A company with over 77 years of experience, Sankin is a leading Japanese producer of cold-drawn steel pipes and stainless steel pipes, chiefly supplying manufacturers in the automotive, industrial machinery, construction machinery, shipbuilding and water supply industries, among others.
In the last 25-30 years, Japan has seen the rise of regional manufacturing competitors who have replicated the Japanese monozukuri process by taking advantage of lower labor costs. However, we still see many Japanese firms have leadership in niche B2B fields. How have Japanese firms been able to maintain their leadership despite this price competition?
To clarify our business, Sankin is a precision material supplier for automotive companies. We supply cold drawn steel tubes to the manufacturers of automotive parts. Manufacturers and fabricators choose our products for superior performance. For example, our tubing has exceptional performance characteristics for applications that require tube bending, forming, and flaring. Our capabilities provide broad coverage of a wide range of applications, specializing in steering assemblies, cylinder and conveyor type applications.
As you have mentioned, the home electrical appliances that were once dominant in the world in the 1970s have been replaced by lower cost-based products. However, in similar fields, our proven quality and improved serviceability has fueled sustainable sales and growth opportunities. Despite changes in the market demands, we have successfully outperformed competitors by being heavily focused as a solution provider.
Regarding industry and safety, we supply our products mainly for safety-critical automotive parts, for example, handles, brakes or the suspension, which are closely related to human safety. Therefore, quality control for the automotive usage is essential in addition to JIT delivery.
It is said that making one car requires about 30,000 parts. If even one of them is lacking, the vehicle cannot be assembled. For example, now we are seeing a shortage of semiconductors, so production of automobiles is lagging behind. In that sense, making an automobile really requires very strict quality standards. Sankin can meet those requirements, so this is the business that we do.
It is not so much about price competition, but rather it is more about high quality and meeting a deadline. However, the situation is rapidly changing and we are fully aware that we need to cut down on costs.
The COVID pandemic over the last two years has wrought havoc on global shipping and logistics. Quarantine measures have impacted human resources and in addition to a near tripling of oil prices, 77% of international ports reported delays last year. This has been further exacerbated by China’s zero-covid policy and the current crisis in Ukraine. How have these disruptions in global shipping and logistics affected your business?
We were seriously impacted by the COVID disruption of our logistics. We are a manufacturer, supplying material to process manufacturers who are exporting their products, so in that sense, our impact is limited. However, due to the increase in the price of gas and electricity at our factory, the cost of production has increased and the production of automobiles has been reduced due to shortage of semiconductors.
Our own production has also been reduced and we suffered a lot in the spring and this summer, but from September onwards, the projections are that production will be back at full capacity. We are confident that we have much to look forward to in the near future.
As part of your trading operations, you have developed a unique logistics service, the JAWS (Just Always Wide Sankin), which handles both steel pipes and steel equipment products. Can you tell us more about your JAWS logistics service and its strengths?
Sankin has two pillars: one is manufacturing - we supply materials to automotive manufacturers and their component manufacturers - and the second pillar is the trading division where we act as an agent for a steel manufacturer, and supply their gas and water pipes. We stock their products at each of our locations across Japan. If there is any request from our customers, we deliver to them on time and provide a logistics service known as JAWS.
Logistics is a very important component of the business. With the shortage of drivers, the companies which have their own logistics networks actually dominate the market. The steel company is very appreciative of Sankin for having an extensive logistics network that can deliver their products in the timeframe specified by clients. Recently, we have been using the JAWS system to deliver our own in-house manufactured products as well.
The strength of Sankin is that since we have two big pillars of business, one can compensate for the other in uncertain times. If our customers in the automotive, motorcycle, and industrial machinery sectors were not doing so well and not ordering so much material from us, we could balance it out with our trading division acting as an agent for a steel manufacturer and other companies or products.
We have customers for industrial machinery, construction machinery, shipbuilding, and water supply and sewage companies. Since we operate in fields catering to different divisions, we can balance out our profit. Also, we have a steel equipment division which makes steel products such as storage units, multi-story parking facilities with charging equipment, and we have group companies which make greenhouses and stairs. So as a group, we are trying to diversify our business and cater to various industries so we can balance out our income if one business is not doing well.
