SUPPLY CHAIN
enue at risk, supply chain managers accelerated purchases where possible, sped the
qualification of new parts and alternate
sites and made emergency product mix
changes.
No option was off the table in meeting
customer needs. One component manufacturer said that if a standard part could
not be made due to missing components,
his company readily recommended a
competitor to their customers and found
their competitors doing the same for
them.
Teams finished their work late each
night, handing tasks to their colleagues in
other time zones so that work could continue around the clock. Then they started
again early the next day. Communication
was critical with daily status reports
sent to hundreds of internal stakeholders. Supplier status information had to be
handled carefully on a need to know basis
in order to avoid unnecessarily disseminating confidential information. Status
communications to customers were vetted
by corporate communications and crisis
management personnel. After the initial
month, a smaller core team continued
work at most manufacturers interviewed
and isn’t expected to wrap up its mitigation work until this Fall.
Lessons Learned from
the Japan Earthquake
By PATRICK BRENNAN
On March11, amagni- tude 9.0 earthquake rockedthemainisland of Honshu Japan. The earthquake, tsu- nami and its aftermath caused devastating human, social
and economic damage. People around the
world were stunned by video of exploding
nuclear power plant buildings, demolished
cities and personal accounts of the tragedy.
The earthquake also heavily disrupted
global manufacturing supply chains. My
discussions with electronics and aerospace
companies since March as well as public
sources have exposed commonalities in
manufacturer experiences and revealed
important lessons for reducing losses
during future supply chain disruptions.
Manufacturers Deployed
Global Teams to Limit
Potentially Massive Losses
All the electronics and aerospace manufacturers interviewed had a significant
supply chain presence in Japan so it was
immediately apparent that there was a
high risk of widespread supplier parts outages. Their company executives met on
March 11. Each company suffered little or
no damage to their own facilities in Japan.
Still, when supply chain staff reached out
to suppliers in the earthquake region, the
initial reports were grim. They informed
their executives of the possible loss of
many dozens to hundreds of critical parts
from their suppliers. The resulting estimates of potential revenue lost were staggering.
Executives immediately directed their
staff to apply all available resources to
assess and mitigate the damage, accept-
ing that other priorities would suffer. In
the end, cross-functional, global teams
worked a month of very long, very intense
days including weekends initially.
Counting the Cost
It has been several months now, and as
the people of Japan continue the recovery
effort, the world is still trying to unravel
the economic consequences of the event.
The World Bank estimates it to be the cost-
Figure 1. Earthquake Losses at a Sample of Semiconductor Companies as of May 2011. Data
collected from published company reports and online sources.
