Source: Chopra, S. and Meindl, P. (2007). Supply Chain Management: Strategy, Planning & Operation. 3rd ed., Pearson Prentice Hall.
- Background to Japanese disaster
It is universally acknowledged that Japan sits astride the edge of two slowing moving plates, and as with other Pacific rim countries in the so called ring of fire this brings about the near certainty of spasmodic earthquakes. On 11th March, 2011, Japan’s most powerful earthquake since records started has struck the north-east coast, generating an enormous tsunami (BBC, 2011). Shortly after, nuclear power station in Fukushima has exploded, destroying thousands of coastal communities. According to near-term statistics (Reuters, 2011), Japanese disaster gave rise to the negative impacts are as follows:
Table 2.1 Overall statistics after Japanese disaster
In addition, given the disaster disruption in Japanese industrial activity, the effect on global supply chains could also be crucial. This is especially vital in industries such as autos, telecommunications and consumer electronics. It is estimated that the negative effect on global growth this year will be inappreciable- at most in the 0.1% to 0.2% range. (BBC, 2011)
Disruption in Japanese automotive and steel production may lead to a rise in the need for these products from other regions, including the rest of Non-Japan Asia, the United States, and Europe. In particular, South Korea, Taiwan and Thailand have a slight import dependence on Japan, approximately 15%, 21% and 20% correspondingly. (Reuters, 2011) These countries are thereby more assailable than other countries in terms of continuous disruptions in Japanese output. In cases where supply chains depend on Japanese parts, the US operations of Japanese automakers and semiconductors imported from Japan would be destruction to US production. Besides, Japan is not a substantial export market for most European countries, hence, the whole effects on European growth would be finite.
- Data presentation
Japanese earthquake and tsunami had a tremendous impact on car and electronic industry in a global scope. With the level of international division in car and electronic goods, many multinational companies were suspended or partially suspended to some extent during the disaster. Demand will be affected as well since many electronics manufacturers are in Japan, and their consumption of semiconductors will be halted until earthquake damage is repaired.
Electronic industry：
Table 3.1 Japan’s hard-hit electronic companies
Source: (Emschina, 2011), International Electronic Business
Research results in Table 3.1 illustrate four aspects that influence Japanese-based multinational companies to pay attention to. Effects to electronic organisations were gathered in three areas, which are Iwate, Miyagi and Fukushima. It is obvious that the accessories of Liquid Crystal Display Panels did not have direct effect on two regions, including Iwate and Miyagi. Furthermore, passive device, semiconductor, liquid crystal display panel and precision components account for dominant position in the global supply chain market. Japanese companies transformed their production manufactures into overseas market, nevertheless, it retained core parts and technologies in the domestic districts.
Table 3.2 Sony operations after Japan earthquake
Table 3.3 Sony Net Loss in two quarters
Source: (Procurementleaders, 2011), Sony details impact of Japan earthquake
As is exhibited in the table 3.2, electronic giant Sony took some measures in time to prevent the situation getting worse. Sony plants and facilities were resumed or partially resumed after a one-month disaster. Subsequently, Sony’s financial results for the first quarter and second quarter ending 02 November indicated that sales declined significantly. It is said that a 15.5 billion yen loss in quarter 1 owing to the poverty of raw materials and electricity power after the devastating disaster. At the same time, Sony reported a fall in sales of Liquid Crystal Display televisions and Yen appreciation led to a massive deficit in quarter 2.
Automobile industry:
Table 3.4 Japanese auto parts suppliers
Units: $million, %
Table3.5 Comparisons of Japanese auto enterprise production with sales volume in March, 2011 Units: %
Source: (Emschina, 2011), International Electronic Business
It is apparent from the chart that sales incomes of the only company in Fukushima are $1.47 billion, which generates GPS, Information processing, Audio and Video system. These commodities can substitute, thereby affecting slightly during the disaster. Of more importance, there are 15 multinational companies in Tokyo, producing a wide spread of goods. In particular, engine and Control System are irreplaceable, which impact remarkably on the global auto supply chain. On the other hands, comprehensive performance of four auto companies leaved much to be desired. Noticeably, Mazda increased its overseas output slightly in the mean time of a dramatic domestic output decline.
