With the words “global supply chain” continuing to dominate business 
headlines around the world, OM will remain in the news until Japan is able to stabilize its economy. And that may not be for some while. Today’s Wall Street Journal (March 16,2011) lead story writes: “International companies from BMW to Boeing girded for possible disruptions to supply chains.” In these early days of assessing the quake’s damage, it is tempting for a gloomy view to carry the news.
After all, Japan is a key supplier of advanced parts used in the final assembly of products throughout the world. Malaysia’s Eita Electronics depends on parts from Japanese factories for its circuit breakers. BMW receives electronic components for navigation systems and digital displays. And Boeing’s 787 wings and fuselages are produced there (see our Global Company Profile in Ch.2). It truly is amazing how dependent one nation’s manufacturers have come to depend on anothers.
The Journal adds:” Supplier logistics are severely dislocated by restrictions on using highways for freight, as well as unpredictable power cuts”. Mazda, Honda, Nissan, and Toyota have all suspended operations even though most of their plants were not heavily damaged. Toyota is even slowing US production, just in case it cannot ship parts it makes in Japan. American auto makers cannot celebrate just yet, as they in turn receive specialized parts, such as batteries, from Japan.
Just to balance the picture, financial services giant UBS issued this report (March.14,2011): “We believe this catastrophe is unlikely to inflict a significant blow to Japan’s growth outlook for this year…First, the major business centers suffered only limited damage as most of the destruction was concentrated in the northeast coast, which accounts for about 7% of Japan’s industrial output. Second, outside of the worst affected areas, business activity moved towards normalization over the weekend”.
Discussion questions:
1. What are some products not impacted by the damage to Japan?
2. What important issues might the UBS report be overlooking?