Some of you may remember my posts on he Japanese earthquake and tsunami, where I asked the question Are natural disasters good for the economy? and a few days latered countered by saying that Natural disasters are NOT good for the economy. Well, as it turns out, Japan is on its way to recovery, perhaps faster than many expected, indeed a sign of economical resilience, a topic I from time to time have covered on my other blog. As Michael Koply writes on softwareadvice.com, perhaps not the first place to look for such news, but nonetheless, "select Japanese manufactures have not only begun to rebuild, but emphatically rally back", he says.
Lean manufacturing – established as the gold standard by Toyota and other Japanese manufacturers – relies on the knowledge that processes and conditions will stay the same day after day. Harnessing this predictability and empirically analyzing results have allowed our global economy to become what it is today. Yet the very nature of our global economy makes “leaning out” difficult. Disasters can halt production for weeks. War and social struggle put business on the back burner. And the default on sovereign debts threatens to rip apart the supply chain one link at a time. However, fast-forward four months after the destruction of the March tsunami began, and select Japanese manufactures have not only begun to rebuild, but emphatically rally back. So, who are these all-stars, and how did they do it?
The article at softwareadvice.com paints an interesting picture of what has happened since the disaster and how the recovery has been made possible, linking to a wide range of online sources for documentation. For what it's worth, Japan's industry has learned and put into practice a number of valuable supply chain lessons:
The “secret sauce” of many supply chains is their connections, relationships, and deals with suppliers. Ironically, the Japanese Big 3 of Toyota, Honda, and Nissan were forced to share these secrets and work together to help assist the auto parts suppliers affected by the earthquake and tsunami. The result? Parts in high demand and short supply have been reduced from 500 to about 30 for Toyota, who is now operating at 90% of its normal capacity. Nissan is reportedly operating at near-normal production levels, while many Honda plants are ramping-up production to pre-earthquake production levels. Given the wide-scale havoc in Japan, these numbers could have been much worse without all three players’ cooperation. Plus, by developing these types of inroads now, Toyota, Honda, and Nissan are laying the foundation for future cooperation in the event of additional disasters.
Not only the automotive industry is doing much better than expected, Canon is another shining example:
Although it was initially expected to take the remainder of the year to recover, Canon is now at pre-disaster production levels. These results even surprised Canon. How did they do it? One of Canon’s overall strategies and focal points has been diversifying its parts production efforts, including focusing on plants in southern Japan and mainland China.
Apple is another manufacturer that seems to have found the right combination of investing in technology manufacturers and negotiating attractive supplier contracts to effectively mass produce its high-quality products:
Apple’s iPad 2 was announced only days before the earthquake and tsunami hit Japan. Many expected the disaster to greatly affect availability of Apple's newest tablet model. In reality, supplies for U.S. markets and other parts of the world were largely unaffected. Apple’s investment in its supply chain has made it seem almost impermeable to disaster.
What is not suprising, if do you look behind the scenes is that Fujitsu recovered faster than other semiconductor suppliers. How come?
Fujitsu was actually ready for a such a disaster before the earthquake. The company had developed an emergency response strategy after an earthquake rocked Iwate three years earlier. Fujitsu quickly weathered the storm by shifting front-end product manufacturing to unaffected plants in central Japan and back-end product manufacturing to southern Japan and China.
For the organizations that are willing to learn there are some great lessons to learn here, and one of my favorite articles - and perhaps the most practical - on how to mitigate supply chain disruptions is Christopher Tang's Robust strategies for mitigating supply chain disruptions, where he lists 9 ways a company can address supply chain disruption risk:
- Modular design allows switching to other components in case of supply shortage
- Strategic stock
- Planned stockpiling of regular demand at central locations to serve areas in need or shortage
- Flexible supply base
- If one supplier goes down, the other can take over, some for basic demand, some for high volume fluctuations
- Make and buy
- Always keep some production in-house, outsource basic items, make high-end items in-house
- Economic supply incentives
- Commit to buying certain quantities from a certain supplier to keep the (backup) business running
- Flexible transportation
- Muliti-modal, multi-carrier, multi-routes transportation, avoid chokepoints
- Dynamic pricing and promotion
- Sell what you have, don’t delay or promise to supply what you don’t have
- Assortment planning
- For retailers, displaying what’s in stock, influence customer choice and demand
- Silent product rollover
- Do not market the introduction of new products or the end of old products
That is exactly what the companies mentioned above have done, and that is perhaps why they have recovered so quickly.
softwareadvice.com: The Post-Tsunami Supply Chain All-Stars
husdal.com: How to measure economical resilience?
husdal.com: Nine ways of mitigating supply chain disruptions