Tuesday, June 14, 2011

The Cost of Supply (Chain) Disruptions

Source: WikiMedia CommonsAccording to Dun & Bradstreet, the business cost of disruptions due to earthquake and tsunami in Japan will be $209 billion in sales volume. This potentially affects 86,418 businesses, 311,934 employees and is spread across 715 industries. Manufacturing durables tops the list of number of suppliers based in Japan that are potentially impacted. Globally extended supply chains mean that this group of suppliers will affect many more businesses across the globe. 
Some early estimates of the impact of such disruptions are already available with news from Honda and Toyota.
  • Honda has revised the projected profits downwards by 63% to $2.43 billion for the fiscal year through March (source: WSJ).
  • Toyota will lose its number one spot for being the biggest auto-producer back to General Motors, after holding it since 2008. Toyota also lowered its projected profit forecast to 280 billion yen ($3.5 billion) profit for the fiscal year through March 2012, down from 408 billion yen for the previous fiscal year (source: Chicago Tribune).
Electronics is another big area of impact. Citigroup Global Markets estimates that Japan is responsible for 16% to 30% of electronics component supply and that is bound to affect the global electronics supply chains as well. iSupply reports more numbers: Japan supplies 10 percent of the DRAM worldwide supply based on wafer production, 35 percent of global NAND flash production, 6.2 percent of the world’s LCD panels (more than 10” in size).
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© Vivek Sehgal, 2011, All Rights Reserved.

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