Supply shortages likely following Japan tsunami

11 March 2011
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As authorities struggle with the human tragedy caused by Japan’s devastating earthquake and tsunami, experts have urged firms to do more to manage supply chain risks.

As of Friday afternoon, the death toll was expected to rise following a tsunami that swept away roads, rail lines and facilities after a massive earthquake off the coast of Japan, near Sendai city.

Electronics and other high-tech components vital to the manufacture of a range of goods could be in short supply as the region prioritises its humanitarian relief effort.

Tim Cracknell, a partner in risk consultancy JLT Specialty, said whether manufacturers higher up the supply chain will be hit would depend on how well prepared they are for supply chain disruption. Although there had been increased interest in supply chain risk management since last year’s ash cloud, which prevented flying over Europe, often business paid “lip services” to these concepts, he said.

Kristian Park, contract risk and compliance director at business advisory firm Deloitte, said: “Assessing the capacity in the wider supply chain, including being able to service different geographies, is an important part of dealing with supply chain risk.”

He added: “Many companies are considering their wider supply chain risks, one of which is provisioning for natural disasters. While it is paramount to look after the security and welfare of staff within the company and wider supply chain, once this has been secured, it will be important to seek to redress the balance in the supply chain and revert to business as usual.”

Cracknell said the resulting supply chain disruption could last for months. “The sheer scale of this event is such that it’s going to have a big impact around the world especially where supplies are coming out of Japan.

“That’s going to be disrupted for some months and one would expect that any urgency that anyone might try to bring to the situation is going to be tempered, like 9/11. You’ve got more import things than supply chains when peoples lives and homes are at risk,” he added.

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