Why Were We Unprepared for Japan?

April 15, 2011 at 7:00 am

As demonstrated by Japan’s recent disaster trifecta—an earthquake and tsunami quickly followed by a nuclear crisis—corporations too often find themselves unprepared when low-probability events shock their supply chains.

They’re caught without a Plan B because of two fallacies: 1) the belief that because no one can predict the future, they should operate under the assumption that things will more or less stay the same; and 2) the notion that a supply chain represents a cost rather than an investment. Moreover, in the case of this particular crisis, many companies likely figured they didn’t need a contingency plan since they buy so little from Japan. They forgot that the Chinese suppliers with whom they do business depend on goods and services from Japan.

The larger supply-chain problem stems from companies’ focus on minimizing short-term costs rather than maximizing flexibility to meet future needs. This leads them to build static supply chains rather than dynamic ones. Such supply chains may save money today, but they carry hidden costs that can rise precipitously in the face of unforeseen events. Read more.

H. Sirkin,  Bloomber Businessweek, April 1, 2011


Entry filed under: Disaster, Japan.

Trade and Investment Barriers Report 2011 U.S. exports down 1.4% in February

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