Efficiency and value hallmark the material handling systems developed by Daifuku for leading manufacturers around the world. President and CEO Masaki Hojo discusses the company’s current plans to become a top-class value innovator, its extremely loyal customer base, and its highly trained workforce.
What would you say has been the impact of Abenomics on the manufacturing sector and indeed on Daifuku specifically?
I believe that Abenomics has mostly been a monetary policy so far and one of the biggest effects is the weakening of the yen, which is why exporting companies are enjoying this result. When it comes to the economic policy of Abenomics, the effects have yet to be seen. Many Japanese manufacturers have already built manufacturing facilities overseas, but they are mainly big corporations. When it comes to small and medium-sized companies, it is difficult for them to build these manufacturing facilities overseas. Perhaps the most important part of the economic side of the Abenomics will be to help these small and medium-sized companies, not only the large ones. Despite these companies being very small, they still have many technologies and techniques that have been developed over the years, which is very much in line with the Japanese way of doing things and are worth spreading internationally.
One idea for this is to encourage various technical tie-ups or partnerships for smaller companies with larger companies to assist them. Typically, Japanese industry works with a vertical integration. For example, there is a large company and under it there are subsidiaries and affiliates to support it. This is a very typical structure in Japan. On the other hand, consider a big company, but then alongside it, rather than under it, there are smaller companies with very specific technologies. This is the horizontal structure, which is more typical in Germany and I feel is a reason why German companies are among the best in the world. Recently, I’ve been thinking that small companies can develop their business through exporting with assistance from the government and big corporations. That is a new approach, a way to change the industry structure.
What opportunities do you see for Daifuku with the ratification of the Trans-Pacific Partnership (TPP), considering you already have a significant presence in the Asia-Pacific region?
From my perspective, the TPP is the most important issue of this economic policy. If the initiation of the TPP is successful, it will be greatly beneficial for Japan. Even if there is some type of friction or some barrier, I strongly recommend proceeding with this kind of initiative such as the TPP. Larger amounts of products will cross borders and will be sold and bought easily.
From this point of view, our business will clearly benefit from the TPP, since companies will need control of goods not only in Japan but in other countries as well. For instance, there is a type of sorting system of fruit. Thai companies are looking to export their fruit to Japan. However, the Japanese market is different from the Thai market so they are looking for ways to meet the needs in the Japanese market. They often come to Japan to observe our installations in the fruit center to replicate them in Thailand.
2015 was a remarkable year for Daifuku, marking the fifth consecutive year you increased your net sales to a record 340 billion yen. What would you attribute this impressive growth to? How do you keep breaking your record year on year?
The market is always changing. Ten years ago, Daifuku enjoyed being at the forefront of providing material handling systems to the flat-panel display industry in Japan. Now, much of the flat-panel display manufacturing has moved out of Japan. Now, we are concentrating on developing the distribution automation for the e-commerce sector. We are constantly changing to meet our customers’ needs, and we are always developing new technologies and ideas to contribute to customer operation efficiency. That is our history. For instance, it is easy to determine what the customers want in Japan, but developing our business outside Japan in European or American markets is much different. The conditions of the competition are very different.
Daifuku is a global company, operating in 22 countries, and over 60% of your sales come from overseas. What are your priorities for further international expansion?
I see two priorities for our strengthening our international positioning. The first is to enhance operational efficiency and productivity and improve comprehensive project management among non-Japan affiliates that have joined the group. By leveraging the strengths of all of these companies, we can increase the collaborative efforts between the companies and Daifuku and strengthen our overall business.
The second priority is to enhance the sales and production framework for manufacturing and distribution systems in Southeast Asia. Until recently, we have mostly focused on providing systems to automakers in Southeast Asia, but I see great potential in the manufacturing and distribution sectors. We have expanded our businesses in this region to meet these growing needs.
Indeed, Daifuku has built a very strong presence in the United States since you established the first global subsidiary Daifuku U.S.A in Chicago back in 1983 to support the automobile production of Japanese automakers in the country. Lately the company has known significantly increased sales about 25% in North America representing 41.1% of your non-Japan sales. How important is the American market to your growth strategies?
Expanding our business in the United States is very important because we already have a good presence in the automobile sector.
We acquired Jervis B. Webb Company in 2007, which helped solidify our business as they have a long history with American automakers. Our reputation with our customers in the automobile industry is growing year over year.
My big concern is how to extend distribution automation for e-commerce. Currently in the United States, companies are more aggressive in spending their capital to build new distribution centers in the United States and looking to incorporate e-commerce. We are looking to grow our business further in this sector, maybe two times of what it is now. The business potential in the future is very good.
