Supply chain aftershocks01 April 2011 | Christopher Ludwig
The devastating earthquake in Japan has led to widescale production stoppages at the majority of plants in the country, and has threatened global production with supply shortages, the extent to which was unclear at the time of going to print, particularly as the crisis unfolded at Japan’s nuclear power plants. Similar to the volcanic ash disruption last year, the situation once again highlights the global links in the automotive supply chain and their potential threats.
Toyota, Nissan, Honda, Fuji Heavy Industries (which owns Subaru), Mitsubishi, Suzuki and Mazda all stopped production, with Toyota, Honda and Nissan apparently hit hardest. IHS predicted at least 285,000 units of lost production across Japan by March 23rd.
Plants across the world started to feel the pinch within days of the quake. Toyota and Subaru slowed production in North America in anticipation of a parts shortage. GM closed a plant in Louisiana because of shortages, highlighting the global threat.
A spokesman for Denso said that none of its plants in Japan had been severely damaged but production had been suspended in the week following the earthquake. The company said its operations in North America had not been affected but it was investigating potential issues with the supply chain likely to emerge in the week that followed.
Nissan’s Iwaki engine plant continued to be hit by aftershocks a week after the quake, while damaged deliveries of parts and supplier shutdowns had limited operations. Honda and Toyota extended plant shutdowns until at least the weekend of March 26th, and possibly longer.
Operations at ports around Japan were suspended in the days following the disaster and delays were expected to follow because of berth congestion. NYK Line said that the ports of Sendai (pictured) and Hachinohe were severely damaged by the tsunami and remained out of operation. The company has suspended acceptance of new bookings for those ports, along with Hitachinaka, Ofunato and Onahama ports.
Medium term there is expected to be ongoing disruption to the supply of parts and vehicles from Japan to global markets but the extent of this disruption on overseas production remains unclear. Honda said that there was no immediate impact on operations in North America, with the majority of its parts localised, however it has since told dealers that their orders will see delays until May. In Japan Honda said it lost contact with 44 of its 113 suppliers in the area most affected.
Nissan said the knock-on effects to its business operations outside Japan were currently being studied but that it expected current stock levels in Europe to be sufficient to support ongoing sales operations in the immediate future. Likewise, a Toyota Motors Europe spokesperson said that the suspension of production in Japan will have no immediate impact on the delivery of parts in Europe, but the company is assessing further impact.
Japan exports 6.5m transmissions globally, according to IHS, as well as a significant amount of engines. Microchips and other electrical components are also expected to cause disruptions to global production, as these are components that all carmakers, Japanese and foreign alike, source from Japan. The industry has already experienced shortages in microchips, and it was these sorts of components that led some manufacturers to halt production in Europe during last year’s ashcloud disruption.
When something approximating normal production resumes, a large amount of airfreight and premium freight is likely to follow. “Capacity issues will continue due to cargo backlogs creating universal demand for premium solutions,” said Brad Brennan, MD of emergency provider Evolution Time Critical.
Neal Williams, MD of Priority Freight, warned that backlogs and an escalation in disruption would hit urgent cargo moves should conditions deteriorate further at the Fukuskima nuclear plant. “We believe that provision of emergency freight will increase accordingly,” he added.