Effects of the Japanese Earthquake on Supply Chain Systems

SUPPLY CHAIN 1
THE EFFECTS OF THE JAPANESE EARTHQUAKE
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SUPPLY CHAIN 2
Executive summary
The Japanese earthquake caused damages on the supply chain systems developed by
companies. The damages included both transport and communication disruption and loss of
physical manufacturing assets and equipment. Therefore, the companies halted operations for
a period of time to recover and remodel the supply chain system.
The earthquake taught management some valuable lessons on the vulnerabilities present in
supply chain systems. Consequently, the management developed and introduced various
changes to supply chain such as information systems and the dispersion of supply nodes. The
changes allowed the companies to have a higher level of response to future disasters.

SUPPLY CHAIN 3
Table of Contents
Executive summary.....................................................................................................................2
The Japan earthquake................................................................................................................2
Effects of the east Japan earthquake on industries................................................................4
Toyota and other automotive industries.............................................................................5
Lessons learnt from the earthquake...........................................................................................5
Information disruptions..........................................................................................................5
The cost of overreliance.........................................................................................................6
Supply chain portability using information technology.........................................................7
Supply chain evaluation.........................................................................................................8
The Just-in-time lesson...........................................................................................................8
Changes after the earthquake....................................................................................................9
Introduction of supply risk management................................................................................9
External integration with key suppliers................................................................................10
Introduction of information systems to supply chain...........................................................10
The manufacturing information system................................................................................11
Improvement on the just in time system................................................................................11
Failure mode analysis procedures.......................................................................................12
Conclusion................................................................................................................................13
Bibliography.............................................................................................................................14

SUPPLY CHAIN 4
The Japan earthquake
Natural disasters cause disruption to supply chain and logistics globally, due to the resulting
damage of firms and facilities (Craighead, 2007). The disasters include earthquake and
floods, which are beyond human intervention. The move to globalize supply chain and
logistics has increased firms’ exposure to damages caused by natural disasters. Additionally,
an increase in interdependence and outsourcing has further increased the level of exposure to
risks (Goldsby, 2009). The exposure to risk increases since disasters happening in support
locations could paralyse supply chain operations. However, the local firms have the
responsibility of identifying the possibilities of a disaster occurring and give necessary
guidance.
The report focusses on the Great East Japan Earthquake that happened on March 11, 2011,
accompanied by a tsunami. The disaster caused widespread damages on buildings, factories
and ports. The earthquake also reduced the industrial output by 15% in the months that
followed. Despite the earthquake hitting Tohoku and Kanto regions to a greater extent,
business in other Japan regions suffered from supply chain disruptions (Choi, 2016).
Furthermore, Japanese citizens were worried about the mass unemployment that could arise,
especially for the casual labourers (Christopher, 2004). The employees could remain
unemployed due to the temporary dormancy of manufacturing companies that offer daily
casual labour. Therefore, the country projected a fall in economic production. The persons
who would face the unemployment challenge included the citizens evacuated from homes to
safe areas away from the earthquake and accompanying tsunami.
The report intends to identify the lessons learnt by Japan companies as a result of the
earthquake. Various lessons were learnt even some challenging the effectiveness of the famed
just in time inventory management system. The method was criticized due to the high
susceptibility to stop in the event of disasters. Companies faced product shortages since quick