Supply chain disruptions force more delays in Japan

 @ibtimes
on March 24 2011 6:08 AM

Supply chain disruptions in Japan have forced at least one global automaker to delay the launch of two new models and are forcing other industries to shutter plants and rethink their logistical infrastructure.

Toyota Motor Corp <7203.T> said on Wednesday it would delay the launch in Japan of two new additions to the Prius line-up, a wagon and a minivan, from the originally planned end-April due to production disruptions from this month's devastating earthquake.

The world's biggest automaker has suspended production at all of its 12 domestic assembly plants at least through March 26 and has estimated a production loss of 140,000 vehicles until then.

The automaker is just one of dozens, if not hundreds, of Japanese manufacturers facing disruptions to their supply chains as a result of the quake, the subsequent tsunami and a still-unresolved nuclear threat.

We still don't know the full extent of what can be done to substitute the affected parts, Honda Motor Co <7267.T> spokeswoman Natsuo Asanuma said. Japan's No.3 automaker has suspended production in Japan at least until March 27.

Japanese companies are not only reeling from damage to factories and suppliers in quake-hit northeastern Japan, but are also suffering from fuel shortages nationwide and power outages in the Tokyo area that are affecting production, distribution and the ability of staff to get to work.

Ford Motor Co said on Wednesday it had felt no immediate impact or disruption from the earthquake in Japan this month.

Right now, we have no immediate impact to our production in terms of our supply chain, but clearly you would expect us to be looking at that on a daily basis and we are ... locally, regionally and globally, Peter Fleet, the president of Ford ASEAN, told Reuters in an interview.

Shares in Toyota fell 1.2 percent in a Tokyo market <.TOPX> down 0.8 percent.

Suzuki Motor Corp <7269.T> said its three car assembly factories in Japan will remain closed on Thursday and Friday, but they will operate an engine factory on those two days using parts already in inventory. The company said it has yet to decide on plans for next week. Suzuki shares fell 3.1 percent on Wednesday.

Meanwhile, Panasonic <6752.T> said on Wednesday that a factory making printed circuit board materials in Koriyama, northeast Japan, restarted Wednesday. Several other factories in the region remain closed, including one in Fukushima assembling digital cameras and audio equipment, and one in Sendai making optical pick-ups. The company declined to give any details about other affected plants. Panasonic shares fell 1.3 percent on Wednesday.

Renesas Electronics Corp <6723.T>, the world's No.5 chipmaker, has restarted operations at three earthquake-hit factories in Japan, a spokeswoman said on Wednesday.

Operations at three other factories of the firm's 22 plants in Japan remain suspended after the production restart at three plants located in Aomori and Yamagata prefectures in northern Japan.

RETHINKING AEROSPACE SUPPLY CHAIN

Japan's airlines and its aerospace industries are also suffering logistical woes.

The crisis in Japan has firmly shaken up the aerospace supply chain, according to the research and consulting firm, Frost & Sullivan.

Japan's three first-tier aerospace firms -- Mitsubishi Heavy Industries <7011.T>, Kawasaki Heavy Industries <7012.T> and Fuji Heavy Industries <7270.T> -- all have major roles in the Boeing 787 programme and all have 787-related production facilities in Nagoya, as do the subcontractors that supply them, the company said on Wednesday in a report.

Considering the fact that 35 percent of the 787 and 20 percent of the 777 are from Japan, Boeing faces considerable financial risk at the cost of uncertainty in its supply chain.

Mitsubishi shares fell 1.4 percent on Wednesday. Kawasaki shares rose 1.2 percent and Fuji shares fell 6 percent.

Mitsubishi, Kawasaki and Fuji have said that their plants in Nagoya are unaffected by the earthquake and are not suffering any production disruption, the report added. Boeing has also categorically said it has enough inventory to cope with any short-term disruptions its Japanese suppliers may face.

Frost & Sullivan said the catastrophe had raised some big questions about the globalised supply chain and just-in-time manufacturing.

Aerospace companies have realized that a global supply chain is a double-edged sword, with the losses almost nullifying the gains. This disaster will cause companies to revisit the trade-off between lowest cost and availability.

LEAN VERSUS ROBUST SUPPLIES

Echoing those comments on the global supply chain was Paul Kleindorfer, the Paul Dubrule Professor of Sustainable Development at the INSEAD business school in France.

The crisis would encourage more resilient and robust supply chains, he said.

We'll see greater attention paid to the finding of additional sources of supply, but those sources in other countries will face high hurdles because of the high quality of Japanese manufacturing and that's not going to be easy to do in other countries in Asia. Japan will continue to occupy a special role along with South Korea and Taiwan.

Kleindorfer also said all companies, not just in Japan, should use the crisis there as an opportunity to focus on selecting or pre-qualifying alternative sources of supply that they can rapidly switch to in case of a disaster.

Companies also need to invest in a war room infrastructure so that when a crisis happens, they have the ability to respond and to ascertain and rehearse and switch and tell their customers and their boards what they can expect. It shouldn't take a month to figure out what happened.

(Reporting by Isabel Reynolds, Kentaro Sugiyama, Chang-Ran Kim and James Topham in TOKYO and Ploy Ten Kate in BANGKOK; Writing by Matthew Driskill; Editing by Lincoln Feast)

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