The Great Tohoku earthquake from earlier this year wreaked havoc on many Japanese business’ operations across the world. In this pecial news focus, ARN reports on how these companies managed the disaster, and lessons learned on keeping supply chains and communications open throughout.
When the Great Hanshin earthquake stuck Japan in 1995, news about the disaster travelled slower than it did now when the Great East Japanese quake struck the Tohoku region in March 11. In addition to the higher level of interconnectivity available in today’s society, the larger scale of the disaster and the nuclear accident that followed ensured that information about the earthquake and tsunami spread quickly to all parts of the world, particularly to other countries in the Asia Pacific such as Australia.
Canon Australia consumer imaging director, Jason McLean, first became aware of the disaster while driving home from work on the Friday evening that it occurred. “I was shocked and my thoughts immediately went to my Japanese colleagues and friends,” McLean said. “What unfolded from there was beyond belief as I saw the devastation reaped by the tsunami on TV. Fortunately we were spared any direct losses of people from either the quake or the tsunami, but the human toll of the disaster has touched everybody.”
Hitachi Australia channel business group general manager, Dipak Kumar, found out about the disaster much in the same way after returning from a flight back from Brisbane to Sydney. “The first time I heard about it was when I got in my car and on the radio, and I didn’t realise how big it was until I got home and saw images from Japan on my television,” Kumar said. “My first reaction was that I became concerned about the safety of my colleagues and friends in Japan and whether they were okay. I was in complete and utter shock after I saw what was happening there.”
For OKI Data Australia marketing manager, Chris Thorley, a combination of immediate discussion with the resident Japanese managing director and digital alerts from media outlets to which he subscribed to alerted him to the earthquake in Japan. “At first we were relieved to learn that for the most part of our staff were not affected, but then learned of the larger impact to those outside of the company in North Eastern regions, and in turn, one of our component manufacturers,” Thorley said.
Concerns for the safety of staff in Japan was also an immediate reaction by staff at Sony Australia. “We were in shock and concerned for the welfare of our Sony colleagues who were in the middle of this disaster, ensuring that our staff had a way of supporting their colleagues in Japan and the Japanese employees,” Sony Australia head of corporate communications, Jenny Geddes, said.
While staff at Panasonic Australia saw a lot of information coming through on the television and Internet as the situation unfolded, managing director, Steve Rust, found that Panasonic’s global headquarters was also quick to share news about the disaster with its worldwide network. “Initially our main priority locally was supporting our Japanese staff working in Australia and confirming that their families were safe, which, thankfully, they all were,” Rust said. “Of course, Panasonic Australia was deeply saddened by news of the event and, of course, sent its deepest condolences and sympathies to the people of Japan, expressing sincere hope for a speedy recovery to the country and its people.”
Following a disaster, how a company is able to weather it is largely dependant on how its management reacts to it. The Tohoku earthquake not only tested the way Japanese management disseminated information to its worldwide branches, but also the ways overseas offices kept up to date with the head office in Japan. It was a challenge that Canon stepped up to. “Immediately after the earthquake, our Tokyo headquarters established the Earthquake Disaster Recovery Task Force to globally coordinate the recovery efforts across development, production and sales operations,” Canon’s McLean said. “Locally we established a similar task force with responsibility for managing the impact in Australia and New Zealand.”
Hitachi in Australia kept in touch with its factories in Japan through its export group and made sure that any potential delays in products coming from Japan would be communicated to all of its customers. “At the same time, we tried to look at alternatives as well and see if we could get the same parts from other factories, as Hitachi has production facilities in other parts of the world,” Hitachi’s Kumar said. “So we were just assessing whether we could get parts from other parts of the world. In the end, there was not a lot of impact on the supply chain, because we were able to get products from other factories, and certain factories came online earlier than expected.”
Meanwhile, Oki’s Thorley praised the vendor in Japan for provided daily updates on the status of their operation, which “dropped back to every second day after the first two weeks and then eventually a weekly progress report.” Since April 6, Sony has been responding to fluctuations in material or component supply by “adjusting its production levels at certain domestic and overseas manufacturing sites that were not directly impacted by the earthquake,” according to Sony’s Geddes.
Focusing on meeting the needs of its customers and retailers in Australia, Panasonic Australia monitored the ever-changing situation in Japan closely as it happened. “As the situation in Japan developed, we endeavoured to pass on as much information as we could, when relevant, to our resellers and partners that would assist them in meeting the needs of their customers,” Rust said. “We’d really like to thank our resellers and partners for their response, as many contacted us directly and expressed their condolences and were very accommodating of us as we strived to provide them with more information.”
Staying in the loop
While the regional headquarters of these Japanese multinationals had access to the latest information and updates about the disaster situation, companies such as Canon in Australia was aware of the importance of ensuring that its resellers and partners were up-to-date and well supplied to meet the needs of their clients. “We kept everyone well informed, but due to the enormity of the disaster, lack of some components and rolling electricity shortages, it was a challenge to estimate exactly when camera production would return to pre-quake levels, but we were at pains to ensure that available stock was allocated in a fair manner,” Canon’s McLean said. “Fortunately, while we expected the worst, the updates from Japan were always far better than anticipated.”
Hitachi stayed in touch with its dealers and resellers, and informed them well in advance if there was any delay in products from Japan. “Luckily enough, for a lot of the products we had enough inventory in Australia to cater for the needs of our resellers and dealers, so most of the products we had in Australia already,” Hitachi’s Kumar said. “For those products where supply from Japan dropped, we just stayed in touch with our partners and made sure they were aware what the consequences were and when we would get the product from Japan.”
