The Increasing Importance of Material Handling Today and in the Future
An interview with Katsumi Takeuchi President and CEO of Daifuku Co., Ltd. and Hirohito Kuse, Professor at Tokyo University of Marine Science and Technology
In May 2007, we kicked off celebrations for Daifuku’s 70th anniversary. In commemoration, Mr. Takeuchi discussed the material handling industry and Daifuku’s position in it with Professor Kuse, a specialist in city logistics and distribution.
Diverse Logistics Needs
Kuse: Congratulations on seventy successful years. Let’s discuss the boundary between production and distribution. It seems that the line becomes blurred, and the two are mixed into one. If this is true, I think that importance of material handling such as transport, storage and sorting will increase. What is your opinion?
Takeuchi: Let me use car manufacturing as an example. It is becoming common for many types of cars - small and large – to be on the same line. In addition, 24-hour operation is popular, even other industries such as food. Our challenge is how to propose systems or develop products to meet individual needs of customers in various industries but still increase the sophistication of our technology.While manufacturing is a basic part, we approach business holistically, meaning we produce the products, design the systems and install them on site. I think that aftermarket service will gain importance.
Kuse: I visited Daifuku’s system support center (SSC) in Shiga Prefecture, and I thought it was wonderful. Daifuku created a mechanism that monitors customer's material handling system, detects troubles in advance and performs remote maintenance. In the future, safety and security will be more important, so it is a new approach that is ahead of its time.
Takeuchi: We have approximately 15,500 customer sites in Japan alone. If a production/distribution line stops, it will cause our customers a lot of trouble. We try to prevent trouble in advance. If a site experiences issues, we try to recover the systems quickly. To do so, it is necessary to maintain a facility like SSC and to build a mechanism to support customers' material handling system all day, every day.
Sophisticated Technology to Japan and Other Countries
Kuse: You mentioned manufacturing earlier, how do you approach it?
Takeuchi: We like to do everything we can within our own company including consulting, engineering, designing, manufacturing and developing software. For example, when we manufacture a control panel, we use our own parts to build it, resulting in a more unified design. Remote monitoring from SSC and part life prediction is possible only if we have streamlined processes.
Kuse: That seems like the opposite of outsourcing, but the benefits of accumulated technology can be great. Companies that take this approach become strong and can survive.
Takeuchi: Certainly, in Europe, a system integrator procures stacker cranes, racks and conveyors separately from specialized manufacturer and builds the whole system. Daifuku can recommend our systems to customers with confidence, but I sense discomfort with systems built with a conglomeration of products from different companies. So, we like to manufacture our products with our own technology, and we value this way of thinking.
Kuse: Recently, I have heard about the internationalization of logistics. Does Daifuku integrate this idea?
Takeuchi: At Daifuku, our policy is to build factories as close to the customers as possible, to deliver the products manufactured on-site to local customers, to have quick delivery time and to cut costs, including transport costs. Outside of Japan, our main factories are in the U.S., Thailand and Korea. Recently, we have added factories in China and Taiwan. We have to establish operations internationally in order to grow business. Currently, foreign sales account for 45 percent, but our goal is 50 percent or more within three years, as described in our medium and long-term business plans.
Kuse: Many Japanese companies are internationally active. Behind the scenes, companies, like Daifuku, that support these expanding Japanese companies are simultaneously expanding their material handling equipment businesses using excellent and widely used Japanese technology. I think this is an interesting subject.
Takeuchi: When it comes to building Daifuku factories in other countries, we are challenged with differences in business climate and culture. Additionally, skills and technology used by the people we work with overseas are different. Our objective is to ensure that the products manufactured on our behalf have the same high-quality as those made in Japan.
Kuse: When I visit other countries, I sometimes feel that sophisticated Japanese technology and craftsmanship are not available everywhere.
Takeuchi: When we do business in other countries, we invite employees from those counties to Japan and train in our technologies. We opened a training center at Shiga Works for this purpose. Courses are taught by skilled engineers and foreign employees can compete in our skills contest.
Strengthen Internal Control to Enhance Corporate Reliability
Kuse: How do you address risk management and CSR (corporate social responsibility) as a global corporation?
Takeuchi: Risk management plays a big role in our new corporate governance system. We have structured a local and global framework to raise awareness, assess and properly respond to natural disaster including earthquakes and product accidents as well as emergencies like terrorism.
Kuse: In my classes at Tokyo University, I am working with students to explore why Japanese companies have expanded their business globally and what has made them withdraw. Main issues include market conditions and cost; however, risks and infrastructure are additional reasons. Market risks include diseases, accidents, politics, labor disputes, etc. Inadequate infrastructure includes poor roads, lack of transportation, unstable electricity supply, which affects production.
Takeuchi: That’s right. For example, factory working days may be restricted for an electric road leveling in China. This is a risk. Traveler safety and transportation must be investigated in other countries before entry. It is essential to research risks prior to doing business and to take action to mitigate the effects of these risks.
Kuse: You have dealt with risks while pursuing growth. As it is said in management books, authority can be handed over but responsibility can not. Building the framework of strong internal controls should be important from a CSR perspective. After-sales service, as you mentioned, is a part of social responsibilities.
Takeuchi: In the sense of social responsibilities, there are many things that should be done. Factories should not adversely affect the community or the environment. Companies should provide job security and contribute by increasing profits and paying taxes. We like to encourage social involvement too. As part of our 70th anniversary celebrations, we donated vehicles with Daifuku’s wheelchair lifts to the local community. In the future, we aim to expand the beneficial uses of our products.
