Supply Chain Resilience

Abstract

This research paper revolves around supply chain contingent options and controlled redundancies in an automotive industry. We know in today’s time it is imperative to keep our automotive supply chain as lean as possible to compete and stay in this business. Keeping the supply chain lean and keeping fewer suppliers will reduce the volatility, improve quality and would also lead to higher economies of scale and lower cost. But when disaster strikes, the same concept backfires and makes you run out of business. This trade off could be a game changer for many organizations. Lean organizations also work towards the goal of “zero inventory” and without the inventory; dealing with unexpected circumstances and inconsistencies grows more urgent. This research paper will also deal with the implementation of lean in the contingency planning along with affect of natural disasters on global supply chain in automotive industry. Risk assessment models along with lessons learned from black swan event will also be discussed followed by a personal analysis on contingency plan to be implemented on a supply chains to resist the disasters and recover with minimum financial damage.

Background

The 2011 Tohoku earthquake in Japan followed by a nuclear meltdown was the most powerful natural disaster in the history of modern Japan. This disaster not only impacted the Japanese automotive supply chain but disrupted the global supply chain in the automotive industry. Many companies including Toyota and General Motors rely on suppliers located in Japan which were heavily affected by the disaster to an extent where most of the companies had to halt their production lines for a prolonged period. For example, Renesas Electronics, a semiconductor company which supplied microprocessors and other electronic components for Toyota at the time only made chips in one factory in Japan which was decimated and Toyota could not get its hands on the components leading to an immediate shutdown of manufacturing processes. The supply chain management at Honda was also went through a lot of pressure under these testing times where they had more than 100 suppliers were in the affected regions and lost total contact with at least 40 of them. Automotive supply chain is as complex as it gets, with more than 20,000 parts required to produce an automobile, unavailability of even one part could lead to a delay and the product being unshipped leading to a greater lead time, and an increase in inventory holding cost. Another example, specialty paints, Xirallic pigments to be more precise, produced by Merck Chemicals International of Germany was the only company to produce these specialty paints for automobiles which according to the manufacturers produce “a strong glitter effect as compared to other pigments. Lighter body color, high color intensity and a