Guest Commentary: A Lesson from Japan Earthquake: Countries Can Be Critical Paths

It goes without saying that in manufacturing, often the company with the shortest lead time is the winner; whoever gets the hottest new product to market the fastest gets the trophy at the end of the race. Our customers have it down to a science, but bumps still come up from time to time. There’s a term they use to describe the part of a product that drives the overall lead time, called the “critical path component.” It’s called “critical” because it’s a piece necessary in the final product. But it also takes the longest time to produce, becomes the lengthiest part of the supply chain, and keeps manufacturers up at night.

Usually, the critical path component involves a particularly cumbersome process, one that might take a day to work through instead of six hours. So for items like electronics, something as small as a diode or a piece of glass, “critical” to the functioning of the product, can often hold up fulfillment for days or even weeks.

So let’s just say that after the 9.0 magnitude earthquake off the coast of Japan, a lot of our customers haven’t been sleeping as well. That’s because until the whole mess is sorted out – if it’s ever sorted out – Japan has become one giant, country-sized critical path component. The nation is a manufacturing hub that ships 30% of the world’s flash memory for electronic devices like tablets and smart phones, 15% of DRAMs for PCs, and 13% of the world’s vehicle parts. It’s a significant epicenter for global trade, to say the least. And right now, it’s tough to get anything in or out.

Many manufacturers have felt ready for events like these, multi-sourcing components so that when one supplier goes down, there’s another ready to take its place. But that’s a bit trickier when an entire section of the globe goes offline. If there’s a lesson to be learned in the wake of the tsunami, it’s that multi-sourcing isn’t just about suppliers, but also regions of the world. Our on-demand team leader, Ken Webster, touched on the same subject a few weeks ago, discussing how civil unrest in Libya might lead to higher prices for everything from groceries to blue jeans to inkjet printers. In an increasingly global business environment, manufacturers need to recognize that the most disparate events can make what was previously possible seem impossible. Japan is a stable and prosperous democracy, but as this “once in a thousand years” event shows, risk lurks everywhere.

Companies that build plans for these kinds of scenarios and have alternate sources ready will win market share. Those that don’t are at the mercy of recovery in the wake of a disaster. And granted, some industries will feel the effects less than others – Japan’s auto manufacturers build a lot of their vehicles in the U.S., for instance. But for others, it’s less certain.

Japan will rebuild itself, the world’s economy will recover, but the competitive landscape will look a little different. After a tragedy like this, it always does.

Patrick Maley is Vice President Industry Marketing at RedPrairie. He and his team are responsible for driving the strategy, messaging and vision for RedPrairie’s core industries. In his 7 years with the company he has also been VP Corporate Marketing and a Sr Account Executive in the sales group. Patrick has over 20 years of experience in the manufacturing and logistics industry marketing and selling products and solutions to automotive, high tech, retail, 3PL and food and beverage companies. He is a graduate of the University of Pennsylvania and resides in Brookfield, WI with his wife and 5 children. He is also a die-hard Philadelphia Eagles fan.