Quake shows weak link in global supply chains

3:35 PM chains, Global, quake, shows, supply No Comments

The disaster in Japan has a problem with such multinational companies as business suspended: the system they use to roles to keep deliveries is slim and low-cost - still vulnerable to sudden shocks.

Factories, ports, roads, railways and airports in Northern Japan have been shut down or damaged due to one he affected the nuclear power plant in the region. So, auto and technology companies are cut off from suppliers in the disaster zone. Some had to stop or slow production.

"When you're running incredibly slim and you're going global, very prone to errors, become Wheatstone", says Stanley Fawcett, Professor of global supply chain management at Brigham Young University.

The risks are higher, because so many companies keep inventory them low, to save money. You can maintain without new supplies not production for long.

Subaru of America has suspended overtime in the only North American in Lafayette, Indiana Toyota Motor Corp. canceled production overtime and Saturday in their 10 North American plants. The two companies try to save their existing supplies.

The auto plants damaged by the earthquake one was located in Miyagi, providing parts for hybrid batteries in Toyota Prius, Camry and Lexus hybrids. It is unclear if a joint venture between Toyota and Panasonic, start the plant running again.

Story: plant shutdowns expand Japanese automakers

Even companies whose Japanese Lieferanten have escape damage encrypted to ensure, supply lines remain intact. Ford, based on a Japanese plant for hybrid batteries for the merger, the flight and the MKZ hybrid vehicles. This work was damaged in the earthquake. But Ford is transportation in Japan no chance because of the troubles. It is on the lookout for alternative supplies and seeking parts in centrifugal casting process when shipping is finished.

"The whole thing overnight could change", says spokesman Todd Nissen.

Story: Japan crisis could squeeze car world production

Car manufacturers all over the world tried to copy the Japanese car manufacturing system, the so slim and cost-efficient is considered. It is built to close links between Ministry of war car manufacturers and suppliers. But if a kink in this system, known developed line to an entire Assembly as the supply chain shut down within hours.

Toyota says that his 20,000 to 30,000 vehicles contain parts. Most come from about 600 suppliers. And the chain not everything. The 600 suppliers even rely on hundreds of other companies to provide raw materials and components.

Use vehicles for many interchangeable parts - of tubes and pipes, screws and nuts. But thousands of other parts are specifically designed for certain vehicles. Steering wheels, seats and even rear-view mirrors to distinguish from vehicle to vehicle.

"A car if you can create only 98 percent of the parts are," says Fred Hubacker, executive Director of restructuring company Conway MacKenzie in Detroit car. "Many of these parts are high-tech products that are not easily replicated."

The disaster threatens the delivery of Japanese of manufactured chips for consumer electronics, from washing machines to television sets to iPads. Factory shutdown and crippled shipping routes pose a security risk for companies that rely on chips for storing data. Japanese semiconductor Giants Toshiba Corp. and Renesas Electronics Corp. have temporarily closed facilities because of the quake.

The electronics companies, which depend on chips from Japan try that assess depth of supply disruptions. Chip prices have already jumped on fear of shortages. The price for a type of memory chip NAND Flash, often in portable electronic devices, used has called more than 10 percent increased since the disaster, analysts say.

For consumer electronics, supply chains are complex. Some phones have dozens of chips. Apple Inc. iPad requires parts from all over the world. The inside of the device show are how much coordination Apple must have enough parts with suppliers all over the world to ensure.

The Wi-Fi version the iPad uses a Toshiba chip data store, analysis of iFixit.com. The chips, the control communications of Broadcom Corp., in Irvine, California comes memory comes from Samsung Electronics Co., Korea. Texas Instruments Inc., power used for the touch screen a chip in Dallas. The processor is designed by Apple, based in Cupertino, California,

These are only the most important semiconductor guts of the machine. A variety of other chips that do other companies, other things in the iPad: activate the compass, for example, and detect if light the screen hits. All other iPad parts, from the glass touchscreen on the screws and cameras, come from a variety of suppliers.

Toshiba one of the companies was forced, after the quake factories closed. So, it is possible to delay that could disturb the delivery of chips for Apple and iPad shipments.

Apple declined comment. Toshiba representative back not immediately one message from the associated press on Wednesday.

HP new CEO, Leo Apotheker, the AP said that his company's infrastructure in Japan is "more or less intact", but that it takes longer to find out the extent of the damage in its supplier network.

Market research firm IHS iSuppli estimates that Japan is to make world's largest supplier of Silicon of semiconductor chips. Its deliveries around the world form about 60 percent.

Japan is also one of the main suppliers of "wafers", are the building blocks of computer chips.

Barclays Capital wrote in a note to investors, that a lack of large wafer consumers such as Intel, the world's largest semiconductor company and Texas instruments could squeeze analysts.

Multinational companies have built in the last two decades and closely managed supply chains that span the world. These chains associate low-wage factories in countries such as China with offices in Europe, Japan, and the United States. BYU Fawcett says, is highlighted, is "lean and global."

Companies have kept to an absolute minimum cost-cutting supplies. As many have to leave what quickly has "just in-time" deliveries with sales management according to.

But the efficiency conducted a risk: the lean, far-flung supply chains left multinational companies vulnerable to shocks provide. And the shocks come, one after the other.

The 2001 terrorist attacks in New York and Washington froze global transport. The 2003 SARS outbreak production in South China down. In Iceland stopped air traffic in Europe the eruption of the volcano in the last year. And now a Japan disaster unfolds.

Fawcett says that companies begin to completely rethink the wisdom of supply chains that will have to cross oceans. In the middle of the 2000s, he says, some US companies started factories from China after Mexico. There, they could use still cheap labor without fighting with ocean crossings.

He says he suspects the trend - called "in the close sourcing" - more will become after the disaster in Japan popular.

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