Supply Chain Challenges in Post-Earthquake Japan: The Case of Automotive Industry

The supply chain practiced in the automotive industry of Japan prior to 2011 natural calamities in the form of tsunami and earth-quake was very well-run and streamlined. The motor makers used to rely on lean philosophy in manufacturing the vehicles. This system offered several pros in the form of reduced wastage, cut costs, and enhanced quality of the products. Automakers saved in huge costs associated with keeping inventories. Lean manufacturing benefitted in quality products in that only products were produced that were needed by the customer. Locally-sourced materials were also advantageous for the automotive companies in Japan as it kept them secure and less vulnerable in the face of supply interruptions in the country. The use of a single source for the most common car parts was yet another advantage as it offered quality items with competitive prices (“ASH BUS 307 Week 5 Final Assignment Paper”).

Because the majority of players in the Japanese auto industry practiced lean production, hence, they failed a contingency plan.

This system could only work where the operating environment was stable, with predictable demand. Another disadvantage was that of lack of standardization of the auto parts, which resulted in failure to share the supply amongst the automakers. Second, the production of auto parts was not dispersed across the globe, doing so could have helped in tough times of earthquake and tsunami. The third disadvantage of the supply chain prior to the 2011 disaster was that of dependence on single sources, i.e. they “put all their eggs in one basket”, hence, faced with interrupted supplies.

Toyota’s plan for a reliable and safe supply chain what it called “foolproof supply chain” is not in line with the lean manufacturing system.

According to the text in the last paragraph of the case study, part of Toyota’s plan is to hold inventories in bulk. Toyota seems destined for having suppliers who could keep inventories of useful parts that could be used to fulfill orders for quite a lot of months. It is also clear that Toyota wants independent global regions each self-sufficient in supplying parts, a plan that is likely to increase storage costs. Therefore, the proposed supply chain system is, by no means, consistent with the lean production (“Suppose Realco”, 2018).

First, Toyota can polish up on its plan of the foolproof supply chain by identifying global areas with higher demands, followed by a robust demand forecast model. More than single sources of different parts can further strengthen this quest. This way Toyota could do away with supply chain inefficiencies.

Second, Toyota’s plan could be improved through embedding sustainability into supply chain operations. The 3P bottom-line “profit — planet — people” has been too essential today that it can’t be denied of its consideration when formulating a supply chain strategy. Companies pursuing environmental sustainability have an edge in terms of productivity, production competencies, supplier relationship management, and supply chain processes (Slade, “6 Strategies for Better Supply Chain Management in the Current Economy”).

Third, Toyota should make sure that well-thought-out response plans are in place. These plans shall focus on, first suppliers, and second catastrophes. The company needs to be vigilant enough to highlight suppliers who are highly important or slightly replaceable. Unforeseen situations like floods, earthquakes, tsunamis, etc. may affect the transportation network, roadways, airways, and railways, eventually turning into big distress. Companies addicted to strategic contingency planning tend to respond to such circumstances beforehand and are less vulnerable to crises like these.

Finally, it is important for Toyota to not only safeguard itself but it must be interested in keeping things immune for the entire chain of supply. The consequences of a natural calamity tend to be drastic even a long time has passed after a disaster occurred. Since all supply chain processes and functions are interlinked and dependent on each other, a single player exposed to a disaster means the entire industry is at risk of the same. This is easily understandable with the advent of globalization as the world has now intertwined to turn into a global village. A small supply chain interruption in one part of the world can have a huge impact on businesses in other parts of the world.

With the recommended plan, Toyota will be more engaged with its suppliers as the company will have to ensure the pursuance of proposed strategies to the suppliers.

It’ll be necessary for Toyota to establish close coordination with its suppliers required to hold bulk inventories at their warehouses, especially during the process of production because retaining inventory may give rise to more wastage which reflects a cost on the part of the suppliers (“Suppose Realco”, 2018).

It was a desperate need of Toyota to initiate something new that could help fight natural disasters and keep supply chain processes smooth-running. The plan required that new production units are to be set up at physically dispersed locations in addition to suppliers keeping inventories for use in coming months. Another factor that will affect the way Toyota interacts with supply chain players is the standardization of the parts which aimed at dealing with the shortages. When a company is short of any parts at some point in time, this strategy is going to help out.

References

ASH BUS 307 Week 5 Final Assignment Paper. (n.d.). https://www.bartleby.com/essay/ASH-BUS-307-Week-5-Final-Assignment-P3TGHAD38RTS

Slade, S. (n.d.). 6 Strategies for Better Supply Chain Management in the Current Economy. https://blogs.oracle.com/scm/5-strategies-for-better-supply-chain-management-in-the-current-economy

Suppose Realco. (2018, February 20). https://acasestudy.com/suppose-realco/