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. Japan Quake Reveals Fragility Of Modern Industrial Systems

Japanese manufacturers such as Toyota have been enthusiastic proponents of the just-in-time system as they seek to eliminate waste and boost productivity. The methods requires a complex production plan for automobiles, which are made up of some 30,000 parts, and disruption can cause major problems. "The just-in-time concept was supposed to be the most wonderful thing. But it now turns out that, in such contingencies, we do need sufficient stockpiling," said Noriko Hama, an economist at Doshisha Business School.
by Roland de Courson
Tokyo (AFP) July 19, 2007
Widespread disruption to Japan's automobile production after an earthquake has highlighted the industry's vulnerability to supply shortages as it expands aggressively to meet strong global demand. Honda Motor Co. on Thursday became the latest Japanese automaker to suspend part of its output for two days because of difficulties buying piston rings from Riken Corp. which was badly affected by Monday's quake northwest of Tokyo.

Toyota, Japan's top-selling automaker, has been forced to suspend production at all of its domestic plants from Thursday evening until Saturday because of problems buying parts from the same supplier.

"Automakers operate with such high efficiency even to the level that they have to stop production when disaster strikes," said Atsushi Kawai, an auto analyst at Mizuho Investors Securities.

"We are dealing with a disaster. We never know when or where one will occur," he said, adding that it would be hugely expensive for automakers to hold emergency stocks of parts in case of such an emergency.

The problems have highlighted the industry's heavy dependence on one supplier and the fragility of the "just-in-time" inventory system that means parts arrive at a plant just when they are needed to keep costs down.

"To secure production it is safer to have multiple suppliers," said Tatsuya Mizuno, an analyst at Fitch Ratings.

"But at the same time they face severe competition globally and have to seek more efficiency. That means fewer suppliers is better because it makes procurement costs cheaper," he said.

Japanese manufacturers such as Toyota have been enthusiastic proponents of the just-in-time system as they seek to eliminate waste and boost productivity.

Toyota president Katsuaki Watanabe said Thursday that suspending production was "unavoidable because the part supplies stopped."

The methods requires a complex production plan for automobiles, which are made up of some 30,000 parts, and disruption can cause major problems.

"The just-in-time concept was supposed to be the most wonderful thing. But it now turns out that, in such contingencies, we do need sufficient stockpiling," said Noriko Hama, an economist at Doshisha Business School.

Riken supplies Japan's auto industry with half of its piston rings for engines and 70 percent of its transmission sealants so production problems caused by Monday's quake have taken a heavy toll.

The auto parts supplier said Thursday it aimed to resume some of its production on Monday.

Among other automakers, Nissan Motor Co. is suspending part of its production from Friday until next Monday while Suzuki Motors and Fuji Heavy Industries -- the maker of Subaru vehicles -- are also reducing output.

Investors, however, seemed unfazed by the temporary cuts, which automakers expect to make up for by adding extra shifts in the future.

Toyota Motor rose 80 yen or 1.07 percent to 7,540, Nissan Motor added six yen or 0.46 percent to 1,319 and Honda Motor advanced 20 yen or 0.45 percent to 4,470 as the overall market rallied after Wednesday's sharp falls.

"The carmakers will suspend their production for one working day or so, which means they can just make it up by operating on a weekend. The impact should not be so significant," said Kawai.

Source: Agence France-Presse

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Technology Proves Precious In Deadly Japan Quake
Tokyo (AFP) July 20, 2007
Telephone connections are always among the most vulnerable lifelines in a natural disaster, but technology has turned into a crucial asset in Japan's latest earthquake. Japan's telecom operators, like other companies, suffered damage to infrastructure in Monday's 6.8 Richter-scale earthquake in central Niigata prefecture, which killed 10 people and injured more than 1,000 others.

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