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Live Updates: Japan Quakes Shake Foundations of Auto & Electronics Industries

Posted by Elementum News Desk | April 15, 2016

Consumer electronics could be facing months of supply chain disruptions after the Kumamoto quakes rattled manufacturers in Southern Japan.

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What Happened

A 7.3 tremor struck the industry-heavy region of Kumamoto, in southern Japan, early Saturday morning. Just two days earlier, a 6.4-magnitude shake rattled the same area, killing nine, injuring thousands, and shutting down industries. Communities are threatened by risks of powerful aftershocks, and many have had to evacuate buildings after structural damage. In some areas, residents have chosen to sleep on the street rather than return to their homes. 

The big supply chain issue? The popularity of semiconductor and other electronics producers in the region, whose fragile manufacturing process could have been critically damaged by the quakes.

As aftershocks continue to devastate the region, companies across the globe are holding their breaths in anticipation of a conclusive damage report. Our take: Don’t wait around. Act now to secure your supply and mitigate losses.

Impact Analysis

4/29/2016 | 15:30 PST:

  • Axis Communications announced that its supply chain has been impacted by Sony's production problems following the earthquake.
  • Honda's motorcycle factory production remains halted through today. 

4/27/2016 | 13:30 PST:

  • Professor Yossi Sheffi at MIT spoke to us about what steps companies should take. He said to approach the aftermath of the quake in two steps: "First, find out the extent of the damage. You might understand your T-1 and T-2 suppliers' statuses, but what about 3rd and beyond? It takes a while to find out that some parts might be damaged. That should be your first priority."
  • How can companies get that information quickly? It's about opening up communication and assigning clear tasks. When everyone is on the same page and sharing their findings, things get done faster. 
  • The second step Professor Sheffi advises is to "find out when impacted parts or suppliers will begin to affect customers." It's important to track how long your company has before you're facing shortages—that way you know whether you need to seek out alternative suppliers. 

4/25/2016 | 11:00 PST:

  • GM factories (four in the US) remain closed for the next two weeks. 
  • Sony announced Friday that it would delay its earnings release date to next month due to earthquake damage. Shares closed down 6% Monday. 
  • Read about how Toyota's post-2011 preparations paid off. 

4/22/2016 | 8:30 PST:

  • GM announced today that it would halt production at its Oshawa plant for two weeks. But that disruption is also stopping production at its four US factories
  • Honda's Kumamoto factory will remain closed for at least one more week. 
  • Mistubishi Electric has resumed production
  • From this article on Toyota's supply chain: "the sheer size of orders from Toyota — which gobbles up 90% of Aisin’s Japan-made door check straps — means any disruption at just one supplier can have a disproportionate ripple-on effect across the automaker’s production lines."

4/21/2016 | 10:30 PST:

  • AIR Worldwide, a risk modeling software provider, estimates that the earthquakes will cost between $1.7 billion and $2.9 billion
  • Aisin Seiki, the manufacturer responsible for supplying Toyota with door parts, has begun importing extra supply from its locations in China and Mexico, in order to help Toyota resume production in the coming week. 
  • Over 90,000 people remain in emergency centers. Eight people are still missing
  • Kumamoto's airport is now open. 

4/20/2016 | 11:30 PST:

  • The death toll has been raised to 48 as rescue workers continue to search through rubble. 
  • A 5.8-magnitude earthquake struck Northeastern Japan on Wednesday morning, though no extensive damage has been reported. 
  • Toyota plans to reopen its facilities next week, due to significant supply chain restructuring after the 2011 quake shut its factories for months. 
  • Other plants, like Sony and Honda, remain closed until further notice. 

4/18/2016 | 11:30 PST:

  • Operations at Toyota have been the most severely impacted—the company's tight supply chain will lose $277 million
  • Sony has kept its semiconductor factory in Kumamoto closed until further notice. 
  • Two Nissan factories have sustained damage—they have reopened, but have not returned to full capacity. 

4/17/2016 | 22:00 PST:

  • Thousands of homes remain without vital supplies like electricity and water. 
  • Roads, bridges, and tunnels have sustained critical damages—though due to poor weather, many conditions remain uncertain.
  • Major factories are to remain closed through Monday, with buildings critically damaged. 
  • In particular, Toyota has suspended much of its production due to part shortages. 
  • Sony's image sensor plant operations remain halted, though operations at nearby factories have resumed.
  • Semiconductor manufacturer Renesas is assessing damage before making a decision. 

4/16/2016 | 11:00 PST:

  • 41 people have now been reported dead 
  • Rains have halted rescue efforts and building inspections for at least the next day
  • The shallow depth of the earthquake could mean more serious structural damage that would impact communities and businesses into the future.
  • Mt. Aso, an active volcano in southern Japan, has experienced small eruptions, billowing smoke hundreds of meters into the air.
  • There have been no updates on the status of major manufacturers, which remain closed until further notice.

4/15/2016 | 14:00 PST: 

  • Toyota, Nissan, and Honda operations at their auto parts factories have been halted until further inspections can be carried out. Early reports of structural and machine damage spell delays down the line.
  • Semiconductors are the big worry. Renesas, Sony, Fuji, and Mitsubishi are all manufacturers of semiconductors and solar cells that have, of this writing, been shut down. Because of the precise, microscopic manufacturing of semiconductors and solar cells, even the slightest amount of damage can halt production for weeks.
  • Sony’s plant for producing smartphone cameras was also shut down. The plant makes image sensors for iPhones and other major phone brands.
  • All factories will likely remain closed throughout the weekend, as many factories are still inaccessible due to aftershocks.

Our Take

Kyushu, the southern island where Kumamoto Prefecture sits, is nicknamed “Silicon Island” because of its wealth of tech manufacturing. The island produces about 25 percent of Japan’s semiconductors—so if your company relies on electronics parts, specifically semiconductors, now is the time to act.

What to Consider

1. Supplier outreach: After natural disasters and crises occur, suppliers get inundated with requests for status updates from their customers. If your organization waits on communication—or even sends out multiple, disjointed requests—your messages could get lost in the crowds. We suggest an organized effort to reach out to suppliers as quickly as possible. Divide up contact responsibilities to ensure that your team is covering all suppliers—especially the often-overlooked tier 2+ suppliers.

2. Communication tools: It’s easy for different teams across a supply chain org to get tangled in a web of disparate email threads, news articles, and status checks. In these types of disasters, a mechanism that will allow for free flow of real-time information across your supply chain in an organized manner is essential. In emergencies, transparency is a powerful guard against disruptions—it can be achieved by opening up communication channels to everyone involved and setting clear guidelines for individual responsibility.

3. Impacts to parts: Given the scale of events, there are going to be unavoidable disruptions—the key is to minimize the impact to your company. It can take days or weeks for your team to figure out each product and part that is impacted. Instead, it might be more efficient to figure out which parts have the most product and customer impact—especially sole-sourced parts—and prioritize securing those against further disruptions. After events like this, we will likely see capacity constraints, both from halted transportation and a flood of new orders to undamaged suppliers.

 

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