Rethink Over Global Supply Chain Strategy
Devastating as the March 11 Japanese earthquake and tsunami were, few realized the magnitude of the aftershock that would rumble through the global auto industry. Now, a month after the disaster, auto makers across the world are grappling with a shortage of components and spare parts that has shut or reduced plant production.
Just last week, Honda announced it is reducing production at its Swindon car factory in the UK by half, citing parts shortages. Moody’s Investors Service warned it might downgrade its credit rating on Toyota because of the financial repercussions of halted car production. The sudden disruption of the supply chain in the global auto industry is demonstrating that internationalization comes at a price.
The problems aren’t restricted to Japan’s auto industry. General Motors has been forced to curtail production in the United States and Spain to conserve parts, and Ford has instructed its dealers to stop taking orders for certain car colors because a paint chemicals factory in Japan was damaged in the quake and had to stop production.
About 13 percent of worldwide auto output has been lost due to parts shortages and related problems, according to consulting firm IHS Automotive. The company is forecasting output could drop by as much as 30 percent in the six weeks following the quake.
“Considering the intensive relationship between most enterprises and suppliers, any disruption in the industrial chain of the world’s third-largest economy will affect the global economy,” consulting firm Protiviti said in a note.
So is a global supply chain a good strategy after all? Some people are starting to wonder. Read more here.
Date: April 13, 2011