Data analysis and discussion
Japan is a significant source of chips to backup consumer electronics devices. As a case in Sony, Sony is one of the electronic giant companies in Japan. Supply chain issues as a consequence of the devastating earthquake in Japan have influenced electronics enterprise Sony’s first and second quarter profits, enforcing the company to overhaul further solutions to slash costs. During the initial period, Sony had phase back manufacturing at some sites in Japan owing to scarcity of raw materials and power electricity after the disruption, operations are negatively affected by the earthquake and the plants impeded by scarcity make digital cameras, lenses, mobile phones, headphones and televisions. However, Sony took further measures as necessary, including deploying available materials and components among Sony Group companies, utilizing alternative components and expanding procurement channels so as to restore full production capacity as soon as possible ( Procurementleaders, 2011).
To make up for the deficit of Sony’s television sales and have a core competitive advantage in the mass market, correspondingly, Sony has to reduce costs and prices so as to keep pace with the low sales. What is more, the sudden hit of earthquake affected a multitude of Sony production facilities, thus the company slashed inventory and started an aggressive plan to outsource additional television producing outside of Japan. Senior management also entered into joint manufacturing ventures with industry rivals (BBC, 2011). All these things considered, Sony avoided it at stake and coped with the contingency of this destructive disaster efficiently.
In the automobile industry, Toyota put forward a concept of JIT(Just in time), through with the agreements between parts suppliers and reduce inventory, has been an universal manufacturing model owing to a higher efficiency of production mode. Notwithstanding, once emergency encountered, it is easy to appear production interruptions and difficult to recover right away, which can be revealed on the Table 3.5 as above.
- Conclusion
Japan disaster has an extensive impact on the global industrial chain, highlighting the interdependence of world economy under the background of globalisation. At the same time, it has exposed an industrial chain in some link has an excessive dependence on some countries. Multinational companies set up enterprise research and development centre on the basis of each region’s advantage, in the short term, multinational companies will reflect on global procurement, production pattern in global division of labour. Considering the hard-hit effect and safeguarding the production system, from the point view of stability, multinational companies are supposed to attach more importance to the decentralisation, diversification of layout and the way of procurement. Last but not at least, only the acceleration and advancement in international division of labour can multinational companies disperse potential risks in global scope of supply chain.
- Recommendations
In order to predict and tackle such incidents, operating efficiently on the supply chain in the future. I propose some recommendations are as follows:
• Start a lean or Six Sigma Initiative—put lean thinking tactics into consumer-facing process, suppliers, logistics, planning and scheduling. Companies are driving profitability and quality advancements as well as improving delivery at every sector in the value chain. The same can be applied to Six Sigma or Lean Six Sigma. Moreover, realising the probabilities and setting realistic goals can be succeeded in the operations.
• Use labour management in distribution centres--- It is critical that material s arrive generates delays that can give rise to lost sales in the market. Therefore, have sufficient staff at spare is necessary. For another thing, being overstaffed when there is nothing to load or unload costs money. Multinational companies can utilize labour management software, savings from standards and incentives can be tremendous.
References
BBC, (2011), Japan earthquake: Tsunami hits north-west, Retrieved at:
(accessed 05 November 2011)
Bidgoli, H. (2010), The Handbook of Technology Management: Supply Chain Management, Marketing and Advertising, and Global Management, John Wiley and Sons, pp. 191
Chen, IJ & Paulraj, A. (2004), Towards a theory of supply chain management: the constructs and measurements. Journal of Operations Management, 22/2: 119-150.
Chopra, S. and Meindl, P. (2007). Supply Chain Management: Strategy, Planning & Operation. 3rd ed., Pearson Prentice Hall.
Emschina, (2011), International Electronic Business, Retrieved at: http: //www.emschina.com.cn (accessed 06, November, 2011)
Lysons, K. & Farrington, B. (2006). Purchasing and Supply Chain Management. 7th ed., FT Prentice Hall.
Procurementleaders, (2011), Sony details impact of Japan earthquake, Retrieved at: http://www.procurementleaders.com_learninggroups_supply-chain-management_scm-news_1415-sony-details-impact-japan (accessed 06, November, 2011)
Reuters, (2011), Japanese earthquake & Tsunami disaster data, Retrieved at:
(accessed 05 November, 2011)
