APICS CEO Abe Eshkenazi CSCP, CPA, CAE -
September 16, 2011
Rebounding and Risk Proofing
Six months after a devastating earthquake and the resulting tsunami, Japanese automakers still are feeling the pains of lower production. However, Toyota is working to build a supply chain that, when the next one strikes, would recover in two weeks instead of six months or more.
According to a September 6, 2011, Reuters article, "Toyota and other Japanese automakers were forced to halt a large portion of their production both inside and outside Japan for months after the earthquake and tsunami cut off the supply of hundreds of parts from the country's devastated northeast."
Toyota is implementing a three-step plan to enable a two-week recovery, Reuters reports. Toyota leaders expect the plan will be fully implemented in about five years. So, what's the plan? First, further standardize parts across Japanese automakers, enabling them to share common components that are manufactured in multiple locations. Next, negotiate with suppliers up and down the chain to retain inventory__a few months' worth. This step would affect specialized parts that are not made in multiple locations. Lastly, make each region of the manufacturer independent, so a disaster in one region would not affect production in another.
Toyota Executive Vice President Shinichi Sasaki told Reuters that these three steps would also help offset losses from the strong yen by ultimately lowering costs and creating protection__whereby costs and revenues are in the same currency__cutting foreign exchange exposure within regions.
"More than the March 11 disasters, Toyota is hurting from the yen's historic strength, which is wiping billions of dollars from the export-dependent company's profits."
Reinforcing supply chains
The APICS Operations Management Body of Knowledge (OMBOK) Framework, third edition,features an updated and expanded section on risk management. Consider how the it defines a risk management framework: "Disruptive supply chain risks lend themselves to a three-step risk management process, which consists of the following steps. Identify the sources of potential disruptions ... Assess the potential impact of the risk ... Develop plans to mitigate the risk." How might Japanese manufacturers have revised their risk management frameworks after the March 2011 earthquake and tsunami?
The 2011 APICS International Conference & Expo features an entire learning path dedicated to the subjects of organizational change and risk management. For example, one session will be presented by Yingming Yue, CPIM, associate director of supplier management at Nektar Therapeutics. Yue's session will help attendees identify the risks that threaten their organizations, familiarize themselves with useful risk mitigation tools, and understand success factors in implementing risk management programs.
APICS 2011 takes place October 23-25, 2011, in Pittsburgh, Pennsylvania. The program features a wide variety of presentations for you to view as you endeavor to bolster your organizations' supply chains and your own careers. Please join us for this valuable event.
In other news
How APICS Operations Management Now relates to you
Operations management is everywhere. Today, operations management professionals have unprecedented impacts on the global economy. Consider these questions and how today's edition of APICS Operations Management Now relates to you and your career.
- What are some of the threats to your industry's supply chain? How can you protect against these risks while keeping costs low?
- Have you ever had to restructure your supply chain after a disaster or other break in business continuity? What did you learn?
- What do you think of Toyota's strategy? Is it possible to risk-proof a supply chain?