As a member of the Kawashima Group, Sugiyama Seisakusho is playing a pivotal role in the supply chain of the automobile industry
We would like to use your company as an example to challenge the misconception that Japanese firms have somehow lost their innovative or quality edge in the eyes of the West. With that in mind, from the perspective of Japan’s top domestic manufacturer of commutators, can you please share with us your take on monozukuri? What sets your company apart from your regional manufacturing competitors?
Monozukuri from a wider perspective can be described by Japan’s geographical location. Of course, we are living on an island and one might assume that there is a scarcity of everything, but actually, it is not like that. If you search hard enough you will find anything here in Japan in terms of raw materials. If the company would like to have access to raw materials, the company will find a way to bring them here to Japan. First-hand access to raw materials in Japan is something that defines monozukuri’s possibilities. Material accessibility is one thing, and the next thing is connections. Manufacturing companies are making these throughout their entire existence, and firms cannot exist in the space alone, they need affiliate companies around them to help promote businesses together. This kind of mutual trust between many companies has occurred throughout Japan’s entire monozukuri history, and that history itself has allowed companies to stay alive in this price-competitive world that we live in.
Our wide range of customers demonstrates in a good manner the Japanese monozukuri excellence, because a good bond between companies means that they are willing to talk to each other and communicate. That communication leads to better business and making better products alongside customers. Supply chains are next, and that leads to good and strong material procurement
You just spoke about price competitiveness, and that comes from being able to balance quality and quantity as well as having a network of mutual trust and support. How have you managed to achieve a balance between quality and quantity?
It is very hard to implement and to balance all things within your company. That balance comes thanks to QCD in many cases. We have to draw a line between the quality of the Japanese market and other markets outside because the preference is given to different parts of QCD. When we look at the Japanese market, the number one preference is given to the Q or the quality. For example, 97% of our products serve the automotive industry, and it is fair to say that the automotive industry demands high-quality standards for products released by tier 1 and tier 2 suppliers. We strive to produce the highest quality products possible, and that is the top priority for our company.
Number two on that list is lead time, which is represented by the D, or delivery. The automotive industry demands not only top quality, but for products to be delivered on time. This aspect is highly important in the domestic market.
Last but not least is C or cost. Cost is a tricky subject, and as much as you can produce and satisfy the needs of final users, you still need to make that product profitable. That is the only way to continue a business. If you compare to the foreign markets, the cost comes at the top of the list, so in those markets, the price decision comes first before quality and delivery. Japan puts it in the third position, meaning we have flexibility cost-wise.
If you are always stuck in rival mode, you will have less time you can devote to R&D, which is key to finding new approaches and new business opportunities. This speaks to the beauty of Japanese monozukuri and means that companies here consider the time spent on R&D as vitally important to maintaining that balance we have talked about.
The automotive sector is living a particularly transformative time with the switch to EVs. What kind of technologies and products are you developing for the next generation of automobiles? What kind of impact is this switch having on your company?
The winds of change are coming and several things are happening with basic changes in the automotive industry. With the rise of EVs and autonomous driving, the CASE era is something that we are looking towards right now since30% of all commutators we produce serve the needs of engines. Of course, changing the entire structure of the motor will inevitably drop our sales in that type of commutator, for that reason we are looking at what is happening in the industry and attempting to take new approaches.
There are no clear solutions here, but one we might consider is brake systems. Currently, brake systems only perform one feature, its job is to stop the car. In newer EVs brakes won’t just operate by themselves, they will have some kind of electrical motor features in a way to enhance the brakes, thus creating more precise components. The next generation of brakes will perform to a similar level as if a human was operating it without the need for human interaction.
We feel that with these changes, the conventional system of brakes will change entirely and there will be a need for new motors inside the structure of these next-generation brake systems. We will be ready for that and we will be providing these new types of commutators for these kinds of structures.
Unfortunately, despite our optimism, it will be hard to say exactly what type will win out in the end, but the important concept here is that we need to look at designs that may seem impossible and turn those impossibilities into possibilities. Coming up with designs and products that customers need is the most important factor to manufacturing companies like ours.
When you think about the future of transportation, we are not always going to be driving ourselves, and I think in the near future autonomous driving is going to become quite normal. For that reason, safety is such a hot topic right now in the industry. We need safety measures because machines are emotionless and do not understand danger unless we make it clear to them. Our customers must feel safe using our products because there is a lot at stake and without trust, the industry really cannot move forward.
Back in February last year you became part of the Kawashima Corporation, turning into a consolidated subsidiary. Could you tell us a little bit about the events that led up to you joining Kawashima in terms of the motivation to join the group, some of the advantages of being part of it, and what the impact has been on your activities?
