Turning a condemned plant into a contract manufacturer — and a buyer of other firms’ factories (2012)

Close it, or remake it

At the centre of this decision is the question of whether there is any road other than closing a production site whose market has disappeared. Once NTT changed its procurement policy and the main product had been displaced by foreign routers, shutting the Honjo plant had ample logic behind it, and most of the company supported exactly that. What Shimizu Koichiro brought forward instead was neither equipment nor headcount but a process skill — the changeover technique accumulated on exchange boards. Bring in the work of building other companies’ products and the skill survives in a plant that has lost the product it used to sell; the shift to contract manufacturing can be seen as an attempt to re-measure a site’s value from the side of capability rather than assets.

Keeping the capability alone, however, did not make it a pillar of the business. To meet a 5% margin standard Oki bought a circuit-board plant, and kept adding scale afterwards by taking over other firms’ factories. Without the acquisitions, contract manufacturing would most likely have remained subcontract work. Oki wound its company up and remade it in 1949, spent ten years from 1998 letting go of semiconductors, and in the 2010s bought factories. Close it, or remake it — that the answer to the same question differs from decision to decision suggests why this company’s business mix has been reassembled again and again.