Automakers this week continued to slow down production or shutter plants altogether as electronic component shortages stemming from Japan’s recent disaster rippled through the supply chain.
The Wall Street Journal reported Monday that several European auto manufacturing facilities have been affected already or could face disruptions in the coming weeks.
According to the report, Adam Opel AG, the German unit of US auto giant General Motors , reduced output at its German and Spanish plants, and France's PSA Peugeot-Citroën warned that diesel engine production would be affected. Last week, Volvo Cars said that inventory of some components was down to a week's worth of production; output could be squeezed if stocks are not replenished.
In Japan, damage to factories, combined with the lack of electricity and fuel, has forced several OEMs to stop production. In a press release, Toyota said Tuesday that a vehicle production halt, which began on March 14, will continue at all plants in Japan (including subsidiary vehicle manufacturers) until March 26. "A decision on when vehicle production will resume in Japan has yet to be made," the company said.
On the up side, Toyota added that "TMC parts plants in Japan resumed production of replacement parts for vehicles already on the market on March 17 and resumed the production of parts for overseas production on March 21." Meanwhile, all of Toyota’s 13 North American vehicle and engine plants are running normally, but "overtime has been curtailed to conserve parts that come from suppliers in Japan," the company noted.
Honda made a similar announcement on Tuesday as well. The OEM said production of finished units would continue to be suspended until March 27 at several of its Japanese factories. "Concerning operations from March 28 onwards, Honda will make decisions based on the status of the recovery of Japanese society as a whole as well as the supply of parts," the company said.
US OEMs, which have been slowly recovering from the recession’s punch in the gut, will also feel the pinch. Citing industry analysts and company spokespeople, the Wall Street Journal said the US auto sector will likely encounter "sporadic production shutdowns for several months," as a result of the shortages. Supplies of microchips, sensors, rubber, and forged metal parts were tight before Japan’s massive earthquake and tsunami, and the situation will be further exacerbated in the disaster’s aftermath.
General Motors, for instance, said it suspended production at its Shreveport, La. assembly facility for the week of March 21 because of "a parts shortage resulting from the crisis in Japan."
The company also said: "We are constantly assessing the situation and anticipating adjustments in our plants around the world as needed. These adjustments may include optimizing the usage of parts that are -- or will be -- in short supply, modifications to manufacturing schedules and temporary suspensions of production."
Very likely in the coming weeks and months, we're going to see companies in many other sectors talk about the impact of shortages from suppliers in disaster-struck regions of Japan. I’m curious, though: What supply chain lessons stand to be learned from this? Which practices are going to be implemented to stave off significant revenue and profit loss if supplies can’t be replenished quickly and factories go black for extended periods of time? And what kind of worst-case scenario planning will kick in to avert future situations?
I, for one, think the 21st century supply chain is encountering one of its most extreme pressure tests. Tried and true practices that have forged lean supply chains, just-in-time inventory models, and a stripped-down number of key supply partnerships have met their match in a big way. While I would say the world could do without disasters of this magnitude, I’d like to see if Japan’s recovery also sparks innovative thinking around new and much-needed manufacturing, supply chain, and cross-industry collaboration initiatives.