In Japan, the manufacturing industry accounts for around 20% of the GDP and working population. Manufacturing is one of the key industries in Japan, so much so that it is called a manufacturing powerhouse.
Source: Trends and future challenges in the manufacturing industry (Manufacturing Industries Bureau, Ministry of Economy, Trade and Industry)
In recent years, the spread of the new coronavirus has had a major impact, with supply chains being disrupted.
Many companies have been forced to go out of business due to the suspension of production lines due to the inability to procure materials. This incident has led to concerns about supply chain vulnerabilities.
In this article, we will touch on the current status and issues of the manufacturing industry in Japan, and then explain the key points of efforts to resolve them. Please use this as a reference for improvement measures, such as problem-solving methods for the future of the manufacturing industry.
INDEX
- Current status of the manufacturing industry in Japan
- Current issues in Japan’s manufacturing industry
- Future measures to resolve issues in the manufacturing industry
- Key points for solving manufacturing industry issues
- Examples of specific problem-solving in the Japanese manufacturing industry
- summary
Current status of the manufacturing industry in Japan
According to “Trends and Future Issues in the Manufacturing Industry” released by the Manufacturing Industries Bureau of the Ministry of Economy, Trade and Industry, sales significantly decreased for a period of time in the first half of 2020 due to the spread of the new coronavirus infection.
Although the industry situation has been on a recovery trend since the second half of 2020, sales have not reached the level before the spread of infection.
*Source: Trends and future challenges in the manufacturing industry (Manufacturing Industries Bureau, Ministry of Economy, Trade and Industry)
Below, we will explain the current state of the manufacturing industry in Japan.
Changes in the business environment due to soaring raw material and energy costs
Due to the global situation, raw material and energy costs are rising day by day in Japan.
Furthermore, due to the weak yen, the prices of imported goods are also rising. For companies that import raw materials from overseas, increased costs have become a serious issue that cannot be avoided.
Impact of the spread of the new coronavirus infection
The disruption of supply chains due to the spread of the new coronavirus has hit Japan’s manufacturing industry hard enough to make it difficult to carry out business activities. This is probably due to the fact that many companies have located their factories overseas in order to reduce production costs.
Although the overall manufacturing market is on a recovery trend, stable procurement of materials is difficult, and production lines continue to be backed up. The challenge is to create a system that allows the supply chain to function properly.
Decarbonization through carbon neutral declaration
Carbon neutrality is a policy that balances the amount of greenhouse gas emissions and absorption, reducing net emissions to zero. Each country has announced that they aim to become carbon neutral by 2050.
According to the results of a 2020 greenhouse gas emissions survey released by the Ministry of the Environment, the manufacturing industry (industrial sector) accounts for a high proportion of CO2 emissions, accounting for approximately 24% of the total (before electricity and heat distribution). That is why there is a strong need for efforts to decarbonize the manufacturing industry.
*Source: FY2020 Greenhouse Gas Emissions (Final Value) Overview (Ministry of the Environment)
The environmental impact of the manufacturing industry includes waste from the manufacturing process and greenhouse gases generated from the use of electricity, gas, oil, etc.
Current issues in Japan’s manufacturing industry
From here, let’s take a look at what issues Japan’s manufacturing industry is currently facing. The current challenges faced by the manufacturing industry are as follows.
- Delay in capital investment
- Lack of successors due to a decline in the working population
- Delay in passing on skills due to lack of instructors
Delay in capital investment
Although capital investment in the manufacturing industry has exceeded depreciation expenses since 2012, it has been decreasing since around 2020 when the new coronavirus infection spread.
*Source: Trends and future challenges in the manufacturing industry (Manufacturing Industries Bureau, Ministry of Economy, Trade and Industry)
Efforts to improve operational efficiency, such as dealing with aging equipment and introducing IT tools and systems, are important, but many companies do not do so. While sales are sluggish, it is difficult to make a decision on additional investment, but proactive efforts will be necessary to expand the market in the future.
