December 15, 2017 / 8:58 AM / a year ago

Japan's Yamato plans automated facility to beat labor shortage

TOKYO (Reuters) - Yamato Transport Co, Japan’s largest package delivery company, plans to open a new distribution facility with labor-saving technology near Tokyo early next year, its chief executive said on Friday.

Yamato Transport Co. President and Chief Executive Officer Yutaka Nagao speaks during an interview with Reuters at the company headquarters in Tokyo, Japan December 15, 2017. REUTERS/Issei Kato

The move comes amid widening labor shortage and a surge in parcel volumes because of the country’s growing use of e-commerce retailers such as Amazon.com Inc (AMZN.O).

The Bank of Japan’s quarterly survey on Friday showed Japanese companies were faced with the most severe staff shortages since 1992.

“It’s especially difficult to find workers in big cities. The labor shortage got more severe in December,” Yamato Transport CEO Yutaka Nagao said in an interview.

The company, a core unit of Yamato Holdings Co (9064.T) that is known for its black cat logo, has become a symbol of Japan Inc’s struggle with labor shortages.

Yamato, which commands a 47 percent share in Japan’s parcel market, saw its delivery volume rising 60 percent in the past 10 years to over 1.87 billion packages for the year ended in March.

It has put pressure on Yamato’s profit margin as the company has to pay more for its workers and contractors to deliver packages on time.

For the six months ended in September, parent Yamato Holdings posted an operating loss of 12.9 billion yen ($115.1 million), its first first-half loss in its 68-year history as a listed company.

“I expect the labor shortage to continue ... We need to consider labor-saving measures,” said Nagao, 52, a career insider who joined the company in 1988.

The new facility in Kanagawa, outside Tokyo, will have automation in parcel-sorting work that is currently done by an army of part-time workers at its neighborhood delivery stations, Nagao said.

Yamato raised delivery prices for retail customers by 15 percent in October, the first such hike in nearly three decades, to overcome ballooning labor costs.

The company also started negotiations with its 1,100 biggest corporate shippers to reduce their volume discounts. Nagao said Yamato had also been talking with smaller corporate clients over a price hike.

Some relatively large shippers stopped doing business with Yamato after they failed to agree on new prices, but the company could ask for further cuts in volume discounts in coming years if necessary to reflect costs, he said.

“Our service prices have not yet reached fair levels,” he said.

($1 = 112.0900 yen)

Reporting by Taiga Uranaka and Ritsuko Shimizu; Editing by Gopakumar Warrier

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