Japanese (and Global) Supply Chain Must Change Rapidly Amidst Tragedy

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How do you plan for a once in a thousand year event?

The crisis in Japan is staggering. The nightmare of the ever increasing nuclear tragedy and  tsunami, combined with a massive earthquake has created one of the greatest non-war challenges any nation state has had to face in our lifetime. The human tragedy is heart stopping. Unfortunately, the potential long term economic tragedy could be worse.

Japan's manufacturing efficiency could end up thwarting its recovery and the global economic recovery along with it. The effects of Japan's massive supply chain disruption are already being felt around the globe. A GM pickup truck plant in Louisiana was forced to close because it cannot get the parts it needs to operate. Toyota & Subaru have also ratcheted back production. The article says:

GM makes two compact pickups at its Shreveport plant, the GMC Canyon and Chevrolet Colorado. Both use a five-speed manual transmission made by Japanese supplier Aisin Seiki Co, which has halted production in Japan and suspended overtime in North America.

An interesting article about these critical supply chain disruptions details how the impact could be felt directly for months and theoretically ripple through the global economy for years:

The most significant initial impact will be to the hi-tech, steel and auto industries quickly followed by those that depend on these industries such as medical devices, communications gear suppliers, car dealerships, solar, ship building, aviation and consumer electronics

The very system that created the powerhouse Japanese manufacturing economy, lean, could now be responsible for global production shortfalls in all the industries mentioned above.  Supplies in a lean manufacturing environment are short by design and without continuous resupply things will get very difficult in the global production ecosystem in very short order.  Renault got in touch with today to rapidly seek sources of alternative supply because they have 6 days inventory from some of their northern Japanese suppliers and the prospect of resupply is grim.

Luckily, the manufacturing capacity exists and through open marketplaces alternative supply can be found rapidly.  The global manufacturing OEMs that will be suffering in the coming days and months need to immediately turn to the recovering North American manufacturing supply market and the Chinese.  The open manufacturing capacity can ramp quickly to meet this new and unforeseen demand.  The profound effects of this tragedy on the global supply chain are unmistakable, however if supply chain sourcing professionals act quickly and decisively, they can be lessened.


David Landsman

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