July 16, 2017 10:12 pm JST

Japan's YKK adds some zip to cope with fast fashion

Zipper king overhauling its production system to counter nimble Chinese rivals

KOICHI KATO, Nikkei staff writer

TOKYO -- The fast fashion revolution is driving home the need for speed at Japanese zipper giant YKK, whose massive global market share -- estimated at nearly 50% -- is under threat from smaller Chinese rivals capable of shipping their products more quickly.

YKK has a solid reputation for quality, but it is struggling to keep up with the extremely short product-development and production cycles embraced by this new breed of clothier. To keep its heavyweight clients, the company is transforming itself into a speedier supplier.

One major change has been to introduce a new production management system capable of moving the zipper production process from one phase to the next by the hour instead of by the day, as was previously the case. 

YKK has already introduced this change at plants in Shanghai, Vietnam and other overseas facilities in Asia, and will soon do the same at its flagship plant in Kurobe, Toyama Prefecture, central Japan.

The move is aimed at enabling the company to better supply the quick-moving fast fashion retailers, which are gobbling up a growing share of the market.

Clothiers like Sweden's H&M Hennes & Mauritz and Spain's Zara have shot to dominance by delivering trendy new collections every four weeks or so, rather than every three months like most traditional apparel companies. The latter group includes some of YKK's biggest customers. They tend to focus more on quality and spend more time developing and manufacturing their products.

"We haven't been able to keep up with the pace of fast fashion companies, which demand delivery within a month of placing an order," said YKK President Hiroaki Otani.

Specialists vs. all-rounder

Smaller but faster Chinese zipper makers have taken advantage of YKK's lack of agility, siphoning off the Japanese powerhouse's customers.

All of the roughly 3,000 Chinese zipper makers are small players, with none generating annual sales of more than 20 billion yen ($176 million). Their strength lies in their specialization, which enables them to crank out products more quickly.

Most focus on making one of the three main zipper components: elements, or the teeth; the slider, which is the tab that joins and separates the elements; and the tape, which is used to attach the zipper to clothes, bags or other products.

By contrast, YKK operates a vertically integrated production system that handles all the zipper parts. It even has a unit, called the Machinery and Engineering Group, that develops machine tools for manufacturing zippers.

YKK even handles such tasks as melting the copper alloy used for the teeth and slider, and manufacturing the thread used to attach the tape to the main product.

This do-it-all approach enables YKK to manage all aspects of quality, which has helped it win the trust of traditional apparel makers.

The problem is that Chinese makers are not only fast, but they have also improved their quality in recent years, said Otani, who spent the three decades to 2014 working at the company's units in Hong Kong, Shanghai and elsewhere. Stiffer competition from these rivals, and a stronger yen, have bruised YKK's earnings.

That is evident at the company's fastening business, which accounts for more than 40% of group sales and nearly 80% of operating profit. Sales at the unit (excluding in-house transactions) for the year through March fell 10% on the year to 292.7 billion yen, while operating profit dropped 22% to 47.3 billion yen.

The unit's total asset turnover ratio, which measures how efficiently assets are used to generate sales, fell to 0.62 from 0.84 for the year that ended in March 2010.

Despite a strong earnings performance at YKK's AP unit, which mainly supplies construction materials, overall group sales declined 4% for the year, while operating profit slid 13% -- weighed down by the weak results at the fastening business.

Cutting the waste

In addition to speeding up the production process, YKK is also trying to ensure that its global network of about 50 plants operate more efficiently.

To make that happen, the company is expanding its decorating operations, which includes gilding work and adding brand logos to zipper components.

At the moment, large plants in the U.S., China and elsewhere are the only overseas YKK facilities capable of handling decorating operations. The components made at these factories are then shipped to smaller plants.

This approach, which requires moving components over long distances, is well-suited to low-mix, high-volume production, but it comes up short when trying to quickly supply a wide variety of goods -- which is what more and more customers want.

YKK's machine tool unit is close to developing a new type of low-cost machine for decorating work. Installing this equipment at its plants around the world would obviate the need to ship components between factories.

A dash of AI

YKK is also working to make its operations more energy-efficient, and therefore less costly.

In April, the company established a center at its Kurobe plant to study ways to use robots to improve energy efficiency. Staffed with an elite group of engineers, the center has already come up with potentially useful ideas for saving energy at its zipper production lines.

"Progress in energy-saving technology and greater use of artificial intelligence could lead to a return of sewing operations from Southeast Asia to Japan," Otani said.

Under its medium-term business plan for the period through March 2021, YKK aims to increase sales at its fastening business to 385.3 billion yen and lift operating profit at the unit to 69.8 billion yen.

It also plans to increase during that period the number of global research and development centers to nine from the current six and expand the R&D workforce to 1,060 from the current 810.

In 2013, YKK Chairman Tadahiro Yoshida set a target of increasing the company's unit zipper sales to 10 billion in four years from the 7.5 billion at that time. But the company has fallen short, with sales for the year through March totaling 8.8 billion. The new deadline for achieving the target has been pushed back to the year through March 2019.

But meeting even that deadline could prove difficult if the company's attempt to reinvent the way it develops and manufactures products falls flat.

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