Breaking News, World News and Taiwan News .^ȲĤ@^ɨơB^sD
GUIDE POST        Photo Gallery        Topics        Comics        About Guide Post        
Tuesday, March 22, 2011
Supplies intercepted
The disaster in Japan has exposed a problem with how multinational companies do business: The system they use to keep supplies rolling in is lean and cost-effective — yet vulnerable to sudden shocks.

Factories, ports, roads, railways and airports in northern Japan have been shut down or damaged because of the stricken nuclear plant in the region. So auto and technology companies are cut off from suppliers in the disaster zone. Some have had to slow or stop production.

Automakers around the world have tried to copy the Japanese car manufacturing system, which is regarded as lean and cost-efficient. It's built around tight links between an automaker and its multiple suppliers. But if a kink develops in that system, known as the supply chain, an entire assembly line can shut down within hours.

Vehicles use lots of interchangeable parts — from hoses and tubes to nuts and bolts. But thousands of other parts are custom-designed for specific vehicles. Steering wheels, seats, and even rear view mirrors can differ from car to car.

"You can't build a car if just 98 percent of the parts are available," says Fred Hubacker, executive director of auto restructuring firm Conway MacKenzie in Detroit. "Many of these parts are highly technical products that are not easily replicated."

The disaster is also threatening the supply of Japanese-made chips for consumer electronics, from washing machines to TVs to iPads. Factory shutdowns and crippled shipping routes pose a risk to companies that depend on chips for storing data. Japanese semiconductor giants Toshiba Corp. and Renesas Electronics Corp. have temporarily closed facilities because of the quake.

Over the past two decades, multinational companies have built and tightly managed supply chains that span the globe. These chains link low-wage factories in places like China with operations in Europe, Japan and the United States. The emphasis, Hubacker says, is on being "lean and global."

Companies have kept inventories at a bare minimum to cut costs. Many have relied on what's called "just-in-time" management to quickly match supplies with sales

But that increased efficiency has carried a risk: The lean, far-flung supply chains left multinationals vulnerable to supply shocks. And the shocks have come one after another.

The 2001 terrorist attacks in New York and Washington froze global transportation. The 2003 SARS outbreak shut down production in southern China. The eruption of a volcano last year in Iceland stopped air traffic over Europe. And now a disaster is unfolding in Japan.

Hubacker says companies are starting to rethink the wisdom of depending entirely on supply chains that must cross oceans. In the mid-2000s, he says, some U.S. companies started moving factories from China to Mexico. There, they could still take advantage of cheap labor without having to contend with ocean crossings.

He says he suspects the trend — called "near-sourcing" — will become more popular after the disaster in Japan.

Sitemap | Top Stories | Taiwan | China | Business | Asia | World | Sports | Life | Arts & Leisure | Health | Editorial | Commentary | Travel | Movies | TV Listings
Classifieds | Bookstore | Getting Around | Weather | Guide Post | Student Post | English Courses | Subscribe | Advertise | About Us | Career | Contact Us
Copyright © 1999 – 2014 The China Post. Breaking news from Taiwan, China and the world.
The China Post  Terms of use