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Vibrant SMEs of JAPAN

Manufacturing accessories for the Japanese market in emerging economies [Kaya]

Secret to Robustness
  • Start of production in Bangladesh, with many advantages.
  • Risks also distributed by dividing manufacture between China and other countries.
  • Struggle to change joint venture to wholly owned company bears fruit.

Kaya is a manufacturer of bags and other accessories. Its products are all supplied on an OEM basis, to retailers that are involved at all stages from planning to sale. All Kaya’s manufacturing is done by offshore subsidiaries. Until now, Kaya utilized a center in China, but in 2014, it will also start production in Bangladesh, as an initiative to build up a more stable supply system.

Manufacturing offshore for over two decades

Until now, Kaya manufactured all its accessories at its own plant in China. In 1989, less than a decade after the company was founded, it established a joint venture with Do All (??) (currently Beston), a South Korean manufacturer of sewn goods. The joint venture had a plant in South Korea, but in 1993, it shifted production to Guangdong in China. The move offshore was intended to benefit from low labor costs and extra production capacity. In Japan, large-lot production requests are sometimes refused, but in other countries, that doesn’t happen. The move was an advantage for accessories, which required mass-production capabilities.

Because Kaya left manufacturing at the offshore center to its partner at first, many of the products weren’t good enough to be sold. To meet standards in the Japanese market, quality control staff were assigned from Japan in an effort to improve quality.

However, progress did not go smoothly. Differences in approach between Kaya and its partner became clear, and although quality improved relative to that at the start of the operation, the improvement did not go beyond a certain level. Only a few of the Japanese employees lived in Guangdong, so Beston had more influence on the plant, and therefore more say. There were also cultural differences: If Kaya tried to return items that were unsuitable for the Japanese market, due to soiling or defects, Beston told it to "overlook small defects." It was impossible for Japanese-style attention to detail to penetrate the joint venture.

Nevertheless, as labor costs in Japan continued to rise, it wasn't realistic to bring production back to Japan. The only option was to get local employees to understand thoroughly what was meant by "quality that could compete in Japan." In 2007, Kaya dissolved the joint venture with Beston, switched to being the sole investor, and rehired staff. Although Kaya struggled to make redundancy payments to employees assigned from Beston, and to come up with the assessed value of its holding, those issues had to be overcome to stabilize the quality of its products.

Currently, quality has improved to such an extent that over 90% of products are satisfactory. In 2010, Kaya also succeeded in entering the Chinese accessory market.

However, the environment surrounding the Chinese plant has changed drastically. As China’s economy has grown sharply, basic compensation per employee has exceeded 30,000 yen. In 2012, labor costs increased 40 million yen from the previous year, and the political unrest arising from the Senkaku Islands dispute has been ongoing. As it was hard to reflect cost increases in the price of products, Kaya expected to have difficulty in supplying products from China alone. Accordingly, it decided to do manufacturing in Bangladesh, an emerging economy.

A new start in a friendly country that makes a good impression

In the sewing industry, most companies are looking into South-East Asia, where wages are low, for similar reasons. However, materials must be obtained from China, so considering transportation costs, there is little cost merit in Thailand and Vietnam, which have relatively mature economies. Kaya set its sights on neighboring countries that have even lower labor costs. It decided on Bangladesh, where sewing is a major industry, and which has been utilized by companies from Funabashi in Chiba, where Kaya’s head office is located.

This January, Kaya established Kaya Tiger Bangladesh Ltd., a joint venture in Dakar with Tiger Ltd., a Bangladeshi towel manufacturer. With 90 employees, the joint venture started manufacturing tote bags ordered by Tiger, producing 50,000 per month. As well as aiming to increase production to 100,000 per month, Kaya is considering expanding the range of products and transferring some manufacturing from China.

Kaya has a good impression of Bangladesh, where people are cheerful, amicable toward Japan, and hard-working. Although there are issues in terms of infrastructure (power grids, roads and harbors) and lead times, conversely, Kaya finds business opportunities in long lead times. It intends to enter the market for items such as suit covers, which have little fluctuation in demand and can be manufactured consistently. Kaya will continue making its mark in the accessory market by leveraging its double arrangements in China and Bangladesh.

Bangladeshi factory

Bangladeshi factory

One Point: Key Point is Foreign Market

Also envisages production for Japanese market

Says Kazunori Ikeya, Kaya's President: "With accessories, what matters is being able to supply lots of things as cheaply as possible." Kaya's shift from Japan to South Korea, China, and Bangladesh is a way to deliver products consistently in a continually changing environment. At its plant in Bangladesh, Kaya deploys veteran staff from the China plant to improve workers' skills. For the time being, the products will be for overseas markets, but the company also envisages production for the Japanese market. It may not be long before you encounter a Kaya product made in Bangladesh.

Company Data

President : Kazunori Ikeya

President : Kazunori Ikeya

Company name KAYA International Co.,Ltd.
President Kazunori Ikeya
Industry Type Manufacture and sale of bags and other accessories
Address 7-8-11 Honmachi, Funabashi-shi, Chiba Prefecture, Japan
Phone 047-426-3428

Printing day:April 4, 2014

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