The Post-Tsunami Supply Chain All-Stars | Who Recovered the Fastest and How?


Analyst, Software Advice

Many will not forget the sights of the March 2011 earthquake and tsunami in Japan. These natural disasters tested Japan and the manufacturing prowess upon which the country had been built. Unfortunately, the manufacturing methods that led to glorious growth in post-war Japan are what led to post-tsunami crippling.

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?

Sharing Secrets Saved the Japanese Big 3

Supply chains are known for their secrets. 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. While production levels are still less than desired, and certain models’ availability is limited, this is a positive movement for the industry. Car manufacturers expect a brighter second half of 2012.

The results aren’t all rosy, however. Honda has reportedly increased production of all units except the 2012 Honda Civic, which is expected to be delayed until later this year. Toyota, meanwhile has seen sales drop 21.1% over the past year.

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.

Diversified Production Centers Put Canon Ahead of Schedule

Canon, the Japanese producer of many of the world’s printer and camera products, has been one of the great success stories of production post-disaster. 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, whom initially announced it wouldn't be until the end of the year before production reached desired levels.

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. Diversification is a central, reoccurring theme within Canon; general business diversification is core to Canon’s strategy. Canon’s success is a great example of how investing in supply chain redundancy can be fruitful both today and tomorrow.

Apple’s Supply Chain Investment Pays Off

Apple’s iPad 2 was announced 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.

In fact, Apple’s supply chain has been called one of the secrets to its success. The company’s ability to produce large amounts of high-quality tech products – at a price that consumers are willing to pay – has helped Apple become the third-largest vendor of PCs in the world.

Apple has found the right combination of investing in technology manufacturers and negotiating attractive supplier contracts to effectively mass produce its high-quality products. Reinvesting its profits in its supply chain has ensured Apple continued access to key components, even in light of natural disasters and increasing competition.

Fujitsu Recovers Faster Than Other Semiconductor Suppliers

One of the major manufacturers of semiconductors in Japan, Fujitsu, has wafer fabrication operations near the heart of the earthquake disaster zone. Yet, the company recovered more quickly and efficiently than any other semiconductor supplier. In fact, five plants dedicated to manufacturing the chips were back at pre-earthquake production levels in less than three months.

How did they do it? iSuppli notes that 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. Fujitsu also included redundancy in its manufacturing capabilities, such as preparing its plant in Mie to handle processing 150mm, 200mm and 300mm silicon wafers.

What’s Important to Focus on in the Meantime?

Back in April, supply chain software executive Paul Martyn blogged for Forbes that he expected full recovery to take 9-12 months. These supply chain all-stars have beat these expectations by collaborating with other businesses and suppliers in crisis, focusing on redundancy in the supply chain and effectively preparing for disaster situations.

For the organizations that are willing to learn, there are some great lessons in how these companies recovered. Today, businesses must identify and plan for the vulnerabilities in one’s supply chains now to prevent future weaknesses. This focus is the most sound way of balancing disaster-readiness while still focusing on profits.

Have you analyzed your supply chain and assessed which points are most vulnerable? What have you done in terms of developing a disaster action-plan? Share your experiences below.

Thumbnail image created by Adam Browning.

  • Vidya

    Great to know about the ‘secret sauce’ of the above mentioned all-star supply chains . And yes , need of the hour is to re-look at the supply chain for the ‘unimaginable’ situations.

  • Jan Husdal

    Thanks for a great-write up with links.  It’s good to see Japan back on its feet again, showing what is supply chain risk management in practice.

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