In the hindsight, no one industry or player has come out with a statement mentioning any contingency plans that were in place and had helped one dodge this bullet! I am not a supply manager, but for their own good, supply chain managers for big companies, like the auto giants, SC fabs and consumer electronic goods majors, should atleast have some sort of contingency plans. Earthquakes in Japan are not too unlikely, per se.
It may seem straightforward to have back-up supply chains, but cultivating relationships with second-tier suppliers means diverting a certain amount of business their way. Forcing supply-chain managers to juggle their suppliers highlights one of the paradoxical benefits of adversity, it does test your abilities!
Japan's earthquake will definitely have impact on the production of some electronic and motor parts. This will be for awhile until most of these plants re-open for normal business operation. This is when the sister company or alternative resource is very useful in order to meet the supply and demand.
I think no one can do much about this. Such natural calamaties affecting the country like Japan where lot of electronics manufaturing is done can't e considered in planning the manufacturing. This might incur losses to the automakers because of not running the compete production.
@jbond: You are right on the fact that companies can't afford to have excess capacity be it in the form of machinery or parts. It really can become a huge cost for them. However, I also feel that one approach companies can take is to have plants that are capable of producing multiple products. I am not an expert on the industrial side, but it does seem to be a viable solution to have production plants on which production can be easily switched so that the goods that are most in demand can be produced on priority. This would be one effective way of maintaining smoothness in the supply chain.
From the distance you have a valid point. Keep supplies up and allow multiple manufacturing points for various parts. There is one main problem with that theory, money. Not only would companies have millions of dollars invested in parts that are sitting on shelves, which many companies were reducing their supplies in wake of the recession. You also have the issue of the machines to manufacture these parts. The tooling alone for some of these parts can run in the millions, let alone the cost of the machines themselves. Many companies have helped their bottom line by interchanging parts and not making some many individualized pieces for specific models.
Bottom line is that in theory this is an easy fix, when in reality it's an expensive fix.
DennisQ - You raise several good points. Master plans, back-up plans, back-ups for the back-ups - all are critical and part of the sc professional's job these days. Glad to hear that this may not cause major disruptions for you. Sincerely, being able to responding to crisis with a level head while quickly and effectively executing against plans on paper is an enviable talent. Curious to hear - how do test your various back-up plans and worst-case scenario response? Do you run spot drills with suppliers? How frequently do you evaluate and update the disaster management plan? Over the years, many people say thay have these plans and can work through all sorts of world disruptions, but no one ever really explains what that looks like. Also, I imagine that while plans look good in the binder sitting on the shelf or in some online company database, real life seems to suggests that
And like Barbara, Ashish, and other mentioned, melding best practices from vertically-integrated, outsourced, and cross-industry models and forging more dynamic supply chains are always discussion points. But, which practices are currently standing out as stellar examples? Which emergency management supply chain practices are failing miserably and have outlived their usefulness? And, how much of the supply chain truly can become formulaic, mapped by exceptions, alerts, and red flags? Reversely, how much of it depends on very talented people who have some instinctive way of fitting different puzzle pieces together. What's the balance between practice, skill, foresight, and rapid but thoughtful execution?
It's easy to forget the automotive industry when you are so involved in the electronics industry (as I am). Not only are auto makers facing shortages, but a lot of finished goods were destroyed. The image of all those cars floating away wasn't in a parking lot, it was a staging area for auto shipments. No doubt a lot of inventory in fabs was ruined, but that was a lot of cars.
The automotive industry was the home of the assembly line which was revolutionary in its time. The electronics industry moved from vertical integration to outsourcing. The supply chain was supposed to minimize the risk of too much supply being concentrated in one place, and yet, we find ourselves in that situation. With all due respect to Ashish (thank you!) the answer has to borrow from the best practices of both models. I wis I could envision what that will look like.
Companies have no choice but to rethink their entire Supply Chain dynamics after the twin disasters in Middle east and in Japan.Nobody knows and can predidct which region will explode next.
While the loss to small and mid-size Japanese manufacturers is understandable, to me, it's surprising to note that multinational giants like Toyota and Honda are also facing supply chain issues. It seems to be bad planning on the companies' part and lack of disaster management plans. Since these multinationals have production plants all over the world, it's easy for them to distribute the manufacturing so that one component is not produced in only one region of the world. This way, it would be easier to maintain the supply of goods in disaster situations.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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