Supply-Chain Challenges in Post-Earthquake Japan Japanese automakers have long been known for the quality of their products,
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The disaster zone in Kesennuma, Miyagi prefecture, 100 days after a massive 9.0-magnitude earthquake and tsunami devastated the northeastern coast of Japan. made themselves increasingly felt in manufacturing facilities far from Japan. One auto industry research firm predicted that about five million cars that the industry had expected to sell in 2011 would never be made.
By spring and summer 2011, in fact, U.S. auto dealers were reporting what one called "a lot of emptiness" in their showrooms. Many logged dwindling sales as supplies fell to as little as one-fifth their normal levels, and popular cars such as the Honda Civic and Accord went out of stock. Without new cars to sell, even trade-in sales were slowing. Honda posted a 27% decline in sales for August 201 1, and Toyota anticipated a dramatic 31% profit decline for the year. Although the Japanese auto industry worked hard to quickly return to full capacity, output was still not fully restored some s ix months after the disaster. The disaster's long-lasting ripple effects thus motivated industry executives to consider some;: changes in their vaunted manufacturing and supply operations. Traditionally, Toyota had used a single source for many parts that were common to more than one of its car models. Although the company locally sources about 85% to 90% of parts and materials needed for its North American manufacturing operations, a strategy that should make it less vulnerable to supply interruptions in Japan, it actually builds a larger proportion of its vehicles in Japan than do the other automakers, so the 201 1 disaster was a serious blow.
In response to these problems, Toyota's management began work to "foolproof the supply chain so that it could recover from major interruptions in as little as two weeks. The plan had three parts. Firs t, Toyota would increase standardization of auto parts so all Japanese carmakers could share the supply. These parts would be made in several locations to ensure uninterrupted supply. Next, the company asked its upstream suppliers of highly specialized p arts, or parts that are sourced from only one location, to hold larger inventories than they had been carrying, as and opened up new options for manufacturing such parts to reduce its dependence on single sources. Finally, and perhaps most ambitiously, Toyota took steps to make each of its global regions independent of the others in terms of parts supply, so supply chain disruptions in one area will not spill over into the operations of any other areas.
What are some of the advantages of the supply chain used in the Japanese auto industry before the March 2011 earthquake and tsunami? What were some of its disadvantages?
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Related Book For
Introduction to Operations and Supply Chain Management
ISBN: 978-0132747325
3rd edition
Authors: Cecil B. Bozarth, Robert B. Handfield
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