Aftershocks hit global supply chains

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The scale of last Friday’s earthquake in Japan and the devastating impact of the resulting tsunami on the costal region north of Tokyo will, almost certainly, cause reverberations across global supply chains.

The human tragedy, expected to count in the thousands of lost lives, the vast swathes of coastal urban landscape laid waste and the looming danger of stricken nuclear power plants makes shocking news and painful viewing. Water, electricity and transport have all been affected.

Power blackouts are expected to hit Tokyo and its hinterland over the coming weeks, causing many to speculate on the scale of lost production at the many electronic component manufacturing facilities in the area.

It is reported that Japan is responsible for 30 per cent of the world’s flash memory, used in a wide range of consumer electronics goods from digital cameras to smart-phones. D-Ram memory for personal computers and specialist glass for screens, including touch screens, may also be affected.

In the recent past, even small interruptions to chip manufacturing have had significant impacts on lead-times and delays to final product supply. Although there are alternative sources in such locations as Korea and Taiwan, shortages are sure to see prices rise as manufactures compete for scarce resources.

The automotive sector is also vulnerable. North-eastern Japan is a major centre for car production with Nissan, Toyota and Honda all having parts manufacturing sites in the area. Damage to infrastructure, ports and roads is bound to affect the movement of materials and finished product.

No doubt, over the next few months, the full impact of this disaster and its impact on manufacturing supply chains will be assessed and conclusions drawn. There will be stories of those companies that planned well for such risks and those that failed to do so.

But I suspect it will be those that had contingency planning in place and that were able to react quickly to finding and securing alternative sources of supply that will be the least affected – it will be those with agile supply chains.

The Red Cross has set up an appeal to help victims of the disaster. If you would like to make a donation click here.

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