You are half-way through your four-year business plan “Value Innovation 2017,” aiming to evolve to a top-class value innovator that provides the best solutions for customers, acting on four aspects in particular: business domains, profitability, brand power and operational efficiency. How would you grade your progress so far, and what are your outstanding priorities?
The most important asset Daifuku has is its employees, not only in Japan, but around the world because our systems have to be created by engineers. A Japanese engineer does not completely understand what overseas customers want. Our first priority is that we hire and train local engineers. This is a very important issue. We have local employees at locations all over the world. If our customers want to utilize our technology or systems, then that kind of a development process has to be done by a local engineer. Those are the key issues.
Why do you think thinking globally and acting nationally but acting locally is so important to globalization?
Because the customer is local. So this is a very important issue because our business models need to be local.
Some of your customers are among the biggest names in the automobile sector, not only here in Japan but in America as well. Why do you think they picked Daifuku for your services in such as a competitive environment? What separates you from your competitors?
From 2000 to 2005, I was working for our company in the United States as the president of Daifuku America Corporation. We had an order problem with an American automaker. At that time we still did not have a relationship with this company, but were introducing our technology and product line to them.
We had some problem in the process of the project and in the end we finished the project as a loss. Sometime later I met the project director, I showed him some additional costs from our perspective. The director asked, "Why are you asking now? Normally we are requested the money before the completion. Why do you ask me after the completion?" I explained to him that requesting before the completion is the US way. “We do not stop until we complete the project. The money is secondary to getting the project completed. I am now requesting additional money to you only after the completion.”
This is one of the differences between a Japanese company and an American company. Often times with companies in the United States, if they lose money in the process of the project then they will stop their work until payments can be made. For us, we do our best to finish your project no matter what.
That is why our customers continue to come to Daifuku. We never complain, and we do our best to finish your project. It is our first priority.
Arguably one of Daifuku’s most important competitive advantages is its corporate culture. Can you outline how this translates into everyday business practices and why it’s so important to Daifuku’s success?
Our business is mainly a material handling business. As I already mentioned, the market is always changing. Some customers may go away and some markets may disappear, but we are able to proceed. Which market has the most potential for us? Which customer is sustainable? We ask ourselves these things every day.
This is a very simple message similar to the story of Who Moved My Cheese?, which is a very famous book in the United States. We don't stay still. If we want to grow, we have to go and find new business.
How are you working to communicate your brand internationally?
In the case of our business, branding is a very tough issue because our business is mainly B2B. Sometimes the branding has to show our presence to other audiences, other than the general consumer. The consumer doesn't know our equipment, or how it can be utilized to deliver the orders they make over the internet, for example.
It takes more time, but there are many ways to appeal Daifuku all around the market. We continuously show them what Daifuku is doing. We are advertising on trains. Sometimes we advertise in a magazine in Japan or magazine in the United States. We try to show that we count some of the most famous and influential companies as our customers, which will help consumers know how we support various aspects of society. This will help our reputation grow.
What would you say to the international audience who may be hesitant about investing in Japan or partnering with leading companies like Daifuku?
Abenomics gives the positive message that Japan is a nice place to invest in and grow a company. This kind of message touches people. Japan needs more of this message to be in the news. On the other hand, everybody knows that the number of workers is substantially decreasing the next 20 or 30 years.
People think that the Japanese market is very attractive, but needs adjusting. Companies can install automated equipment into new manufacturing facilities in Japan. This is just one example.
I also mentioned mid-sized and small-sized companies earlier; currently they have no chance of extending their legacy beyond the borders of Japan. If large companies can work with them, this will stimulate growth. This is a good time for investors to put their capital in Japan.
How is Daifuku “always an edge ahead”, as your motto says? Is it R&D? How were you able to be so agile to the market?
We have worked with some of the largest and leading companies in each market. They always try to push for more efficient technology or they are looking for innovation in the material handling systems. They tell us, “Please try to make this system even more efficient. We do not mind if you take more time.” We are not always sure if we can realize what they want, but we will agree to do what we can. We are where we are now because our customers help us to learn and understand many things in a large variety of markets and industries. We would not be able to educate our engineers and our salesmen in these matters, but we are always willing to learn from our customers so we can provide the best products and services. This is one of our strengths.
What final message would you like to leave with G7 leaders about Japan?
Most importantly, we Japanese cannot only look at things from the Japanese perspective, but also from the perspective of the other economies represented in the G7 meeting. We are not only thinking about Japan. We think about the entire global economy and global happiness.