Japanese management and manufacturing techniques focus on principles like close supplier relationships, just-in-time deliveries and zero defects. Many western companies have implemented such techniques too (see the Real World Views 21.3 in Chapter 21 on Boeing). The tight supply chain links work well, but when disruptions occur the effects are felt across the chain. In March 2011, an earthquake and tsunami in Japan caused serious disruptions for manufacturers.

On top of the loss of life and damage done to property, Japan also had to deal with widespread power outages and even failing nuclear reactors at Fukushima. The aftermath has had an effect on manufacturers too, as reported in The Economist on 31 March, 2011. For example, the article mentions how two companies (Mitsubishi and Hitachi) control 90 per cent of the market for a speciality resin, and another company (Kureha) holds about 70 per cent of the market for a polymer used in batteries for the Apple iPod. In all three cases, the damage to factories has disrupted supply. Toyota also fears a shortage of up to 500 parts, disrupting production in Japan and the US. The article quotes economists at HSBC Bank, who suggest the just-intime-philosophy may have to modified to include a ‘just-in-case’ provision.

Questions 

1 Can you think of a solution to overreliance on a single supplier for key components?

2 Should just-in-time principles be modified to include some level of buffer stocks?

Real World 21.3:

The Boeing 737 jet is the world’s most popular and reliable commercial airliner. The company has manufactured over 6000 jets in the 737 family. The latest model, the 737-900ER, was launched in 2005 and can carry more passengers over a further range than any previous model. According to a press release from 27 January, 2005, Boeing adopted lean manufacturing techniques on this 737 model, the end result of which is one of the shortest assembly times of any commercial aircraft – just 11 days. Lean manufacturing is a production philosophy which treats the use of resources on anything other than value creation as wasteful, e.g. waiting time, transport delays, defects. At Boeing, the assembly time has been cut in half since 1999. A just-in-time approach is contained within the principles of lean manufacturing. For the 737 series, Boeing reports a reduction in work in progress inventory of 55 per cent and a reduction of 59 per cent in stored parts and components inventory.