The supply chain issue affecting Japan appears to be getting much worse than initially expected.
For example, as Reuters reported on Tuesday, a shortage of parts is now threatening to force Sony to cut production or suspend output at five more plants in Japan.
As the report explains (our emphasis):
Global electronics and autos seem to have been most affected by the turmoil, but in an illustration of how the ripples are spreading, global miner Rio Tinto warned the disruptions posed a threat to its expansion plans.
More than 10 days after a 9.0 magnitude earthquake and 10-metre tsunami struck the northeast of Japan, manufacturers are struggling to get back up to speed as factories grapple with a lack of components, power cuts and damage to infrastructure.
Such is Japan’s position in the global supply chain that companies from Apple Inc to General Motors Co and Nokia are feeling the impact. Toyota Motor Co , the world’s largest automaker, said all 12 Japanese assembly plants would remain closed until at least March 26 and it was not sure when they would reopen.
Production lost between March 14-26 would be about 140,000 units. Toyota had been expecting to resume assembly on Tuesday. Electronics giant Sony said more five plants, mostly in central and southern Japan, were hit by parts shortages stemming from the disaster and would close or reduce output until the end of the month. “If the shortage of parts and materials supplied to these plants continues, we will consider necessary measures, including a temporary shift of production overseas,” the company that makes the Playstation games console said in a statement on Tuesday.
Now, when you compound the phenomenon of companies looking to shift production overseas with the recent volatility in the yen exchange rate — we can’t help thinking that some European countries are particularly well-positioned to benefit.
So well-positioned in fact, that they could even steal a significant chunk of Japan’s manufacturing industry on a permanent basis.
After all, just on an exchange rate basis the argument for permanent relocation does look compelling:
Germany and Italy particularly spring to mind in terms of fitting the gap on a manufacturing skills basis.
With our tongue firmly in cheek – it’d also be one reason to exacerbate the Japan crisis if you happened to be an EU commissioner, eh?
Related links:
China’s Japan syndrome – FT Alphaville
Global industries consider options on supply chains - FT
Just-in-time is not past its sell-by date – FT