Supply Chain Aftershock: The Japan Disaster's Impact on Consumer Goods
Although pale in comparison to the heart wrenching human tragedy in Japan, large manufacturers are trying to assess the impact, both near and long term, on their supply chains. In his book on manufacturing, “In Praise of Hard Industries”, Eamonn Fingleton discusses the Japanese industrial strategy as a key manufacturing source for the whole value chain from base materials to electronic components. It is that very strategy that is now causing severe disruptions across several value chains, including consumer goods.
Food supplies and markets, particularly rice and seafood (spinach and milk have also been mentioned), are severely impacted by the events in Japan. In the longer term, fears of food contaminated by radiation will require additional monitoring to reassure both the domestic and export markets. Japan is also one of the largest markets for premium goods across food, apparel and other consumer goods categories. It is likely the disaster will severely crimp this revenue.
Our interest, as always, is in how well or poorly supply chain technology supported company needs in dealing with the unexpected event. We come away with four recommendations:
- Modernize supply chain response management. The expectation isn't to fully anticipate the event, but to respond much more rapidly as we saw in the high tech/electronics segment.
- Go deeper with supply risk assessment. While the electronics industry responded quickly, the mitigating tactics were only one or two levels upstream in the supply chain.
- Reassessment of global supply networks. As demand becomes more and more global, supply networks must follow. Globalization (i.e. diversification) of supply will also limit the effect of local or regional disruptions.
- Better supply/demand contingency models. In base materials, industry planners seem unable to answer the question as to whether lost capacity (supply) will increase prices or lost demand will lower them. Also, the analysis necessitated by events in Japan must be combined with the implications of the unrest in the Middle East to allow for more comprehensive contingency planning and more effective supply response.
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