Japan Crises Affecting Global Supply Chain

Manufacturers and other businesses that rely on Japanese components and/or products are beginning to realize that the earthquake, tsunami and nuclear crisis that have devastated Japan are likely to affect their supply chains for several weeks and possibly even longer.

For example, The New York Times is reporting that Nissan has at least nine Japanese vehicle and parts factories and 35 suppliers that have been disrupted by the disaster. In the article, the chairman of Nissan Americas says he can offer no guess on the financial toll or when the company would return to normal.

Likewise, Honda has told US dealers that it will delay taking orders for Japanese-made cars and trucks that they would normally receive in May until the company has a better idea of its ability to ship them. And Toyota plants remain shuttered, as well.

Computer manufacturers are other technology firms are facing similar concerns. Toshiba Corp and Hitachi LTd both announced last week that their assembly lines have been affected.

And some aircraft manufacturers are in a bind, too. For instance, roughly one-third (35 percent) of the Boeing 787 and 20 percent of the 777 are manufactured in Japan.

As Dirk De Waart, a director of management consultancy PRTM, points out, the catastrophe in Japan underscores the realization that just-in-time inventory can increase supplier risk to a point where companies can be quite vulnerable. In some cases, buffering inventories with second-sourcing deals can help mitigate these risks. For instance, aircraft manufacturers may want to dual-source sub-assembly level components to safeguard against uncertainty.

TAGS: Finance
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