Cost Awareness and Flexibility: Nidec Founder’s Thoughts on Successful Production Management

What is the role of manufacturing plants? Is it enough to just produce high-quality goods? Not according to Nidec’s founder Shigenobu Nagamori. At a meeting with investors in Tokyo, Nagamori emphasized the importance of thinking of production plants as profit centers—units accountable for profitability. "The profit of a company comes from its manufacturing plants. That’s how we think at Nidec,” Nagamori said.

This may seem like an obvious concept. But Nidec, a company that has acquired nearly 60 different businesses throughout its 45 year-long history, has found that a change of mind-set when it comes to production management is an effective, and often necessary, recipe to turning around underperforming businesses. "Many business leaders fail to realize that it’s not only about manufacturing high-quality products, you also have to produce them at a low cost. After we acquire a business, we look at the entire manufacturing process and start by making meticulous improvements to everything from productivity to procurement,” Nagamori explained.

Sometimes, the key to increased profitability and successful production management is flexibility on a company-group-wide level. After acquiring Leroy-Somer and Control Techniques, two motor and electric power generation businesses that previously belonged to Emerson Electric Co., the Nidec group significantly strengthened its presence in Europe in terms of manufacturing capabilities. But, many of the plants had low operation ratios, prompting the company to start integrating and optimizing production. Excess factories were regeared to produce automotive motors, one of the product categories responsible for the company’s continued growth.

Another example involves a German subsidiary producing automotive components and an Italian subsidiary with a factory in Hungary manufacturing motors for home appliances. When the German company received a large order for automotive pumps from a major OEM based in Europe, the Italian company agreed to trade factories so that the pumps could be manufactured in Hungary where the local employees could be trained to speak German relatively easily. In return, the Italian company received a new factory in Romania. Since Romanian and Italian are mutually intelligible to a large extent this exchange of factories resulted in a win-win situation, underlining the power of flexibility. “Language and communication are also important factors when it comes to organizing production and learning a new language from square one is not an easy task,” Nagamori said.

Recently, Nidec received its first new president since the company was founded in 1973. Yoshimoto Hiroyuki, who assumed office in June, will focus on the post-merger integration of newly acquired companies with a hands-on approach emphasizing the profitability of manufacturing plants. The inauguration of the new president came just half a year after the completion of the first section of the new Nidec Center for Industrial Science, located in Kyoto Prefecture, where technology aimed at making manufacturing more efficient is being researched. In July, Nidec announced an upward revision to its consolidated fiscal first-half and year-end financial forecasts for the fiscal year ending March 31, 2019.