Lack of successors due to a decline in the working population
According to the 2022 Manufacturing White Paper released by the Ministry of Economy, Trade and Industry, the Ministry of Health, Labor and Welfare, and the Ministry of Education, Culture, Sports, Science and Technology, the number of people employed in the manufacturing industry has decreased by 1.57 million people over the past 20 years. In Japan, an aging society with a declining birthrate, the working population is decreasing year by year, as shown in the data above, and the lack of successors has become an issue.
Additionally, in recent years, there has been an increase in cases of people changing jobs to companies with better conditions rather than continuing to work at the same company. One of the reasons for the lack of successors is that the people who inherit the technology quit before they are fully developed.
*Source: 2022 Manufacturing White Paper (Ministry of Economy, Trade and Industry, Ministry of Health, Labor and Welfare, Ministry of Education, Culture, Sports, Science and Technology)
Delay in passing on skills due to lack of instructors
Japan’s manufacturing industry, which is said to be a manufacturing powerhouse, is highly regarded for its high technological capabilities. In order to continue to maintain high technical capabilities, it is important to pass on knowledge and know-how.
However, as the engineers who support the manufacturing industry are aging year by year, a shortage of instructors is becoming an issue. In fact, in the 2022 Monozukuri White Paper mentioned above, more than 60% of business establishments answered that they “lack human resources to instruct” in a survey on human resource development issues conducted in 2020.
*Source: 2022 Manufacturing White Paper (Ministry of Economy, Trade and Industry, Ministry of Health, Labor and Welfare, Ministry of Education, Culture, Sports, Science and Technology)
In addition, the lack of talent from the next generation to teach technology is thought to be contributing to the delay in passing on technology.
Another reason for the delay in passing on technology is the lack of a mechanism for passing it on. Engineers’ knowledge and know-how have been cultivated through experience, and there are no manuals or other visualized materials available.
Using verbal explanations and observing and memorizing methods of inheritance makes it difficult to pass on skills in a short period of time, making improvement difficult. When reviewing the current means of inheritance, visualization through the use of AI etc. will provide hints for efficient inheritance methods.
Future measures to resolve issues in the manufacturing industry
In order to improve the issues faced by the manufacturing industry, it is important to create a system that allows for more efficient work. Here, we will explain what needs to be done in the future in order to resolve the issue.
Resolving the human resource shortage by promoting DX
If DX is promoted, the current analog work will be digitized, work will become more efficient, and productivity can be expected to improve.
Tasks that used to be handled by individual employees have become more visible, and a system has been established that anyone can follow, which has the added benefit of creating a workplace that is easier to work in. By replacing routine tasks with automation and reviewing processes for non-routine tasks, you can further reduce the burden on employees.
Realization of smart factory
In a smart factory, the management of production facilities and equipment in the warehouse and the work data of personnel are aggregated using the Internet of Things (IoT).
By analyzing the collected data, it is possible to solve current problems in the manufacturing industry and create a system that can find new added value.
Rebuilding the supply chain system
The spread of the new coronavirus has disrupted supply chains, making it difficult for many companies to continue their operations. In the future, it will be necessary to anticipate all risks and strengthen the supply chain.
It is necessary to review procurement flows and production systems and diversify risks by separating production and delivery bases. Please rebuild your system based on a variety of scenarios and create a system that is resilient to risks.
Carbon neutral measures
In order to achieve carbon neutrality, it is effective to switch the electricity used to environmentally friendly electricity such as renewable energy. However, considering the initial investment cost, switching is not easy.
It would be realistic to start with what you can do immediately, such as reducing power usage and reviewing your power company.
Improving workplaces through 5S activities, etc.
In order to increase efficiency and improve business operations, it is important not only to make large-scale efforts but also to work on things close to home. One specific initiative is 5S activities.
5S is an acronym for the following:
- Organize
- Tidying up
- cleaning
- cleanliness
- Discipline (habituation)
Specifically, it refers to a system that makes it easy to handle goods, goods, and information. This is an initiative adopted by many companies for the purpose of maintaining and improving the workplace environment.
