The resilience of Japan’s supply chains is tested again

By George Olcott in Tokyo, Japan, and Nick Oliver in Edinburgh, UK

Only five years after the devastation of the Tohoku Earthquake which caused a massive tsunami, the meltdown of the Fukushima nuclear plant and disrupted supply chains around the world, Japan has experienced another major earthquake. This time the quake was centred on the city of Kumamoto on Japan’s southern island of Kyushu. The force of the latest earthquake is equivalent to that of the 1995 Hanshin earthquake, which caused nearly 6000 deaths and devastated the city of Kobe.

Mercifully, the casualties from the latest earthquake are far fewer than the Hanshin or Tohoku earthquakes. However, questions are already being asked about the security and resilience of global supply chains.

Kyushu, like Tohoku, has a high concentration of industrial facilities, many of them vital links in the supply chain of key industries such as automotive and electronics. Many companies have already had to halt production at sites affected by the earthquake. Examples include:

  • Toyota, who have stopped production at some sites from at least 18-23 April.
  • Honda, who have suspended motorcycle production at their Kumamoto factory from 18-22 April.
  • Daihatsu have stopped production at their Oita and Kurume factories until 22 April.
  • Mitsubishi Motors have suspended production at their Okayama light vehicle plant until 20 April due to lack of parts.
  • Renesas, who have stopped production of semiconductors at their Kumamoto plant and are considering temporarily moving production to another location.
  • Sony have stopped production at their Kumamoto semiconductor factory. This will impact on the production of Sony digital cameras and smartphones

If previous disasters are anything to go by, we can expect a flurry of reports that dwell on the risks that just-in-time logistics pose for supply chain resilience, and how day-to-day efficiency comes at a price when disaster strikes.

Our research into how Japanese companies recovered from the Tohoku Earthquake, which so badly ruptured many supply chains, suggests a much more optimistic picture. We found that in 2011 an abundance of social capital (goodwill, essentially), both within and between firms led the much faster-than-expected recovery of the supply chain in 2011. The existence of strong ties between firms, not just between suppliers and clients but in some cases even between competitors, permitted a rapid, coordinated and focused deployment of resources that aided recovery. (See our California Management Review article on the 2011 earthquake here). Ironically, the very existence of tight, JIT logistics both fosters and requires the development of these close, cooperative relations.

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