Zintro experts discuss Japan’s automakers production and supply chain disruptions

By Maureen Aylward

Toyota recently announced that it will slow its production of cars due to significant disruptions in its supply chain from the Japanese earthquake and tsunami. Honda and Nissan are likely to experience shortages too. We asked our Zintro experts to discuss what they think are the most significant consequences of this announcement and how the shortage could affect the automobile industry in the US and globally.

Athar Zaman, an engineer with diversified exposure in American, Japanese, and Korean automotive assembly, supply chain management, and materials/ parts management, projects that Toyota lost approximately half of its Japanese production in March, about two thirds in April, and half in May. Overseas shipments of cars and parts needed for overseas production will continue to suffer well into the summer.

“Japan’s seven big automakers have lost more than half a million units of output since the March 11 quake” Zaman notes. “Toyota and Honda will produce new vehicles at significantly reduced levels, limiting production at its US plants to about 50% of normal volumes. It’s likely that the US, within 30 to 60 days, could see vehicle shortages this summer, considering that Toyota manufactures cars like Yaris and Prius in Japan.” Zaman reports that delivery of about 800,000 auto parts have been affected by the earthquake and its aftermath. Toyota is still struggling to obtain sufficient supplies of about 150 components, which is down from 500 parts in short supply right after the quake.

Todd McMyn , who lived in Japan and was a contractor in the automobile industry at Nissan Calsonic, says that he believes that Japan is going to have problems replacing its production due to the integrated nature of suppliers to the  auto production floor. “The key to Japan’s success is the family relationship between suppliers and the final assembly. This is not easy to replace; it’s a process developed over 50 years of business through a unique cultural phenomena called TQM and Kaizen,” McMyn says. “There is no doubt that the Japanese will fix the problem and continue with superior quality, but it is not easy due to the complexity of the quality requirements and the tight integration of the supply chain.”

Sanjay Kalse, an automotive professional from India who works with Toyota, Honda, GM, VW, Fiat, and Tata, says in the US and globally the volumes of vehicles available may go down and this will have impact on sales. “Customers may not wait to buy a Toyota or other Japanese made cars,” he says. “But this does not mean that Toyota will suffer in the future.”

Kalse says that Toyota, Honda, and other car manufacturers in Japan will have to work on disaster management and duplicate manufacturing facilities in countries like Thailand, India, and China, exporting components from these countries to other locations. “These countries may become Toyota hubs for components to be produced for exports,” he says. “Toyota needs to reduce the dependability for components on Japan and think about more local component production.”

Hemant Patil, an engineering and manufacturing IT project manager with a specialty in automotive parts, says that the shortage will have a multifold impact on manufactures that will experience supply chain disruptions. “The degree of impact will vary from brand to brand and from market to market depending upon respective brand images,” says Patil. “The immediate and direct hit will be on lead times to deliver, which will result in increased waiting periods for customers.” He further notes that the auto companies that have taken a major hit due to the natural disasters will see further losses due to sale declines. To recover, many of them will have to go for price hikes sooner or later. This will contribute to customer dissatisfaction and adversely affect the brand loyalty.

Some companies, like Nissan, that were on the verge of expanding business to newer markets like India, will suffer the most due to the unsettling disruptions that affected laying a strong foundation in new markets. “The outcome will be a reduction in market share for these companies,” Patil says.

By Maureen Aylward

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