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When developing strategies and initiatives directed at supply chain disruption and risk management, organizations sometimes dwell too much on the negative consequences. That is understandable since a supply chain disruption of the magnitude and scope that involved the devastating earthquake and tsunami that occurred in Japan had far-reaching financial and bottom-line implications that are still being played-out on the global stage.
An article published in today’s Financial Times (paid subscription or preview sign-up account required) provides quantifiable evidence of both the negative or positive impacts. A graphic attached to the article quantifies the impact of the earthquake on Japan’s domestic automakers, and their stock price. Four months after the actual incident and Toyota stock has dropped 7.8 percent, Mitsubishi is down 7.1 percent, and Honda has dropped 6.6 percent. Supply Chain Matters has thus far quantified over $2 billion in direct costs reported to date from Japan based companies.
There is however the opportunity side of the disaster. Some companies were able to leverage the consequences of the disruption to market advantage. On the stockholder equity side, Mazda stock is up 3.5 percent, Nissan is up 2.9 percent. Nissan continues to communicate that its global sales will rise 10 percent in the fiscal year in spite of the disruption, because the majority of its global production capacity remains external to Japan.  Nissan claims that it was able to assess major supply chain issues caused by the quake in about an hour. In early April, the period directly after the quake, Nissan began shipping engines from its Tennessee U.S. V6 engine plant directly to Japan in order to keep its Japan assembly plants operating. At the end of June, Mazda announced that its Japan based assembly plants had reached normal production levels, including overtime, while Toyota forecasts that normal production will not occur until the fall.
The Hyundai and Kia brand combined has posted a volume output increase of 14.6 percent year-to-date. Reports are that Hyundai models are in such high demand that assembly plants are working to maximum capacity to keep-up with global demand. In May, Hyundai announced that it would invest $173 million to double its engine production capacity in Alabama.
On the supply side, supply chain teams who were able to quickly analyze and assess the overall impact to specific component supply quickly moved to lock-up any remaining alternative supplier capacity, assuring continuity of supply as well as headaches for industry competitors.
We are often reminded that in the Chinese symbol depicting crisis, the meaning translates to both danger and opportunity. When formulating a supply chain risk management strategy. Organizations need to remember both of these aspects and have plans to address either scenario.
Bob Ferrari
