Supply Chains In Japan Suffer Huge Disruptions Due to Lack of Strategic Supply Chain Plans & Vulnerability Analyses

Supply Chains In Japan Suffer Huge Disruptions Due to Lack of Strategic Supply Chain Plans & Vulnerability Analyses

Stockpiling Inventory Is Not the Answer

March 24, 2011 - Manassas, VA. – In the wake of the recent earthquake and tsunami in Japan, companies are struggling with numerous supply chain disruptions from lack of raw materials to damaged facilities to missing personnel. INSIGHT, Inc., a top international provider of supply chain planning solutions for the world's foremost companies, believes that ad hoc strategies such as drawing down inventory stockpiles are poor substitutes for proper supply chain continuity planning.

“Infrastructure has been severely compromised in Japan which, in turn, impacts the ability to both manufacture and distribute,” says Dr. Jeff Karrenbauer, president of INSIGHT, Inc. “Even if companies have stockpiled parts, it will be a long time before product flow is back to normal in Japan, so these inventories will eventually be depleted. Therefore, companies need to have a strategic supply chain plan in place that mitigates the impact of disruptions. Possible components of the plan include inventory positioning, alternative sourcing, transportation options and so on.”

Wall Street Journal reporter, James Hookway, wrote in an article titled, Worries Rise Over Disrupted Supplies, “Worries about supply-chain disruptions from Japan's earthquake continued, with some Asian businesses saying they were slowing production to preserve stockpiles of crucial components.” 

Strategic supply chain plans incorporating inventory analysis balance the cost of extra stock against the risk of lost sales, lost customers, and a negative impact on bottom-line profitability. Too much inventory results in higher costs, negative impact on cash flow, and too much working capital tied up and unavailable for other initiatives. Too little inventory results in missed sales, lost customers, and poor service. Strategic planning ensures companies have alternative sources of parts and supplies along with balanced inventory levels.

According to an analyst from Bank of America Merrill Lynch, the Japanese earthquake will result in at least four to six months of disruption to the world’s technology supply chain. Technology makers on average have four to six weeks of inventory, he added, which won’t be enough to span the recovery. Technology analysts say the most persistent worry for digital device makers is the supply from Japan of NAND flash — the lightweight storage chips used in smartphones, tablet computers, digital cameras and a variety of other components. 

The concern for dwindling supplies of consumer electronics parts and other technology components is spreading. Even where factories in Japan are operating, power outages, shortages of fuel and raw materials and ruptured logistics mean products and parts face delays in getting to customers. Apple may face shortages of key parts, including the battery and the flash memory used to store music and video, for its newly released iPad 2, according to a report from research firm IHS iSuppli. 

Here in the United States, the automobile and electronics industries have already felt the impact of the Japanese disruptions, including plant shutdowns and rising prices. Relief may be weeks away, while disruptions continue to spread. The world's No. 2 iron ore miner warned the disruptions posed a threat to its expansion plans, while shutdowns at plants manufacturing heavy earth-moving equipment and electronics will likely create additional pressures.

INSIGHT helps companies take a holistic look at their supply chain, including determining optimal network designs, identifying vulnerabilities, developing mitigating strategies, including alternative raw material and manufacturing sourcing plans, determining optimal inventory policies and levels and more to sustain companies affected by current events. 

About Insight, Inc.

INSIGHT provides optimization-based supply chain analytics and consulting services developed specifically to meet the dynamic business challenges prevalent in today’s business environment.  Founded by supply chain and operations research experts in 1978 with the goal of using world-class technology to add intelligence to decision making, INSIGHT solves the supply chain management issues of the world's foremost companies, including Abbott Laboratories, BASF, Clorox, ExxonMobil, Goodyear, GE, Kellogg, Nestle, PepsiCo, Pfizer, Procter & Gamble, Toyota, and Unilever. 

SAILS, INSIGHT's award-winning flagship product, can accurately represent a company's current business practices, from raw materials sourcing to capacity planning through delivery to the end customer. Insight Enterprise Strategy (IES) is the first and only product which combines full supply chain design capabilities with the cost and demand impact of marketing initiatives, thereby generating profit-maximized corporate strategies. The X-System®, a proprietary optimization engine, powers a family of powerful analytical tools, including the design of global supply chains, shipment planning and dispatching, production planning and scheduling and transportation procurement. In addition, INSIGHT provides optimization components, partnering with third-party software providers to deliver best-of-breed solutions.  Our software and services help firms minimize costs, maximize profits, free up capital, streamline operations, and increase customer service levels. For more information, please visit us on the Web at http://www.insightoutsmart.com.

For more information, please contact:

Becky Boyd

MediaFirst PR – Atlanta

becky@mediafirst.net

(770) 642-2080 x 214