A Look Inside Canon

The sea of blue caps seemed to stretch to the horizon. Beneath each one of them, a Chinese worker quietly, meticulously popped a paper roller or other part into place—parts that, when fully assembled, would form a Canon image­RUNNER ADVANC­E printer.

That was the scene that greeted IPG and a small group of U.S. editors and analysts last month when they toured Canon's largest MFD manufacturing facility in Suzhou, China, more than an hour west of Shanghai. It was the second stop on an exclusive tour of Canon's operations in the Far East, which included a visit to Canon Inc.'s Tokyo headquarters. There, they met with several Canon executives, including Chairman and CEO Fujio Mitarai, to learn more about Canon's global strategy.

Seeing imageRUNNERs being built at the Suzhou manufacturing facility, though, was the most impressive part of the trip. The vast 188,368-square-foot building was filled with hundreds of employees, some working side by side, others in stations 10 or 15 feet apart. They worked silently, occasionally looking up at the small group of visitors moving through their plant, while automated delivery vehicles crept slowly down the aisles, bringing parts (and keeping those visitors on their toes).

The manufacturing plant is part of a 3,659,730-square-foot campus that employs 8,594 workers in Suzhou, a city of more than 4 million, laced with picturesque canals and famous for its classical gardens. Chairman and CEO Kazunori Katayama explained that nearly all of the parts for the imageRUNNERs are manufactured on site (drums and toners excluded). He pointed out the large injection molding machines used to create plastic molded parts for the machines, such as paper trays and the machines' exteriors. Making the parts in-house, he said, assures tighter quality control and saves money, since Canon avoids paying transportation costs for delivery of parts.

Katayama explained the quality assurance testing his facility conducts of the final products, which includes listening to them for "irregular sounds." No defective products are allowed to leave the plant, he insisted. All told, the plant produces between 700 and 1,000 units a day, he said—models such as the imageRUNNER ADVANCE C5051, C2030, C9075 and 8105. They are then shipped all over the world.

Katayama confided that his greatest challenge is the increasing cost of labor. Workers wages are higher than China's minimum wage, he said. To cut costs, the facility is trying to increase efficiency and decrease workers.

"We do want to introduce automation in the sorting process," he said, through a translator. "So with that effort, we believe we will be able to maintain our competitive edge."

An Excellent Plan

Katayama and all of the Japanese management staff in Suzhou are employed by Canon Inc., headquartered across the East China Sea on the south side of Tokyo. IPG and the other editors and analysts visited those offices, home to 7,000 employees, on a rainy day at the beginning of their trip.

There, Chairman and CEO Fujio Mitarai detailed Canon's "excellent global corporation plan," now in phase four, and the six key strategies Canon is implementing to achieve the "overwhelming number one position in all core businesses." These include expanding peripheral businesses, developing new business through globalized diversification and establishing a globally optimized production system. Canon also plans to establish three regional headquarters (to include the U.S. and Europe) and is planning to locate production facilities worldwide. He cited the Canon Virginia facility, which mainly produces cartridges but is capable of manufacturing copiers and printers as well.

Despite setbacks like the 2011 earthquake in Japan and the October floods in Thailand, both of which impacted Canon's production operations, Mitarai said Canon anticipates a 5 to 7 percent sales increase per year from 2012 to 2015. At the end of May, he noted, the 75-year-old company showed global growth of 8 percent.

Canon listed net 2011 sales of 3,557 billion yen (roughly $44.84 billion), 27 percent of which came from the Americas. Of that, Canon's office segment (including copiers, laser printers and digital printers) brought in 53 percent. The company's ratio of research and development to net sales, executives noted, was 8.7 percent in 2011, higher than its competition.

Large-format Poised for Growth

In describing the company's large-format printing business—bolstered by the acquisition of Océ—Yoshinori Ikeda, group executive, L Printer Products Group, Inkjet Products Operations, acknowledged that Epson and HP may have better brand recognition than Canon (which has 21 percent of market share), however Canon has a much wider product lineup. Its equipment covers not only the graphic arts (proofing, signs and displays) but also the CAD market, both color and black-and-white. Examples were given comparing Canon inkjet printers with comparable-sized HP and Epson printers. Canon's models had more compact footprints, were faster and produced sharper images.

When asked about further integration of Océ into Canon, executives noted that the Océ brand still has high customer loyalty, so it still may take some time to fully unify the two brands, though full integration is the long-term goal. (The integration of Océ technology into Canon products is already fully underway.)

Canon is pursuing opportunities in cloud-based solutions and has acquired six cloud services companies, Mitarai noted. The company also sees plenty of opportunities in inkjet production printing, as evidenced by the introduction earlier this year of the Océ ColorStream 3700 (printing color at 328 feet per minute). The demand for larger-format digital presses is being addressed by new Canon technologies like Océ InfiniStream, a 28˝ liquid toner packaging press demonstrated in May and set for a mid-2013 release.

IPG and other U.S. guests toured the Canon showroom for a historic look at Canon products over the years and a glimpse of newer innovations, like mixed-reality technology, which allows someone to look through a special viewer and interact with equipment that isn't really there. The visitors were also given a peek at some very interesting new products, still a year away from release (and thus under non-disclosure agreements), which showed impressive advancements in color accuracy. One color device in particular, to launch in 2013, seems very well suited for the in-plant market.

Overall, this visit to Canon's operations in Japan and China was an informative, eye-opening experience that clarified Canon's intentions to expand its foothold in the graphic arts market, while revealing some of the steps it is taking toward that goal.