Commenting on the news that Toyota has put one of its UK factories on short-time working due to a shortage of parts following the earthquake and tsunami in Japan, David Noble, CEO, Chartered Institute of Purchasing & Supply said:
“We are now seeing the domino effect that the earthquake and tsunami in Japan is having on the world’s supply chains. This may seem like a delayed reaction but many manufacturers are finding themselves increasingly exposed as the stocks of components they were able to call upon in the first six weeks of the crisis are now running low.
“Added to this is the problem of phantom demand, where corporations buy more than they need in order to protect their future interests. Whilst it is the automotive industry that has been hardest hit so far, other sectors, such as electronics, could be next.
“The automotive industry operates as a complex web, but most of Toyota’s suppliers are based in or around Tokyo which is why this disaster is having such an impact. It’s important to remember that even if just one of the thousands of parts that go into building a car is missing, it’s impossible to build that car.
“There are some crucial lessons to be learned about balancing the need for ‘lean’ supply chains with mitigating the risk of future supply chain failure. Most notably businesses need to think about engaging with a range of supplies across geographies, rather than relying on those in one particular region, but they also need to ensure they are adequately measuring supply-chain risk and looking at alternative solutions such as managing stocks for other businesses. Investors and analysts need to pay more attention to this issue when assessing business performance.
“Whilst this disaster has hit the manufacturing sector particularly hard, large global businesses of all kinds face increasingly complex supply-webs which are more efficient but also more vulnerable.”
The comment has been picked up by The Telegraph