Owning the machine: in-house IT and logistics behind the Shimamura model (1999)

Design the cost structure before the scale

The heart of this decision is that Shimamura deliberately took onto its own books the computing and the logistics it could have outsourced and stayed light without — and in doing so designed the cost structure itself. On the unfavourable ground it had chosen — small catchments away from the station, a ceiling price it refused to breach, thin margins on high volume — the company turned the compression of operating cost into its competitive advantage. All-store online item-level control; scheduled overnight delivery with purchase slips abolished; stores run by fixed-hours staff; central buying at head office — each is an unglamorous piece of rationalization, but bundled together and owned outright they became a moat that is hard to copy from outside.

The character of the model shows in its two stages: the foundation Shimamura Tsunetoshi laid, and the doctrine of self-reliance that President Fujiwara Hidejiro built on top of it. Single-minded concentration on clothing, plus the moat of doing things in house, carried the company across the whole country through the deflation years, and still works today as the inventory control that shifts goods between stores until the last piece is sold. Before competing over how many stores to add, Shimamura settled which ground it would fight on and how it would hold costs there — the model begins in that order of operations.