Vertical integration for tape manufacturers: from adhesive formulation to finished product
- R&D should take a very active role in business expansion.
- Nitto’s head of R&D planning suggests structuring your business vertically, i.e. engaging with the market in conjunction with the entire adhesive tape value chain, from raw materials suppliers to converters, according to the principles of environment, speed, differentiation, cost, flexibility, and communication.
- The key to success is taking vertical integration up a notch: forging open discussion with your suppliers and partners in the supply chain, while considering the balance between innovation and disclosure, as well as cultural differences.
Afera’s Turin conference presentation series
Today’s tape business strategy is changing
At Afera’s last annual event for the tape industry, a leading European tape manufacturer talked about better structuring its business to engage successfully in today’s market. Michel Sabo, head of R&D planning at Nitto Belgium N.V., suggested structuring businesses vertically, i.e. engaging with the market in conjunction with the entire adhesive tape value chain, from raw materials suppliers to converters, according to the principles of environment, speed, differentiation, cost, flexibility, and communication.
But this vertical integration should be turned up a notch: Open discussion with your suppliers and other partners in the supply chain are key, and in doing this, so is finding the balance between innovation and disclosure, and considering cultural differences.
What is Nitto’s profile?
Everyone knows the multinational’s name, but who is Nitto and what is it as a company up to? Celebrating its 100th birthday this year, this producer of tapes and other products—already 13,500 of them—is based in Osaka, Japan, and has 102 companies and 30,000 employees worldwide.
Interestingly, Nitto holds 5% of its business in Europe, which also holds the same proportion of the world’s population. Mr. Sabo said that they want to increase their business share in this region. The manner in which a successful, forward-looking, tape-related business is set up indicates that R&D should take a very active role in business expansion. “We have to go to the next level,” explained Mr. Sabo. “We have to change the way that we are developing products.”
What was business like traditionally for a European tape company?
According to Mr. Sabo, Nitto had its products (e.g. different tapes, double-coated tapes, and surface protective films) and its customers. The customers utilised the tapes, converted them and brought them to market. Until recently, Nitto had always made its own products: Not a company that bought polymers, Nitto formulated its own adhesives starting from the monomers. The adhesives were coated using various coating techniques and processed roll-to-roll. In addition to tapes, Nitto’s core technologies included films, such as those for electrical insulation and polyethylene co-extruded films for surface protection.
But carrying on with business defined by these parameters isn’t enough anymore. The generations of electronics, such as phones and tablets, are becoming shorter and shorter. Mr. Sabo says that every 6 months new products are used, new demands are created, and businesses in the tape market must react to them immediately if they are to be successful. And meeting success in this case means knowing and engaging in the complete party—the evolving value chain: the OEM, the parts makers and the converters. The tape manufacturer’s product may be a different shape, structure or layout depending on the party it is made for, and it constantly needs to be updated and adapted.
So Nitto cultivates its existing business while developing new products and applications, and the company goes about developing new demand. The result of this is new business, Mr. Sabo explained, and from there on, Nitto grows. A few of its product range over the years: thermal release sheets, polarising film and transdermal patches.
“We obviously have access to many different technologies and view tape as a functional sheet—not just something that sticks, but we want to add different technologies to that product,” shared Mr. Sabo.
At Nitto’s R&D, they focus on both the upstream and downstream of their demand. They are currently working on reduction of CO₂ emissions by collaborating with universities on creating “green” solvents and emulsions which can help them meet the requirements of the market.
Customer insights: environment, speed, differentiation, cost, flexibility, and communication
If your tape business’ world revolves around the current market, evolving with it and adapting to it, and the market’s landscape starts to include environmental regulation and sustainability standards, it follows that you take these on as well. As Mr. Sabo said, there is legislation according to which many countries refuse to work with products containing certain substances.
In terms of speed of development, meeting customers’ demands, everything should be done yesterday! And everybody wants a unique product. How are the customers differentiating themselves from the rest? How are you as a tape manufacturer going to differentiate?
For customers, cost is key. The most important principle is reducing the cost of production through automation. Nitto is working with companies that have automated tape application systems and equipment, for example, in its efforts to ensure a positive impact on the total production cost.
This is also linked to flexibility. How fast can you react—change—according to market needs?
In order to maintain supplying that market with new products and developments, we need to forge relationships with various external organisations as well: R&D centres, universities, industry collectives and most importantly, suppliers. Tape manufacturers need the support of these groups in order to be able to fulfil the demands of the market.
Where does the environment and sustainability come into play?
Nitto tries to develop, together with its customers, “green features” which allow them to obtain their goals in the environmental world. An example would be reinforcement materials for car bodies. These allow the OEMs to reduce the thickness of the steel, reducing the weight of the car, decreasing in turn fuel consumption.
The company is engaging in “green manufacturing” in 2 ways: on one hand, working toward solvent-less adhesives and emulsions. On the other, embracing the solvent and trying to make the best out of it, and by using distillation systems in which solvent is recovered and reused.
In terms of “green procurement”, Nitto is working on utilising bio-based materials. Currently in development is a project to manufacture a tape using a bio-based raw material. The company has already created a biodegradable mulching film. Finally, “end-of-life cycles product features” including easy dismantling capabilities utilising an external trigger are in development.
In the past, leading environmental regulation came out of Europe in the form of “a headache” called REACH. Nowadays, environmental legislation is a global phenomenon, existing in Asia and the U.S., so it is no longer just European.
Opportunity or threat?
Nitto sees sustainable activities amidst a drastically changing market as opportunities, but they need a change of mindset:
- R&D personnel: They need to look for opportunities in the market, to go where the action is. They cannot afford to isolate themselves in the basement laboratory for too long, while the market passes them by.
- Salespeople: They have to identify the real application needs, to pinpoint their customers’ needs, rather than merely selling the product.
- Production personnel: They need to demonstrate their flexibility as it exists in the equipment.
- Purchasing personnel: Their main goal is to find the suppliers who can work with you or who want to collaborate with you.
Mr. Sabo explained that Nitto is also going into the market with functionalities, meaning that they talk with customers to define what they need—not which product but what they want to achieve, through the following steps: Identifying your application, looking at the materials you use, establishing the function that it has.
Nitto has also organised all of its products under 5 different functionalities: to permeate, to protect, to transfer, to block and to adhere.
Vertical integration (2.0) over total supply chain
Nitto’s message is that vertical integration, however forward-thinking and strategically placed it is now, should be turned up a notch.
The key to success is forging open discussion with your supplier and other partners in the supply chain. At the same time, you have to consider the balance between innovation and disclosure, i.e. if you pursue joint development or open innovation or create IP, how will you protect it? Through non-disclosure agreements?
And you must also consider cultural differences. These already separate northern and southern Europeans in many ways. Asians and Americans also have different ways of conducting business.
About Michel Sabo
Born in Belgium in 1959, Michel developed a strong interest in chemistry at a young age. In 1982, he graduated from the University of Antwerp with a degree in organic chemistry. Mr. Sabo started his career at Nitto in 1985 in the R&D department, which he managed after a few years. 14 years ago, he founded the Nitto Business Academy, where all new company employees in the EMEA region learn about Nitto’s wide product range. Mr. Sabo has served as technical support manager and product manager at all the Nitto Base divisions and is currently responsible for all R&D planning activities.
Questions and comments?