Case Study on Initial Reactions to Supply Disruption: Mitsubishi Electric Corporation
Within hours of the March earthquake in Japan, fear of material shortages, power outages, and factory or logistics route damage raised alarms across the manufacturing world. Mitsubishi Electric Corporation’s initial focus was on determining the impact of the crisis and maintaining clear communications throughout their business. It took them only ten days to fully assess the availability of supply for all components at thirteen of their Japanese factories, while offices maintained close daily communications with factories to provide accurate updates to customers. When examining one of their factories, they found over 200 suppliers were located in the affected tsunami area; where it was unsafe to enter and businesses were encountering power blackout periods. To compensate for a decrease in production capability, the factories lowered their manufacturing capacity significantly to where at the end of May, they were running at 40 percent capacity, and only estimating to be back up to regular production by September 2011. The company was very conservative when accepting purchase orders at this time, initially only accepting ones where there were no penalties for extended delivery times. Maintaining production at this reduced rate would therefore allow them to have enough supplies to fulfill orders until as late as June or July. Meanwhile, Mitsubishi Electric evaluated countermeasures that they could use to handle supply shortages. These included either sourcing from another supplier or changing product design. While they had previously identified alternative suppliers, testing of these suppliers still required a three month time period, and therefore, these supplies were only accessible as early as June. On the other hand, change to product design could possibly affect functionality or standards in different countries. One of the biggest lessons learned from the Japan crisis, was the importance of knowing your suppliers’ sub-suppliers. While it only took Mitsubishi Electric ten days to complete their supply chain evaluation, having even more clarity in their supply chain could have allowed them to react even faster. Moreover, Japan’s reliance on specialized single-source suppliers has left Japanese technology industries open to vulnerabilities. Encouragement to develop alternative suppliers located in different locations could stimulate competition and could leave companies less susceptible to supply shortages.
Case Study on Initial Reactions to Supply Disruption: Mitsubishi Electric Corporation
Within hours of the March earthquake in Japan, fear of material shortages, power outages, and factory or logistics route damage raised alarms across the manufacturing world. Mitsubishi Electric Corporation’s initial focus was on determining the impact of the crisis and maintaining clear communications throughout their business. It took them only ten days to fully assess the availability of supply for all components at thirteen of their Japanese factories, while offices maintained close daily communications with factories to provide accurate updates to customers. When examining one of their factories, they found over 200 suppliers were located in the affected tsunami area; where it was unsafe to enter and businesses were encountering power blackout periods. To compensate for a decrease in production capability, the factories lowered their manufacturing capacity significantly to where at the end of May, they were running at 40 percent capacity, and only estimating to be back up to regular production by September 2011. The company was very conservative when accepting purchase orders at this time, initially only accepting ones where there were no penalties for extended delivery times. Maintaining production at this reduced rate would therefore allow them to have enough supplies to fulfill orders until as late as June or July. Meanwhile, Mitsubishi Electric evaluated countermeasures that they could use to handle supply shortages. These included either sourcing from another supplier or changing product design. While they had previously identified alternative suppliers, testing of these suppliers still required a three month time period, and therefore, these supplies were only accessible as early as June. On the other hand, change to product design could possibly affect functionality or standards in different countries. One of the biggest lessons learned from the Japan crisis, was the importance of knowing your suppliers’ sub-suppliers. While it only took Mitsubishi Electric ten days to complete their supply chain evaluation, having even more clarity in their supply chain could have allowed them to react even faster. Moreover, Japan’s reliance on specialized single-source suppliers has left Japanese technology industries open to vulnerabilities. Encouragement to develop alternative suppliers located in different locations could stimulate competition and could leave companies less susceptible to supply shortages.
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