Since the impact was restricted to a limited number of OKI’s product lines, the Australian branch only advised those customers effected that there were some disruptions to supply. “In almost all cases an alternative product solution was provided to meet customer requirements,” Oki’s Thorley said. While Panasonic’s supply chain in Australia was not significantly affected, there were some changes to the timing of product availability and the company engaged in open dialogue with its customers.
Finally, Sony also went to great lengths to communicate frequently with its affected customers and worked together with them to develop alternative solutions if and where available. “In the last week, we have seen this start to return to normal for the first time since the earthquake,” Geddes said.
Back in business
With almost five months passing since the disaster took place, a number of companies have been fortunate enough to see their supply chain recover complete and see supply levels return to normal levels, while other corporations are still in the process of sorting out any lingering issues in their supply chain. McLean is happy to report that Canon is one of the companies that is well on its way to full recovery. “Camera production has returned to pre-quake levels, so supply of camera equipment is normalising,” he explained. “Given the challenges of the first half of the year, Canon Australia is investing significantly in campaigns and promotions to drive growth in the second half.”
Hitachi’s Kumar is also happy to see that most of Hitachi’s operations are back to normal and the majority of factories have recovered, while some of the factories are still trying to catch up with the backlog of orders that have built up. “Overall, I would say most of our supply levels have returned back to normal,” he said. OKI now only has one product line that still affected by the disaster, which Thorley expects will be rectified within the next month. “As we have an alternative offer to customers in place, we have taken pressure off this product line,” he said.
While Rust sees Panasonic in Australia doing well now in terms of its supply chain, he is aware that the challenges for the company in Japan are still ongoing. As an example, Rust mentions the restrictions in Japan in the use of electric power has meant shutting down or dimming lighting at certain times of the day. “This doesn’t affect Australia and the company understands these are important measures to help Japan get back on its feet,” he said.
Learning from experience
Whenever a company needs to deal with an exceptional situation or a disaster of a massive scale, numerous best practices and learnings come from the ways management and their associates respond to the difficult circumstances. In addition to Hitachi handing the disruption of its supply chain, Kumar was impressed with how the company cooperated with the Japanese government to assess the situation. “Hitachi has been working very closely with the Japanese government on areas that have been severely affected by the disaster,” he said. One learning Hitachi has taken away from the disaster has been the importance of having mechanisms in place to ensure that its supply chain is not impacted. “That comes back to not having all your products in one region, to diversify and have factories in other regions, and Hitachi has been pretty good with that,” Kumar added.
McLean is convinced that a disaster of this magnitude needs the attention of the most senior leaders in the business, and to that end, Canon Australia has followed the lead of its Japanese headquarters and established a disaster recovery team to ensure that they are communicating with the right people and managing the stock that they have in the most effective way. “It is important to be reviewing the situation on a daily basis, particularly in the early stages of recovery,” he explained. McLean also had nothing but praise for his Japanese counterparts, who set an example for everyone in how to face adversity and achieve unthinkable results through sheer determination and teamwork. “There’s no doubt that we are where we are today because of the resilience and ingenuity of our Japanese colleagues under extreme pressure,” he added.
Rust identified ongoing communication with resellers in being critical in a situation such as this, as well as having “some terrific, understanding partners,” while Thorley saw regular and clear communication within the supply chain as the key to dealing with this disaster from a business perspective. “This in turn enabled us to quickly understand the exact nature and impact of the disaster to advise affected customers accordingly,” Thorley explained. Meanwhile, the main discovery Sony made as company was the need for transparency with stock availability, including delays in-store stock. “There has also been a review of the local business continuity plans that will assist us to respond to issues in the future,” Geddes said.
The damage done
As the tsunami wave receded back to the ocean the aftershocks began, the full extent of the disaster became clear. The quake and tsunami had not only destroyed homes, but also large structures such as factories and production plants located in the area. Since some corporation had their production facilities and suppliers located in the affected area, their supply chain was immediately affected following the disaster, while companies that sourced certain parts from the region would also find their supplies being impacted.
As the disaster was mainly situated in the Tohoku area of Japan, Canon’s operations at its Tokyo headquarters were unaffected, but eight of the group’s operational sites in the Northern Honshu area were damaged to varying degrees. Hitachi was one of several corporations that had a few of its production facilities located in the vicinity of where the tsunami hit, such an industrial equipment factory and a Hitachi-related semiconductor supplier located in the affected area.
OKI meanwhile had only two of its product lines impacted by the disaster, one which affected two hardware products and the other affected consumables relating to three series of printers. “Although our factory was able to relocate to a new temporary location within three weeks, the knock on effect cased three months worth of production to the effected product lines,” Oki’s Thorley said. “Fortunately, we were able to, for the most part to secure excess stock from other regions.” Sony also worked hard to mitigate the affect of the quake on its product lines. “Initially, there was concern that we would not meet the demand for stock, however at present we have stock of all our consumer product lines,” Sony’s Geddes said.
As the disaster situation constantly evolved in the days and weeks following the earthquake, Panasonic made every effort possible immediately following the disaster to bring about a resumption of operations at its numerous sites located in each of the devastated areas. Panasonic Liquid Crystal Display Co., Ltd.’s factory in Mobara and Sanyo Electric Co., Ltd. Tokyo Plant in Gunma were some facilities that were initially affected but resumed production on April 28 and March 14 respectively. Factories belonging to Panasonic’s AVC Networks Company in Yamagata and Utsunomiya also resumed production on March 22, while the ones in Fukushima and Sendai resumed on April 1.