have had to evolve in tandem with manufacturers. The role of the trader has traditionally been very important in Japan, with Japan today being home to almost 10,000 specialized trading companies. Can you give us your perspective on how the role of the trader is evolving in Japan?
The big trading companies such as Mitsubishi and Mitsui invest in and procure raw materials such as oil and natural gas. They then provide products working together with their clients. However, we are a small trading company. When I became the president of this company, I told our employees that the role of the trading company was not just to procure raw materials and then sell the products. Rather we need to propose the best and most efficient use of the procured items to our customers, and then sell them. That is key for the survival of trading companies. Obviously as a trading company, we seek to provide something nice for the world, and therefore we make proposals along those lines. For example, in the US, our venture company developed a Zero-G handle. This tool allows the worker to handle heavy products without the load of gravity. Another example is a tool that uses ultrasonic technology to remove miss-installed rivets during aircraft structure assembling. We tried to sell these unique and interesting tools to our Japanese customers. At the beginning, things didn't go well. However, we did not give up and after some time, we were successful. That is what we propose to the customer. The reason why we are able to make these kinds of proposals is due to our experience and ability to procure high-quality machines in the US, and import them to Japan. During that process, we learned how to use the machine as well.
It is interesting to hear that since you assumed the presidency, you have always seen the role of the trading company as going beyond what was traditionally expected. We would like to use Nakano Aviation as a case study for this concept. Could you please elaborate on your core strengths? You already mentioned proposals. How do you add value on behalf of your clients? Why should they come through you rather than go directly to the overseas suppliers?
I think one reason is related to the language barrier that they may encounter when dealing directly with overseas suppliers. Also, if you go directly to the supplier, you need to have properly talented personnel and money to work with them. It is not as simple as just purchasing the raw materials and then producing products. Rather you need to know how to use the products that you purchase. You may also need to learn about the installation and setting up of those products. When working directly with suppliers, you need to take care of all of this by yourself. However, if you use a trading company, the trading company can take care of those processes. That is why it is better to go through a trading company like us.
We know that your company does machining, processing, assembly and treatment for many materials. Can you tell us a little more about these added-value services that you provide?
One unique feature of the Japanese aviation industry was the subcontractor system. MHI, KHI, and Subaru are Tier 1 companies of Boeing and they have their own subcontractors. They are called the backshop. The role of the backshop is to offer labor, equipments or machines. Tier 1 companies provide materials, work instructions, record sheets, and other necessary items for backshops. Usually the backshop is specialized in one process, like sheet metal forming, machining, surface treatment, and so on. Tier 1 companies consider their backshops as the backyard of their own plant, so they provide training and instructions on how to make products. This system does not exist in the US aviation industry. At the beginning, Boeing did not understand this practice. However, they began to understand it, and the term “backshop” was coined. It basically refers to the subcontractors.
What we do at Nakano Aviation is procure materials. If we also take care of the backshops for machining or heat treatment, it is easier for Tier 1 companies, as they do not need to go back and forth in dealing with backshops. It also means that the production control management is easier. A key point is that we hired people with experience in manufacturing. We take care of the production control, and then ask our partners to produce the items. Our three core activities are to procure items, to manufacture items, and to introduce new machines to the Japanese market. Right now, we have stopped introducing new machines to the Japanese market, as it was something that we were struggling with.
You spoke about introducing this subcontractor system that they did not have in the United States beforehand, and the role that you play within that system. You also spoke about the different services and advantages that being a trader can offer. One of those advantages is the network which the trader gives their clients access to. From what we have heard, traders are always trying to expand their network. What types of companies are you looking to work with in order to grow your network going forward?
There are many distributors that we are already working with in the US. When there is new material that we are interested in, we contact our US distributors. It is quite easy to find partners that we want to work with. However, it can be difficult to actually work with them, as those potential partner companies are already working with other companies.
Your company has had an office in Los Angeles since your inception. You told us earlier that your colleague Terry-san was in LA recently for three weeks responding to troubleshooting. Could you elaborate a little more about the purpose of his trip and the current status of your LA operation?
Globally, resources are scarce right now. Therefore, he went to Los Angeles to adjust and coordinate our operation to ensure that we can acquire the resources that we need. We are struggling with a labour shortage at our site in the US. In California the age of the people there is quite high, and it is difficult to hire the best talent. We try to hire Japanese and English bilingual speakers. However, it can be difficult to do so.
Your company has historically acted as a link between Japan and the United States. Are you interested in expanding that profile any further by procuring parts and components from other countries? If so, can you tell us how you plan to do so?
Yes, we are considering expanding our profile. Let me give you this example. KHI develops the BK-117 helicopter, which is a product of their joint development with some European companies. We therefore purchase some parts from European companies. However, we are not thinking about opening a new site or new office outside the US. The reason for this is that Japanese aviation’s focus is on the US.
Airbus is rapidly growing and trying to overtake Boeing when it comes to commercial aircraft. However, it is very difficult to work with Airbus. This is due to the language barrier. We have worked with German manufacturers as well as the Italian company. However, it was very difficult to work with those European companies due to differences in working habits and financial culture.
One of the critical issues for the aviation industry right now is the environmental impact of the industry. We are seeing many proposed solutions such as using digital technology to create more efficient flight plans, for example. We actually met a very interesting venture company in Japan called Euglena who are making an airplane biofuel out of green algae. How do you think the industry can lower its carbon footprint?
The Japanese aviation industry actually specializes in making parts and structure assemblies. It is the aircraft makers and airlines who need to think about this issue, as they are the final makers and users of those aircraft. What matters is the engine, and whether it can use biofuel or electricity. I believe that Airbus has tried electricity-based aircrafts. However, it takes time to develop the EV version of a commercial aircraft. When we look at the automotive industry, EV will probably be mainstream in the future. I think that change will also happen in the aircraft industry.
When we consider aircraft engines, perhaps the engines in electricity-based aircraft will have a different structure and therefore require different items. Even though cars are changing to EV, they still maintain the same structure. However, EV aircraft will have a different structure, we need to consider how we can be involved and what parts will be required in the future.
You already have a very rich history with the company and have contributed a lot to the success of the company. Imagine that we come back on your very last day at the company when you are about to pass it on to the next generation, and we interview you all over again. What dreams and goals would you like to have achieved for the company by then that you would like to tell us about in that new interview?
Right now, inflation is very high. I want to ensure that decent salaries are paid to our employees. It is the role of the president to ensure this. When it comes to our business, I want to continue our current activities. However, I want to make sure that our employees are making a good living. That is my goal for the future.
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