By thoroughly implementing 5S, we can expect to improve the situation of not knowing where things are. Additionally, in an organized workplace, wasteful work is less likely to occur, so you can aim to improve work efficiency.
Key points for solving manufacturing industry issues
Supply chains are the basis of manufacturing operations. Because our work involves multiple companies both domestically and internationally, it is often affected by various social situations.
Therefore, digitalization of operations is recommended to solve problems in the manufacturing industry. From here, we will explain the key points for realizing digitalization that will help solve problems in the manufacturing industry.
Start with small improvements
When proceeding with digitalization, the transition will be smoother if you start with small-scale improvements as tests.
This is because digitizing operations all at once will not only put a heavy burden on migration costs and human resources but may also disrupt existing operations.
After identifying the issues, try implementing them starting with tasks that can be tackled immediately and on a low budget.
Digitalization of work is done while communicating with employees.
Digitalization in the manufacturing industry also plays a role in covering employee shortages. If the transition to digitalization is completed smoothly, existing tasks can be carried out with fewer employees, which will also lead to a reduction in labor costs.
On the other hand, there are cases where some employees are worried that they will lose their jobs, so proceed with digitalization with caution.
It is important to talk to your employees about the purpose of your work digitalization efforts and your future outlook.
Securing and developing digital human resources
Even if you are able to go digital, if you do not have human resources who can quickly respond to any problems that occur, operations will not proceed smoothly. Therefore, in order to digitize business operations, it is essential to secure human resources who can utilize and operate digital technology.
However, as digitally savvy human resources are in high demand from all companies, it may be difficult to hire them. Consider outsourcing to a specialist for a set period of time, such as during the introduction stage or until you get used to it.
Security measures
With digitalization, companies will be able to handle a variety of confidential information, such as their own valuable know-how and information on new products. When this happens, there are concerns about risks such as information leaks.
At the beginning of digitalization, it is essential to take measures such as improving the security level.
Examples of specific problem-solving in the Japanese manufacturing industry
From here, let’s take a look at specific examples of problem-solving in the Japanese manufacturing industry. Please use this as a reference for your future efforts.
Food manufacturer company A/case study
Company A, a food manufacturer, was experiencing delays in responding to customers as conversations between employees began over the office phone.
In today’s rapidly changing world, it is important to be able to respond flexibly and quickly to customer feedback. In this respect, the company was facing issues with internal communication.
Therefore, the company introduced smartphones and internal SNS as a countermeasure. This reduces unnecessary confirmation work and eliminates the need to relay office calls. As a result, office employees who were previously busy dealing with internal matters can now focus on customer service.
Additionally, the company had previously been using different smartphones depending on its department and group company, posing issues with operational management and communication costs. By unifying smartphones from one telecommunications company through this initiative, we have also succeeded in optimizing operational burden and communication costs.
Major general communications manufacturer C company/case study
Company C, a major general communications manufacturer, aims to manufacture products that do not rely on humans.
Collaboration between divisions was an issue in order to shorten delivery times and strengthen the BCP (Business Continuity Plan) with disaster countermeasures in mind, as well as technology succession barriers in response to increasingly complex products. At the company, each division was responsible for different products and factories, and there were no common rules between divisions.
Therefore, in order to solve product development issues, we built a design digitalization platform within our own production system. Through this platform, we digitized operations, established rules and development flows, and aimed to share product development know-how and facilitate smooth communication in real-time.
As a result, the company improved the quality of its product development process through company-wide comparisons, reduced rework, and shortened delivery times.
summary
Manufacturing is one of the important core industries in Japan.
In recent years, the spread of the new coronavirus has made it difficult to procure materials and disrupted the supply chain. The manufacturing industry, which is susceptible to the effects of global conditions, needs to take precautionary measures in anticipation of major troubles and risks that may occur.
In order to explain current issues such as a shortage of human resources and delays in capital investment, efforts are being made to improve operational efficiency through digitalization. Why not start by reviewing your company’s operations and start digitizing tasks that are less burdensome?
