Will global supply chain feel effects of Japan tsunami for years to come?

Will the effect of the Japanese earthquake and tsunami on the global supply chain be felt for years to come, as CPOs grapple with mitigating the loss of Japanese suppliers?

“With Japan a major player in the manufacturing industry, it is impossible to downplay the implication for CPOs, with many companies vulnerable to natural disasters that can have a huge impact as seen so far in 2011,” Richard Hogg, account director at Bravo Solutions, said. 

“In response, it is critical that CPOs quickly evaluate what the loss of Japanese suppliers means to their business, and to assess alternatives available to mitigate that loss.

More so than anything else, the world relies on Japanese manufacturers for their high-precision capabilities.
A byproduct of the culture’s commitment to advancement – and its employment of top-of-the-range equipment – Japanese suppliers have long been known for the high quality and durability of their work,” Hogg said.

Despite not always being the most affordable sourcing option, Japan is heavily relied on for specialty steels, building equipment, medical device components, semiconductors and electronic chips, to name a few.

“Will companies struggle to replace Japan’s output and quality production? The smart bet would be to say ‘yes’,” Hogg said.

While replacing a supplier is never easy, it’s even more challenging when the original is highly specialized. Many substitute options will not have the experience or high-precision manufacturing capabilities needed for these types of products.

One school of thought says companies could wait it out, and hope that their Japanese suppliers quickly get back up to speed. But that’s a dangerous bet. Japan’s manufacturing production will, albeit slowly, get back to pre-disaster capacity. But even when it does, the supplier burden won’t necessarily end.

Another strategy for replacing the loss of Japan’s capacity might be to turn to emerging manufacturing nations such as Malaysia and India. While countries like this will certainly have the opportunity to take on demand, it remains to be seen if they will struggle to meet quality standards.

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