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By SHINJI HOSOTSUBO &
NATHAN LEE RHODEN When we think of Niigata prefecture in Japan, we think of exceptionally
delicious rice, or perhaps the exceptional sake produced from that delicious
rice, but not critical business infrastructure. However, when a series
of large earthquakes struck the Chuetsu area last October, the business
impact rippled across Japan. During a period of four days, the area was rocked four times by 6.0 magnitude or greater earthquakes, and experienced 15 aftershocks strong enough to knock objects from shelves. In the ensuing weeks, traumatized residents were further terrorized by more than 800 nerve-jarring aftershocks of palpable strength. Considering the number and severity of these earthquakes, the loss
of life might be considered mercifully low. A total of 40 people were
killed, and about 4,500 people were injured. Damage to property and
infrastructure was quite extensive. Recent typhoon rains and floods
had waterlogged the soil which led to increased landslides. Damage closed many highways and roads, completely isolating some communities.
All 2,167 residents of one village were evacuated by helicopter to a
neighboring city. Response to the Niigata Chuetsu Earthquakes is largely viewed as successful. The Japanese government established their EOC at 6 p.m., just four minutes after the first jolt. And the National Police Agency, the Defense Agency, the Fire Defense Agency, and the Maritime Safety Agency all responded in a timely and relatively coordinated manner. Live television provided one particularly memorable scene as fire department “Hyper-Rescue Unit” personnel saved a 3-year-old boy from a car that had been buried by a landslide for four days. Despite the rural mountain setting, several semiconductor plants were affected. Alps produces magnetic heads at its Nagaoka and Koide plants, both located only about 12 miles from the epicenter. Matsushita’s Arai fabrication facility is located about 40 miles away. Neither company reported any serious damage to facilities or any injuries among employees, but both suspended operations for several days and found it difficult to assess plant damage because of continuing aftershocks. For Sanyo, assessing clean room damage and gas leakage proved to be
an especially challenging task. Niigata Sanyo Electronics, a subsidiary
of Sanyo Electric Co. Ltd., is located in Ojiya, near the center of
the earthquakes. With sales totaling $460 million last year, this subsidiary
is Sanyo’s largest front-end LSI semiconductor fabrication facility.
Sanyo quickly dispatched a team from its headquarters to assess damage to the plant, but intermittent aftershocks and suspected gas leaks prevented the team from entering the clean room. Two weeks later, a thorough investigation of damage inside the clean room confirmed the presence of dangerous gas leaks. Sensitivity to environmental issues and community concerns have further delayed resumption of operations. Utilities were completely restored by Nov. 30, and test production began again on Dec. 6, yet, to date, full production has not resumed. While accessing damage to their stricken Ojiya plant, Sanyo sought to increase foundry production elsewhere. Wherever possible, they shifted production to other group companies, and actual production began at some alternative sites by early November. Ojiya plant employees were either dispatched to these alternative plants to assist in production or asked to “stand by” at their homes. Despite such efforts, Sanyo Electric Co. Ltd said it would take a $480 million charge to cover damage at the Niigata subsidiary plant and a further $350 million charge to cover lost sales. Details of the “damage” portion were itemized as $180 million for damaged machinery, $40 million from damaged inventory, $260 million for restoration costs, and $3 million in new capital investment. The Japanese automobile industry also felt the impact of these quakes. Nippon Seiki Corporation has group companies and plants in the region. One of them, NS Advantech, suffered major damage to its meter assembly plant. Nippon Seiki decided to shift their automobile and motorcycle meter assembly production to another plant in the area, and thanks to rather heroic efforts from employees, alternative production began within a week. But, even so, supply lines were so tight the temporary disruption forced some customers to stop production at their major assembly lines. Honda Motor Co., Ltd. halted production for two days at its Saitama and Suzuka automobile factories, its affiliate’s Yokkaichi factory where its mini-cars are manufactured, as well as at their Kumamoto factory, where automobile engines are produced. Likewise, Yamaha Motor Corporation, which purchases 80 percent of its motorcycle meter needs from NS Advantech, was also forced to shutdown their assembly lines for two days. Nippon Seiki was able to return meter assembly production to the NS Advantech facility by Nov. 28, and it is said they were back up to 90 percent of their original capacity by the end of the year. And, both Honda and Yamaha said they were able to make up for their lost production before the end of the year, by operating on “make up” days when their facilities would ordinarily have been scheduled to be closed. So, true to form, traditional Japanese corporate values such as employee
dedication, strong relationships with suppliers, and complex ties between
group companies have once again assisted in minimizing the impact of
a potentially severe supply disruption. And while significant “business ripples” can emanate from any of the increasing number of modern factories and plants located in rural Japan, it is still the major urban disaster that presents the greatest risk. The vast majority of Japanese industry is still located in a handful of concentrated urban areas. A major urban disaster will place a real premium on accurate and strategic business impact analysis, while stressing the most ambitious business continuity plans to their very limits. For the most part, Japan remains a manufacturing nation that relies
heavily on highly efficient supply chain management methods. Yet, the
cost-saving advantages of such methods are often in direct conflict
with the prudent needs of business continuity management. We are working
in Japan to develop a practical and functional supply chain BCM methods
that take into account the realities of doing business in Japan. Shinji Hosotsubo is the secretary-general of Crisis Management and Preparedness Organization (CMPO), a membership-driven, non-profit organization whose primary mission is to increase disaster awareness and preparedness among Japanese corporations and communities. He also serves on an official Japanese government working group to establish appropriate standards and evaluate BCP performance among Japanese corporations. He can be reached at hosotsubo@cmpo.org. Nathan Lee Rhoden was born and raised in Japan, and has spent most of his professional career performing new business development for Japanese companies around the world. Rhoden currently works in Tokyo and has been on the CMPO board of directors since 1999. Contact Rhoden by e-mail at rhoden@cmpo.org.
©Copyright 2005 Systems Support Inc. All rights reserved. Reproduction in whole or in part in any form or medium without the express written permission of System Support Inc. is prohibited.
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Earthquakes
Rattle Japanese Supply Chain
For
the first time in its 40 year history, a “bullet train”
actually derailed while in service. Miraculously, none of the 155 passengers
or crew were injured – even though the train was speeding along
at 125 mph on a section of track elevated 50-feet off the ground. Eight
of 10 train cars derailed, with two tilting over to one side. Experts
said the train’s sophisticated automatic braking system likely
failed to stop it in time because it was passing too close to the earthquake
epicenter.
Business
losses were significant. Small businesses were devastated in large numbers,
and the important tourism industry was severely curtailed. Widespread
damage to transportation infrastructure made logistics a nightmare.
Persistent aftershocks kept fearful residents from re-entering their
homes or shopping in retail structures. Major supermarket chains such
as Jusco and Beishia responded by conducting business outdoors in large
tents pitched in parking lots.