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Many of us who observe global supply chain management issues and current developments have been writing and commenting upon the recent devastating earthquake that occurred in Japan and the cascading effect that this one unfortunate incident continues to have across different industry supply chains. The effects of interrupted supply will continue as existing pipeline and safety stock inventories become depleted.
Japan, to its credit, has built a strong legacy of product innovation and quality for certain components and materials and manufacturers recognized these advantages in their prior sourcing strategies. Many manufacturers have discovered risk vulnerabilities in their sources of supply, some discovering that their own suppliers were heavily reliant on components and materials sourced within the impacted regions of Japan.
Manufacturers who will ultimately provide the agility and capabilities to adapt and respond to this ongoing crisis will be far better off than those who unfortunately continue to struggle in finding alternative supply. There will surely be leaders and laggards, and some manufacturers will actually gain business as a result of this crisis.
This week I had the opportunity to read an article published in the Financial Times, Industry Left High and Dry, authored by Peter Marsh (paid subscription or free-preview account required). The article outlines the far-flung nature of today’s global supply chains by profiling an interview with David Cox, the head of operations for San Francisco based Blue Coat, a manufacturer of internet equipment with a worldwide supply network of more than 1000 companies. Beyond the specific incident of Japan, Mr. Cox asks a profound question, one that came to my mind, and was probably on the mind of many in our community.
What if this type of tragedy actually occurred near China’s Guangdong province, the heart of manufacturing for many different high and low-tech industries?
Beyond the far-reaching scope of the impacts to supply, how would individual companies be able to quickly respond to a disruption of that magnitude and scope? It is an interesting and timely question that perhaps has been posed in your own organization. If it has not, assure the best you can, that it is raised.
A hopeful learning will be that quick access to timely information relative to the complete supply chain footprint, supply risk profiles, revenue vulnerability and alternative sources of supply will become mandatory for globally stretched supply chains. Another learning will hopefully be that procurement and finance can no longer view cost reduction targets without some linkage to operational risk and capability. In the end, the loyalty of suppliers to long-standing customers may be the key differentiator to crisis mitigation.
In his FT article, Marsh concludes that the lesson for industry from the Japanese disaster is that consequences of such events across a global scope of operations are always likely to be considerable. We would add that this tragedy could also have occurred in other disaster prone regions of the world, including China or the U.S. west coast.
Supply chain risk and resiliency are unfortunately the new table stakes for today’s globally based supply chains, and skills and process competencies need to be directed at identifying and mitigating risk on a much timelier basis.
A final postscript: The photo affixed to the FT article is that of the stranded ocean freighter Asia Symphony. An internet search notes that the last port of departure for this ship, prior to its arrival in Japan was the port of Tianjin China.