One thing that you manufacture is your own cold drawn steel pipes. How are your cold drawn steel pipes superior to more conventional ones?
To clarify, our cold drawn technology is only applied to steel, so we purchase steel mother tubes and we apply this technology to them. For stainless steel, we have another factory in-house which does the welding process as well. For steel cold drawn pipes, 80% is made for the automotive industry, whereas for stainless steel pipes, 50% is for automobiles and 50% is for heat exchangers in appliances like air conditioners and water boilers.
There are about 30 manufactures in Japan that manufacture cold drawn steel pipes and Sankin is ranked as one of the leading companies, I believe. There are some commercial grades which are subject to price competition, but we provide more specialized products with higher added value to meet customer’s requests.
Are you looking to diversify into new industries only domestically or overseas as well?
For our overseas vision, since we are a family run business, we are not actually trying to expand ourselves and make ourselves big, but rather we are focusing on the business being more robust and secure while taking good care of our employees.
However, we have been receiving requests from our clients to go overseas and for example, our Thai factory was established at the request of a major automotive manufacturer. From the perspective of BCP (Business Continuity Planning), they wanted us to have another factory on top of the existing one, but as you know, the Japanese market is already saturated. As an alternative, we thought that expanding overseas, especially into Thailand, would be very effective for us.
Regarding Mexico, a client has a collaboration with a Mexican pipe manufacturer, who also required expertness and advanced cold drawn technology. As a result, we participated in a joint venture established there.
What role do partnerships play in your business model and are you currently looking for any partnerships in overseas markets?
If we received a good contact, we would consider going abroad. We are actively looking at potential opportunities but do not have anything firmly in place at this time. As for the output of our factory in Mexico, Prosankin, 50% of the overall activity is for the North American market and 50% is for the Mexican domestic market. Our factory in Thailand serves our Japanese manufacturing clients, but Prosankin (www.prosankin.com), our Mexican factory, serves new customers based in the North American market with business development well under way. Additionally, we have dedicated people and experienced teams in place, who understand, support and drive their daily activities to exceed and outperform customer expectations. We appreciate the opportunity to be of service to new customers.
Are you looking to diversify your customer portfolio and find new foreign customers?
It was not that we actually targeted new foreign companies, but the North American market is huge, we would like to diversify our sales channels and we would like to continue acquiring new foreign customers.
What strategies are you employing in order to consolidate your overseas presence?
Currently, our international focus is Prosankin, our Mexican factory, which specializes in cold drawn mechanical tubing. We just started our business and we are committed to taking the right path to benefit our customers. As we continue to make progress towards having a world class and fully operational facility at our Prosankin plant in Mexico, expansion into the North American market becomes attainable. We are pleased with the exceptional progress that has been made up to this point with our production capabilities and overall serviceability to our clients. We will continue our steadfast approach and march forward towards achieving full utilization of Prosankin, as a base to expand into the North American market with the highest level of quality products and serviceability.
As for Thailand and Indonesia, Thailand has a big automotive market. It manufactures about two million units and there is a very good port in Thailand called Laem Chabang. However, Indonesia is an archipelago nation with small islands and the population is high, but their automotive manufacturing produces only 500,000 units and they actually make more motorcycles - 2,000,000 to be exact. What we do in Indonesia is that we purchase cold drawn pipes from Taiwan and Korea, then process and provide them to motorcycle manufacturers. It is not a big business and we are not foreseeing big growth there. For Vietnam, we recently just opened an office and we only have two employees. At the moment, we are just doing research and information gathering on the market.
Let's say we come back to interview you again in four years' time. What would you like to have achieved by then?
I feel that it is very difficult because, for example, if I set a specific sales target - currently our consolidated sales are 50 billion yen - and say that in 4 years it will become 100 billion yen, it does not necessarily mean that there is an advantage for us.
I do not want to put an emphasis on sales. Instead, let’s say I have a small dream that I want to accomplish. My grandfather is the founder of the company and he always said we should make the company very attractive so that employees can consider dedicating their lives to working here as being worth it.
I want the company to give back to employees so they can be happy dedicating their whole life. I always say that I am not the top management of Sankin; I am the father of Sankin.
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