Leaving subcontract dyeing for automotive interiors and integrated production (2003)

The long work of getting out of subcontracting

The heart of this transformation is not that one product happened to land, but that the structure of the business itself was rebuilt. Commission processing is a light model — you hold no inventory and collect a fee — but the price and the margin are held by whoever places the order. Kawada Tatsuo chose to take on inventory risk in order to bring everything from raw yarn to finished product inside the company, and so to stand where he could set his own prices. The automotive work he began as a heretic, out at the window seat, he hardened into a business through the heavy capital spending that integrated production requires, and after becoming president he brought even the last processes in-house with electronic printing and the absorption of Kanebo’s fibre operations. Changing a subcontractor’s disposition, one could say, was not a slogan but a structural reform to recover the power to decide the margin.

That said, another problem was waiting on the far side of leaving subcontracting. Automotive materials, which replaced commission processing as the mainstay, now account for roughly 70% of Seiren’s revenue, leaving the bulk of its earnings owed to a single business. A company whose results once turned on the plans of the big synthetic-fibre makers is now in a position where its results can turn on the swings of the automobile industry. Whether new fields such as semiconductor processing materials and components for satellites can be raised into the next pillar — what Seiren, having remade itself from subcontractor into an independent business, faces next is the work of widening that independence by one more step.