Frankly, despite almost two years passing since that happened, I feel very few results. I think that comes from the clear fact that the past 2 years have not been regular years. Many things happened on the global stage, with the COVID-19 pandemic, Russia’s invasion of Ukraine, and China’s continuous zero-COVID lockdowns. These all led to things slowing down, so it is unfortunate that we are yet to see the results of synergy at a full scale.
The motivation comes down to a number of factors, the first being a product that Kawashima released dealing with aluminum. Current trends in the automotive industry are seeing more use of aluminum than ever due to its lightweight properties. For this reason, we felt there were synergies with joining the Kawashima group. By becoming an affiliate company we have first-hand access to aluminum. In the long run, it is a new attempt for us because conventionally we have worked with copper rather than aluminum. There are a lot of pluses and minus, especially considering aluminum isn’t exactly the easiest material to deal with.
I think when you ask about the greatest advantage of this move, it comes down to the price. Aluminum is cheaper than copper purely based on procurement price. With the group structure, so far so good; we are excited to see more synergetic effects.
This theme of collaboration, especially with your company, goes well beyond Japan. We saw on your website that you have a number of overseas partners and clients that you collaborate with. Going forward, what kind of partners are you looking to connect with?
Structure wise our company is related to tier two or tier three types of businesses, so we are less of a decision-making company, whereas tier one companies are the ones that make the decisions on what companies they will cooperate with. We are in a position where we are dependent on the activities of tier-one companies.
In our company thus far we have been acting more in the way of being approached rather than doing the approaching. We are not directly targeted by domestic or overseas companies, and instead, we wait for those companies to approach us
Most of the companies that we supply our products to are Japanese car manufacturing companies, and they are mostly acting in the domestic market but in some cases, they also expand overseas. Although we do produce and supply here domestically we may find our products being supplied to some foreign manufacturing locations and end users.
You mentioned that most of your clients are Japanese. With all of these unique technologies you have been able to develop and being the number leader in Japanese commutators, are you also looking to diversify your client portfolio by finding foreign customers?
It is very hard to fit into the expectations of all foreign motor manufacturing companies. Valeo, a foreign automotive company is very related to the C aspect of QCD. We have been working hard to foster connections inside the domestic market, and I feel that we have good bonds with Japanese car manufacturing companies and that bond has been developed over several years.
We have a strong number of clientele for our commutators. What Valeo does is once a year they submit around 20-30 new designs to many tier-two and tier-three companies, asking what those companies can do. Needless to say, it is very difficult to fit into this rapid pace. Actually, Valeo is just one example of these kinds of cost-oriented companies, and that creates an obstacle and distraction for us to go to any place that is different from our established business model.
Aside from the difficulties fitting into these foreign carmakers' models, how would you describe your international development strategy?
It is diffictult d to think about any other areas or expansion of our existing business overseas. No particular foreign expansion strategy is being developed by the company at this point in time except the strategy to follow up with Japanese car manufacturing companies. If some Japanese manufacturing companies would like to localize their production outside of Japan and would like Sugiyama Seisakusho to follow up with them, of course, we would be willing to do such an expansion.
Each market is different, and with Indonesia, that came as a result of following up with a Japanese car manufacturing company that localized their production there. South Korea is a different story because as you know there are no Japanese car manufacturing companies there, and Hyundai approached Japanese manufacturing companies, so that was the reason for the cooperation there.
One core reason for our lack of foreign operations comes down to human capital. If you decide to localize production outside of Japan, you must supplement that with proper human assets, which is very hard to find in foreign markets, especially for Japanese companies. With companies of this scale, this is something that we really cannot tackle alone. When you look at our employee count, 350 people work for us in Japan and only 2 are working in Indonesia.
Imagine that we come back in three years' time and have this interview all over again. What are your goals and dreams for the next three years of Sugiyama Seisakusho?
I would like to focus less on the automotive industry. 20 years ago 50% of sales were for the automotive industry and now we have an overwhelming 97%. We might say that this shift in percentages over the past 20 years has been a bad strategy in a way. Diversification is important and it is dangerous to put all your eggs in one basket. Personally, I would like to drop those percentages to maybe around 70%, which would allow us room to explore options in other industries.
The company is very proud of our integrated manufacturing systems, which give us the number one position in terms of speed when producing commutators. We give a full responseof troubleshooting and we carry full responsibility in terms of our products. Here at Sugiyama Seisakusho, we create all of our products from scratch, starting from design all the way to finalizing the product. That gives us a step ahead of our competitors in the domestic market.
Are there any industries that you see the company diversifying into?
Anything with motors is applicable to our commutators. I see potential in not only drones but also next-generation automobiles as well.