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Ripple Effects of Japan's Tsunami in the Construction Equipment Industry

The world’s supply chains are feeling the ripple effects of the Japanese earthquake and tsunami. This is hitting a number of heavy construction equipment providers where it hurts. One of the largest manufacturers of large engines, Mitsubishi, had a plant that was in the tsunami zone. This has impacted companies like Caterpillar, who is experiencing parts shortages. Fortunately, Caterpillar has put into place a business continuity plan for every one of their facilities, a lesson learned from the Oxford, MS tornado that destroyed one of their key parts manufacturing facilities two years ago. Recently, a CAT manager at the Clayton facility noted that “Our plans are kicking into action as we speak. Competitors have had to shut down plants, whereas ours have been kept open. I’m not sure if these competitors had a plan, but because we were ready, we were responding immediately after the disaster. We flew people in to help and had a team on the ground in Japan to help handle the disaster. We actually began to ship more product into Japan to help our employees to get back to normal life as fast as possible.”

Komatsu, one of CAT’s competitors, has not been so lucky. An interview with a supply chain manager at one of Komatsu’s North American plants revealed that problems from the tsunami are on-going. The reason? “Komatsu is somewhat antiquated in their paradigm for supply chain. We are single sourced for large components. When a tornado or other event occurs, your supply chain is impacted. The tornado in Japan is REALLY hampering our supply chain at the moment!”

These observations have been echoed in many prior columns on this blog. Preparedness is key. Disaster planning for “Black Swan” events continues to be a lesson that many companies have yet to put into place.