Approaching midnight on the 16th of March 2022, residents of Fukushima, Miyagi and Yamagata were awoken by a 7.4-magnitude earthquake. Power was cut, buildings shook and a bullet train was derailed. The quake caused some 160 injuries and the tragic loss of two lives despite Japan and its people being prepared for, and accustomed to, such events. The consequences didn’t end there, though.
Toyota was forced to shut down 18 of its 28 production lines, with many of its suppliers severely affected by the earthquake. Production was halted at 11 of its 14 plants, affecting Toyota and Lexus models, including popular Yaris, RAV4 and Land Cruiser models.
At the same time, one of Japan’s largest semiconductor suppliers, Renesas Electronics, had to shut down three of its semiconductor plants. While two of the plants were back up and running (in some capacity) just two days later, the global shortage of semiconductors amplified the impact of this downtime.
This quake comes a year after a 7.3-magnitude severely affected one of the world’s top hydraulic suspension manufacturers, based in Fukushima prefecture. That event led Toyota to halt half of its 28 production lines for four days, with some remaining down for six days total.
Unforeseeable and unpredictable, the earthquake highlights once again the aggressive impact that natural disasters can have on supply chains and production. While the acute consequences of an event like this could be easily managed in more ‘normal’ times, this quake occurred against the backdrop of an ongoing global pandemic and the tragic return of war to Europe.
It goes without saying that the unfolding situation is a humanitarian disaster affecting millions and that, rightly, should be everyone’s first thought. As it stands, there are also significant implications for the automotive industry, particularly in Germany.
While the pandemic and semiconductor shortage had already hamstrung German auto production, new shortages and price spikes for raw materials are now taking effect. With both Ukraine and Russia supplying some key raw materials, like neon gas, palladium and nickel, there are implications for semiconductor production, emission control devices and battery manufacture. Simultaneously, the cost of energy and transport have increased with rising oil and natural gas prices.
Is there any way to protect supply chains against such significant and unpredictable events? Unfortunately, no. Fundamentally, the only way to really maintain supply chains in turbulent times is to proactively prepare, with contingency plans and emergency procedures in place and ready to go.
This volatile period is highlighting the necessity of close collaboration, business relationships, shared purpose and flexibility. These factors are essential to effectively reacting to evolving situations in a positive way with successful short- and long-term outcomes.
