Five Months On: The Japanese Tsunami’s Impact on Global Supply Chains
The tsunami in Japan in March this year caused a dreadful loss of life and unquantifiable human suffering. It also damaged the country’s economy and its industrial base. The full impact (in a broader, global sense), is more difficult to assess.
Five months on, has the predicted disruption to global supply chains (caused by the tsunami) really been as bad as initially forecasted? Or has it been ‘business as usual’ for the most part world-wide?
It all really depends upon just how much of a global ‘driving force’ Japan was at the time of the tsunami – how much sway Japan had on the world economy in the first place.
About Japanese car and steel production
The truth is that at the time of the disaster Japanese influence upon global supply chains overall was not as strong as one would think1, given the nation’s track record and reputation for being incredibly work-orientated, seemingly industrious to an almost inexhaustible level!
Granted, interruptions to Japanese car and steel production have, to an extent, impacted upon global supply chains, but this hardly constitutes a severe body blow to the world economy. In fact, the disruption to Japanese supply chains (for steel products and cars) may serve to create opportunities for suppliers in America, Europe and indeed other parts of Asia2.
What about the electronics industry?
Almost one fifth of all global technology products are made in Japan. And although some major importers of electronic products and components have other suppliers primed to ‘step in’ should their Japanese supply chain suddenly be interrupted, those without a good continuity plan have felt the frighteningly far-reaching effect of the tsunami. Significant supply chain interruptions were caused by the closure of several major Japanese ports and the temporarily closure one of the few silicon wafer foundries.
As a result of delays in the arrival from Japan of electronic components (semiconductors, silicon wafers and memory chips) and goods (digital cameras, music devices, laptops and televisions, etc)2, some manufacturers’ and retailers’ reputations across the Globe have been eroded, their sales have significantly dropped (with their profits plummeting in tandem, of course), and perhaps worst of all, once loyal customers are now buying their ‘must have’ video games, digital cameras, iPads, and widescreen TVs, etc., elsewhere. Never to return?
Sony’s Troubles Mount
The natural disaster hit Sony hard in an already declining market and a period of unfavourable exchange rates. Sony’s Q1 results reported costs totalling $66m for restoration, loss of inventory and production downtime4. Additionally, Sony’s CPS and PDS segments saw a drop in sales due to the restricted availability of some components for certain product lines and decreased production capacity due to damaged manufacturing equipment.
Further supply chain problems were experienced in the UK on 8th August when Sony’s compact discs and DVDs warehouse in Enfield was burnt down during the UK riots. The warehouse was reported to be Sony's only content products depot in the UK5. This certainly isn’t a good time for Sony, which is still reeling from the Play Station cyber-attacks that shut down parts of their network from April until July 2011.
References/Sources
1&2 Movehut / The Impact of the Japanese Tsunami
3 Freightwatch / Japan Earthquake and Tsunami and the Impact on the Electronics Supply Chain Industry
4 http://www.sony.net/SonyInfo/IR/financial/fr/11q1_sony.pdf
5 http://www.theregister.co.uk/2011/08/09/sony_warehouse_london_riots/