As a comprehensive manufacturer of industrial fasteners, Ochiai has been supplying a wide variety of products to its customers in numerous fields for more than 70 years, but predominantly for the automobile industry. Having established a unified in-house production facility where the company performs everything from die design to manufacturing, Ochiai is today an industry leader in its specialized area of industrial fasteners. We sit down with president Takayuki Ochiai, who explains that Ochiai is currently advancing with establishing its overseas production sites internationally, amid increased demand driven by the global automotive industry and the transition to electric vehicles.
The Japanese manufacturing spirit or philosophy, known as monozukuri, has traditionally meant seeking product perfection through craftsmanship. Nowadays however, it involves responding to the ever-evolving demands from customers and providing that added value in the final product delivered. How do you define monozukuri; what for you is the essence of monozukuri for a fastener and bolt company?
For our company, monozukuri means pursuing our customers’ satisfaction with regard to quality and cost, which is the only way for a small company like us that operates in a niche field can survive. We have a stable demand because our products have diversified applications in various industries such as construction equipment, housing, and automotive. Ochiai was established in 1936 and it is a family-run business. I used to be in the technical field and had done sales, so I truly believe that the cost and quality are the two major factors that allow us to prevail against the harsh competition.
As we have conducted interviews across Japan, we have seen how Japanese companies are very successful in niche fields. For example, Yamashina, a Kyoto-based company, with just 150 employees, holds 60% of the global market share for miniature CFRP screws. What is it about the Japanese SMEs that allows them to be so successful on a global stage?
I think the success of Japanese companies in competing on a global stage is attributable to tradition and technologies that have been accumulated for decades. There are a lot of family-run businesses that have continued to the second or third generations where new technologies with a value-added mindset are perpetually added to what they have already amassed. In terms of the global market, Japanese companies offer the best quality and at a lower cost, no one can compete with us.
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One thing that is affecting Japanese companies nowadays is the shrinking population. It is expected that in the next 10 years, one in three people will be over 60, which will affect both the labor force in the company and the domestic demand for products. Can you tell us how the demographic shift is affecting your company? What strategy have you put in place to adapt to it?
The aging population issue is also prevalent in our company where the average age is quite high. Our retirement age used to be 60 years old, but we had to change it to 65. Now, we are discussing raising it to 70, and we need to think of recruiting more overseas workers in the future.
COVID-19 has affected all businesses both positively and negatively. From a manufacturing standpoint, we see that there is a huge bottleneck in terms of supply because people have been relying on China as the manufacturing hub of the world. At the same time, many businesses have shifted to e-commerce channels and selling directly to their customers. What has been the impact of COVID-19 on your business, and how have you adapted to it?
Actually, we have not been greatly affected by the COVID-19 pandemic because 80% of our products are related to the automotive industry, and this industry has recovered globally. In the beginning, last year in March, our sales in the first quarter from May to July was half of what we used to make. It was like the Lehman shock. During that time, we had to reduce the working days for the factory to three days. Nonetheless, we were able to recover from that which is something that we are grateful for. Even before the pandemic, we have been thinking of introducing working remotely to improve our labor force. Women, in particular, cannot dedicate full hours to the company when they get married or have children, so we thought about allowing them to work remotely. The pandemic has become a good opportunity for us to diversify the work style in our company. At the moment, half of our staff, who work in the non-manufacturing field, work from home and we want to increase that number. We are hoping that this change will promote a better working environment for all of our employees.
The automotive field is undergoing major changes. The government has mandated the adoption of EV and battery EV cars by 2035. Moreover, the automotive industry is adopting a new motto where cars will be using CASE technology in which there will be more computers on wheels than a machine. Can you tell us how your company is adopting this? What opportunities do you foresee with this switch to EV and the adoption of CASE technology?
Although EV cars are becoming a trend, the basic structure where our products apply remains the same. Our products are mainly used for air compressors, brakes, and interior components like the seats. Some of our components used for engines and ignition will be later replaced by motors. Thus, we believe that we can shift to motor sales.
The automotive industry demands new materials such as titanium, magnesium, and even CFRP that offset heavy batteries rather than old and heavy materials such as iron and steel. Have you been looking to develop new lighter fasteners for the automotive industry?
Our products are small. There would not be much impact even if we cut the weight down by 30%. The average price of our products is two yen per piece where half of it is the material cost. Changing to a special material would mean costlier material, which will not be as profitable. We will be happy to switch to a low-cost material with the same quality as the material we use now. Otherwise, it will be difficult to develop new material from scratch.
As a company that serves a diverse range of industries, it must be very important to understand the particular fastening system that is suitable for each client’s product. Can you talk to us about how you create the custom service and reduce the lead time when providing fastening solutions to new customers?
