Why FAX Orders Persist in Manufacturing: The "Real Reasons Why Digitalization is Difficult" Revealed from Over 15 Company Interviews, and the Challenge of AI Business OS "FactoryOS"

At 8 AM, the first thing that moves in the factory is not the "machines" but the "FAX machine."

In a factory manufacturing diamond tools, with about 20 employees, the head of the corporate planning department handles everything from manufacturing to sales and order processing. 80% of the orders received by this factory arrive via FAX, and 20% via email. They deal with 100 to 200 business partners, and the order form formats exceed 100 types.

"We receive at least 30 orders a day, sometimes over 100. Since they are sent in proprietary formats by manufacturers and wholesalers, we have to check each one and manually input them into the system."

Some orders are even handwritten on FAX cover sheets. Sometimes, drawing numbers are included to specify details, but often they are not. Over 20 years, nearly 10,000 drawing numbers have accumulated. Repeat orders are about half, if any, and the rest require confirmation each time.

This scene is not unique to this factory. In user interviews conducted with over 15 companies during our product development, similar structural challenges repeatedly emerged across various industries. A sales administration staff member in a cardboard manufacturing company processes 2,000 orders a month. A sales administration team at an apparel manufacturer manually inputs 50 to 100 purchase orders daily. A sales engineering department at a bellows manufacturer processes 20,000 orders annually. In all these workplaces, the entry point for orders was FAX and manual input.

According to a commissioned survey by the Ministry of Economy, Trade and Industry (2019), approximately 76% of small and medium-sized enterprises (SMEs) in Japan use FAX for order processing. While glamorous keywords like Industry 4.0, Smart Factory, and Manufacturing DX are flying around, the entry point for orders remains "paper."

Why do FAX orders persist? What emerged from the interviews were structural circumstances that cannot be dismissed as merely an "IT literacy problem."

Five Structural Reasons Why FAX Persists, as Revealed by Interviews

Reason 1: Customers continue to use FAX

A sales administration staff member at an apparel manufacturer headquartered in Osaka said:

"Our customers range from large home centers to small clients who receive direct shipments to construction sites. Most orders arrive by FAX. We stopped printing paper after a law on digitalization just before COVID-19, but we still end up manually inputting data into the system while viewing PDF data on screen."

In the manufacturing supply chain, it is extremely difficult for subcontractors to ask their customers to "stop using FAX" due to business relationships. During interviews, a common sentiment was, "Our position is weaker than our business partners, so we have no choice but to adapt to their methods."

Digitalization of order processing cannot be completed by one company alone. Unless the entire ecosystem, including business partners, changes, a single company transitioning to digital is meaningless. This is the deepest bottleneck in manufacturing DX.

Reason 2: No suitable EDI exists for small and medium-sized manufacturers

EDI (Electronic Data Interchange) is widespread for order processing between large corporations. However, the situation is different in the world of small and medium-sized manufacturing.

In the case of a bellows manufacturer in Mie Prefecture (199 employees), about 40% of its 20,000 annual orders are via EDI, while the remaining 60% are analog—FAX and email order processing continues. Business partners using EDI are limited to some OEM clients, and most partners send order forms in their own proprietary formats individually.

Even at the diamond tool manufacturer, only one company sends orders via EDI. Almost all of their more than 100 business partners send order forms in proprietary formats via FAX. It is virtually impossible to get all business partners to adopt a standardized EDI system.

As a result, "FAX, which can receive any format," ironically continues to function as the most versatile order infrastructure.

Reason 3: Implementation costs and "on-site acceptance"

Some companies interviewed were also proceeding with the introduction of production management systems. The diamond tool manufacturer had introduced TECHKS from Technoa two months prior and was in the process of master data registration.

"The deciding factor was that it could be operated in the cloud without a server. Our scale is small, so we don't have the luxury of having a dedicated IT person."

However, they are not using functions such as order processing systems or AI OCR. The introduction focuses on order processing and sales management, and they have not yet utilized all functions. The operating profit margin for SMEs in manufacturing is generally 3% to 5%. With limited budgets, system investments must be made incrementally, starting with areas where effects are clearly visible.

Reason 4: High-mix, low-volume production hinders digitalization

High-mix, low-volume manufacturing has a fundamental complexity that differs from mass production factories.

A female sales administration staff member in a cardboard manufacturing company in Niigata Prefecture processes approximately 2,000 orders per month.