Case Study: Learning From the Fukushima Disaster
March 12, 2020
Jay Butler is a Senior Consultant with Seraph. Due to the impact of COVID-19, we bring you a case study from his time in industry working for a large automotive OEM in the U.S. If you want help with how your business can prepare to deal with the supply chain impacts of the coronavirus, email us at CrisisHelp@seraph.com.
In March 2011, a series of deadly events occurred that resulted in supply-chain disruptions, ultimately impacting manufacturing. At the time, I was a Senior Manager in the operations team of a major OEM. That first event was the Tōhoku earthquake and tsunami. The tsunami eventually flooded the lower levels of the Fukushima power plant, killing the emergency generators keeping the cooling water circulating. Ultimately, the damage and resulting radiation exposure impacting many lives. For our organization, it disrupted the flow of critical components needed to complete our assembly processes. Much like the current crisis with Coronavirus and the subsequent disruption of supply chains around the world, the right plans can allow you to better manage your operations and minimize disruptions.
Understand Your Situation
The first critical step in any crisis of this type is to get a lay of the land, and understand your supply chain. Developing a holistic understanding requires tracking where the parts are manufactured, any intermediate warehouse locations, and your overall inventory levels. You also need to understand what barriers will exist to filling your pipeline once supplier production resumes.
In our case, the manufacturing location was Japan. We also had an intermediate warehouse in North America. In your case, the supply chain and route may be a bit more complicated, with intermediate manufacturing steps. Making sure you and your suppliers understand the flow is vital to aid in communicating and managing your plan effectively. With the flow clear, the team must also understand current inventory levels at each step along the way. Based on the expected time that your supplier may be down and the demands from your customers, you may need to change the schedule of intermediate manufacturing or preassembly processes to make sure that your highest demand products can be produced first.
Evaluate your capabilities
Shutting down operations is sometimes not possible, or very expensive. In our case, shutting down all our production for this one missing part was not reasonable. However, we also needed to produce product, and this could not be done without this critical part. The team had to come up with a plan. After brainstorming several different options, we decided that our best option was to use several parts to create “dummy units” that could be used over and over in the assembly process. It was not ideal, but it was better than not running.
Set your priorities
The logistics and production teams then discussed how we could best serve our customers given our limited availability of parts. Do we use the “dummy parts” for all products, or do we use them for specific products? Fortunately, that choice was made a little easier for our team. We had three products in production at the time. One of those was not in high demand, and the delivery chain was long. The team calculated that we could apply the temporary process only to the low runner, substantially extending our inventory, as well as inventory located in our intermediate warehouse location. This also allowed our supply base to recover once manufacturing was restored.
Validate your plan
Make every effort to validate your new process to make sure you have covered all the required processes. We were fortunate that we were able to implement our plan with very little changes. This is not often the case. Many times you will have the best plan, but during your execution situations and circumstances will come up. Our execution is often a series of PDCA (Plan-Do-Check-Act) loops as we move toward our target.
In this case, it took my team just a day to get everything ready and validated off-line. We kicked off the new process and were up and running in just a couple of days. It was a great success for all involved. We were able to keep our facility running with minimal impact. Our high-demand products kept flowing. The lower-demand products were also built using this new process and were completely ready by the time they were delivered to customers.
Supply chain disruptions can be a major headache for any company. But with a good overview of the supply chain, an accurate view of the current situation, and a good plan, you can minimize the impact on your operation and keep your customers happy.
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Seraph's team of operational managers and senior consultants intercede on our client's' behalf to fix a crisis that is putting the business at immediate risk, turnaround a situation that is damaging the bottom line or restructuring to improve the balance sheet. Seraph has successfully delivered projects in the following regions: The Americas, Europe, China, and India. Seraph's Industry Expertise Includes Aerospace, Automotive, Energy Infrastructure, Healthcare, and Medical Devices. Through our other operating companies, we are continually looking for distressed situations where we can put our expertise and capital to work to create value.