In one factory, we produce 400 million pieces of 1,000 different items per month. Based on the extensive range of our fasteners, we can offer proposals with different applications as required by the customers. The customers’ requests and feedback are greatly appreciated because these help us to cater to their needs. We pay attention to the lead time which includes design, production, press and heat treatment, and packaging; all these specific steps take time. Nevertheless, the good thing about the automotive industry is that we can foresee the exact production schedule that they require. Also, when they have decided the product they need, they stick to that design for several years. We have worked with almost all the manufacturing industries, as well as lithium-ion and mobile. However, those industries tend to purchase for a short time which is not very effective for us.
When we spoke with Hashimoto-san, the President of Unytite, he mentioned the importance of adapting his business to emerging market trends. He also said that there was a huge demand for fasteners in the construction industry because steel is being used now more than bricks and mortar, for example. How do you ensure that you stay ready to adapt to these new demands that emerge in the market, and what new industries are you looking to diversify into?
To be honest, our products are already launched and have been utilized in almost all the industries. Furthermore, our products are being used in scaffolding for construction sites. At present, we are trying to enforce our motor business. Though the construction industry is growing and we can generate good sales from construction machinery, the demand is still much lower than the automotive.
As you look to go into the motor industry or the construction industry, will partnering up with other companies be something that you will be looking to do or co-creation for new products?
We only experienced partnering up with an American company in the 1950s, which has already concluded. We also started a factory in Indonesia, however, Indonesian law required us to partner with a local company to open at that time. Now with the change in the laws, Ochiai owns 100% of the company shares. At this point, we do not have any plans to partner with other companies.
Japanese companies are famous worldwide for their R&D expenditure being the highest in the world. About 3% of their annual Gross Domestic Product (GDP) goes to R&D. Are there any new products that you have recently released or you are working on that you would like to share with our international audience?
Many products have come and gone in our company because many of our products are developed based on our customers' needs. We work with customers to develop new products, but the production of such products depends on the changes in market trends. For example, we developed a resin fastener that is no longer needed because of the change in resin quality. But, we also have lasting products such as the product we made for mirrors used in hotels.
Quality and cost are two very important factors for customer satisfaction. With your established overseas companies in Indonesia and Vietnam, how are you ensuring these two factors as you operate abroad?
To ensure that the quality in our overseas factories is the same as that produced in our Japanese factories, we use the same production facilities overseas like in Japan. We also send experienced Japanese engineers to train the local staff. Overseas production takes more effort, and we implement a stricter quality assurance system overseas. When we launched a factory in Vietnam, we were very particular in the qualities of our products produced there.
In your presidential message, we read that you are planning to use the Indonesian factory to meet the needs in the Indonesian and Indian markets, and the Vietnam factory will focus on ASEAN countries and China. You also have a plan to open up a factory in Europe or America. How is your plan going and what are your target markets at the moment?
It has been the dream of the founder of our company to have a factory in North America. Since we have sales offices in the USA and Mexico, to have a factory in North America is one of our options in the future. Currently, we have some customers in the US, but we would like to increase our client portfolio if we can. Currently, we are now approaching Japanese automotive makers from major manufacturers and other industries, and if we gain more customers, we are thinking of having a factory in the US. We would model our American factory to that of our Vietnam factory and target the European and North American markets. Since the Chinese market keeps growing, it could be one of our options to focus on in the future.
We use the Indonesian factory to produce the fasteners for Japanese affiliated motorcycle companies like Yamaha and Honda, with most of these products being sold in the Indonesian market and only some nuts are exported to Japan. The Indonesian factory is targeting the local Indonesian market, but we can provide if there is a growth in demand coming from India. However, there are many competitors in India, so we are uncertain if that's a market we can get into.
It's interesting seeing the appreciation of your products in the Chinese market. What strategies are you implementing to increase your sales in China? Are you interested in opening up more sales offices and having partnerships or joint ventures in China?
We have a direct sales office in Shanghai that generates about $8 million annually. Our local staff in Shanghai mentioned that they will be able to sell our products to a lot of companies if we have a factory in China, but this is still under consideration. Our priority is keeping the cost and the quality of our products because if these are met, we can increase our sales in China.
Your company is celebrating its 85th anniversary this year. What goals and dreams would you like to have accomplished in five years?
I would like to pursue the dream of the company founder of having a factory in North America, but I am also hoping for a politically stable China so we can enter that market. There is a growing demand from our customers in North America, Europe, Asia, and China, where they are requesting us to have local factories. Our Vietnamese factory was requested by our clients.
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