OM in the News: How GM Survived the Japanese Supply Chain Break

Two months after Japan’s devastating  earthquake, Japanese automakers in the US are still struggling with significant supply disruptions. Toyota, for example, which gets 15% of its parts needed for North American factories from Japan, is operating at only 30% of capacity. 

G.M., which spends about 2% of its part’s budget in Japan, identified 118 products that created shortage problems at the start of the crisis. Yesterday’s New York Times (May 13, 2011) documents the dramatic story of how G.M. went through a “white knuckle time” when numerous plants came close to closing. The story ends with the company announcing it is winding down its disaster response operations–the crisis averted. But it did not appear to be anything short of  a catastrophe in early March.

 Four days after the earthquake, G.M. assembled 100’s of employees into a 24-hour-a-day team, in what it called “Project J”. The company idled 2 plants to conserve supplies and found as many alternative sources as possible . Coordinating efforts from 3 “crisis rooms” in Warren, Michigan, the Vice-Chairman realized that existing contingency plans prepared for “nothing on this kind of scale or scope”. Issues with 33 problematic parts did not even become known for 2 more weeks, when G.M. discovered disruptions from sub-suppliers it barely knew of.

One G.M. consultant added: “It’s not just the assembly plant that needs to run, it’s not just the direct supplier. I’ve got to understand every piece at a second tier, a third tier, and a fourth tier below that. We’ve never had to do that before”. With only sparse information available from many suppliers, G.M. sent over 40 employees to Japan to size up the situation–and to offer help getting vital plants reopened. The Japanese culture did not always welcome the offers from outsiders, but in the end, the company resolved all but 5 shortage problems.

Discussion questions:

1. Why is G.M. in much better shape with regard to parts than Toyota?

2. What major lesson did G.M. learn from the disaster?