Potential of “Material Handling and Beyond”
Kuse: I admire Daifuku’s new slogan “Material Handling and Beyond”, which was created in honor of the 70th anniversary. Does “Beyond” define the enthusiasm to expand the material handling market and advance into various business fields?
Takeuchi: “Beyond” means that there is so much potential to expand our technologies as we venture into the global market. By using this slogan, we refer to our intention to face new challenges in the fields we are in today and in the fields we hope to develop in the future.
Kuse: How do new products come about?
Takeuchi: Well, for example, an automated warehouse system for general distribution requires different features, such as high-speed capability and storage conditions. In order to increase the range of our products, we promote research and development investment. However, it is necessary to abandon unprofitable products.
Kuse: Are you considering researching products for use in hotels, hospitals, libraries and offices in the future?
Takeuchi: We have already produced systems for library book storage and one for the hospital environment; however, since such facilities are not necessarily built with the same frequency as manufacturing or distribution operations, we do not have a steady supply of orders for these systems. Instead, we have performed much research and development of a transport/storage system to handle glass substrate, which is a rapidly growing in importance as the demand continues to increase for the production of liquid crystal display (LCD). Our timely and speedy response in this industry had been recognized and has brought about growth for our business. Today, we work with a small number of LCD factories, but it is our ambition to expand our business in the industry. So, the “Beyond” in our slogan also refers to “Something New” – perhaps in the addition of new products and new market.
Kuse: I presume there are 2 different methods when you aim a new market. As it is said in botany and biology, one is to slowly evolve or expand its field. It seems Daifuku follows this method of gradually expanding its business while maintaining CSR balance. The other method for entering a new market is to jump into a new field. For instance, a seed is blown off a plant and is now sprouting on an island. It is to exploit the new market based on this idea and novel vision.
Takeuchi: The first method is what we aim for. It is fundamental to improve our strong skills and insure customer satisfaction. If something is missing, it should be created to solve the problem. This is the core idea of “Beyond”.
Future for the Material Handling Industry
Kuse: Considering social issues such as aging and declining birthrate, the material handling industry will be fundamental in providing diverse and sophisticated equipment to carry us into the future.
Takeuchi: If we focus on the aging issue, mechanization and automation are vital for distribution centers. Declining birthrate will cause challenges in securing manpower. Many of our customers mention this problem and speak of the associated costs. Advancement in technology can help.
Kuse: I wonder why the distribution history is not noted for more products even though the production history of a PET bottle is. Although it is supposed to be distributed under the advanced quality control, it may be frozen or warmed on the way. Related to the risk management mentioned earlier, product quality may drop if something happens during transport despite strict quality control at the point of production. Therefore, logistics must not be neglected. Recording where a product was made and how it was transported should be actualized in a few years.
Takeuchi: RFID (Radio Frequency Identification) is the closest technology available to realize this idea in the distribution industry. Traceability showing route during transport is now available. This function is ideal for chain stores, which require quality control for refrigerated and frozen food. PET bottle water has route transport information showing when and where the product was transported after shipping from an automated warehouse system. The question is how to trace it beyond this point.
Kuse: A Ecorail mark certifies a product is transported via environmentally-friendly methods like rail freight. We should devise a plan and make an effort to inform the public that the logistics, distribution and material handling industries are making a huge contribution to society.
Takeuchi: For example, it is described that “Daifuku is responsible for logistics of this product” on a PET bottle.
Kuse: Yes. It indicates that Daifuku is responsibly transporting the product. It is one idea.
Takeuchi: Since there are many different industry groups, I hope you will encourage this movement.
Improving Social Presence and Recognition of Material Handling
Kuse: My background is civil engineering for city planning. My ultimate dream is “logistics without trucks” – meaning it is ideal to have a pipe for logistics next to water, sewer and gas pipes, which are laid under the ground.
Takeuchi: Which means?
Kuse: Considering a pneumatic dispatch tube network for mail 65km in length ran under Berlin by the end of 19th century, it should be possible to use one car on a public subway train or a running a carrier machine and use up the extra space within public utility conduits; however, it may or may not be profitable for businesses to work this way.
Takeuchi: Profit is not all that matters. Making a social contribution is one of the important roles for Daifuku. We appreciate your viewpoint on the subject.
Kuse: It is important to act consistently and faithfully when executing big dreams for the future. “Lofty ideal and harsh reality” is not a bad stance. The last question I would like to ask you is what is your role in developing and improving the status of material handling industry?
Takeuchi: If our industry becomes more recognized and we could generously invest in research and development, we could offer better products to customers. With this in mind, we would like to further develop our industry. As the leading material handling company, our message should have an influence. For this reason, I am working to improve the recognition of the material handling industry and enhancing our social presence.
Kuse: For example, the idea of product branding is popular. I think “logistics branding” can exist as well. I like helping people understand the merits of technology, which can make it easier to move a heavy load or can provide improved work environments for employees or improved conditions for the environment.
Takeuchi: I hope to inform people how much our industry is assuming this important role in society. Both the material handling industry and Daifuku must encourage this kind of public relations activities. Your idea of branding is surely important in that sense.
Kuse: Of course there are people who understand material handling industry; however the prevailing idea is that it has a less significant, behind the scenes influence on society. I look forward to seeing the change in this perception.
