More supply chain disruption lessons learned from 3/11

Michael Koploy’s recent blog on the after-effects, losers, and winners from the Japanese 3/11 incident provides some interesting points for thought…

One of his key points is that companies who managed to squeak through the incident relied on the relationships and connections with their key suppliers. This was particularly true in the automotive sector, where Honda, Toyota, and Nissan worked together to overcome the problems associated with restricted capacity and supply, despite having a “lean” supply chain.

The incident has also raised some questions about lean thinking in general. For example, Koploy points out that Canon has diversified its production locations across Japan and China, a strategy that is core to its supply chain thinking. Similarly, Apple has a policy of negotiating contracts that guarantee pre-positioning of inventory ahead of major product releases, thereby guaranteeing that the product won’t stock out. (More detail on this in the Tech Broiler blog on Apple’s secret sauce…)

Discussions with some of the companies I’ve encountered suggest that inventory policies are being re-examined in light of the shortages….one company even noted that their “bloated inventories” served them well during the crisis, as they were able to provide product in cases while many of their competitors were unable to so.

I also believe that supplier relationships are key to disruption management. When a crisis occurs, suppliers are much more likely to continue to support their “customer of choice” – which probably isn’t going to be the customer that is gouging them to meet their PPV targets….but this isn’t something that falls into a typical procurement level managers purview when evaluation time rolls around.

The entire thought process on risk management needs to consider not just the short-term financial health issues that surround specific suppliers, but the massive “black swan” events and program planning that follows in its wake. This is an area where I hope to spend more time thinking about during my fall sabbatical….more to come…