Impact of Tohoku Earthquake on Toyota Company Essay Example

  • Category:
    Business
  • Document type:
    Assignment
  • Level:
    Masters
  • Page:
    3
  • Words:
    1724

Impact of Tohoku Earthquake on Toyota Company

Introduction

The supply chain of any company is likely to get interrupted in the event of any natural calamity and this is why Toyota Company’s case was inevitable when earthquake hit Japan in the year 2011. The entire business was affected considering that an earthquake is usually accompanied by massive loss of life and damage to several properties which may include the company’s premises. This task therefore seeks to critically analyze the article by Matsuo which hit the headlines in the year 2015 which was in response to Tohoku’s earthquake and subsequently discussing how the disaster affected Toyota Company. This will basically focus on the supply chain of the company and how the operation was eventually restored back to normalcy.

Over view

To begin with, it is very important to give brief details concerning the earthquake in question before discussing how it affected the company. The earthquake hit the coastal parts of Tohoku on the 11th of March in the year 2011 claiming several lives and several properties (Matsuo, 2015). My focus anyway is how it affected the supply chain of Toyota. First, the earthquake heavily affected the suppliers who were concerned with building parts and components for Toyota Company. This was among the major blows since there is no way a business can operate when goods can no longer be supplied. This means every other thing will be constrained to wait till goods can be outsourced from elsewhere. This not only affects the company but their prospective customers as well. It therefore became a very difficult for Toyota Company to cope with the situation since the customers were obviously in demand of the vehicles but they could not avail them on time (Kurahashi and Irikura, 2013, p.14). This heavily affected the operation within and outside the company and the situation would only be restored later when the country had recovered from the disaster which left several people and companies counting losses. Since Japan had some of their motor vehicle plants in the southern parts of the United States of America and Midwest, they travelled to Japan so that they would help them in rebuilding their company.

The role other companies played

While Toyota Company was struggling to get in terms with the situation, Detroit 3 automakers, an American automotive company played a key role in helping its counterpart to get over the loss considering that Detroit 3 automakers was not affected with the earthquake (Nöggerath et al. 2011, p.31). Although considered rivals in the face of the world, it was Detroit 3 company which came all the way to Japan to assist their suppliers in rebuilding the company. There came a time when the demand had gone so high that Toyota could not meet considering what had just happened to them and it was Detroit 3 which stepped up to help in meeting the customers’ demands for that matter (Jupesta and Suwa, 2011, p.15). This was an ambivalent position because in the process, they gained the customers mileage as well and this enabled them to rise above the local confines since prior to this the company was only very popular among the Americans. Detroit 3 is a tandem of three companies which are Ford Motor Company, Chrysler Automobile and General Motors. The company has since been steadily improving and it is among the major contributors of the economy of the United States of America. With Toyota struggling to win the loyalty from its discontented customers, Detroit three has been scaling higher every day and this is an impact of the Tohoku earthquake.

Emergence of new markets

Nevertheless, new markets spontaneously emerged in the United States of America and this even made the hopes of reclaiming the lost glory a nightmare (Fujimoto, 2011, p.53).

This was because automobile are manufactured in Japan and when the calamity eventually hit the country, their manufacturing had to stop or decline considering that raw materials and man power responsible for the manufacturing were affected. For the decision of starting up market in outside countries like the United States of America to be reached, there was a good reason and it was because America itself had registered great decline over the previous years and they were determined to put an end to this decline (Canis, 2011, p.45). Therefore, it was proper for Toyota to set up markets in outside countries since it would take Japan a couple of years to restore normalcy.

This is the table of North American auto industry before the earthquake

North American Production

The United States Sales

Source: (Canis, 2011, p.65)

Delay in supply

There should be a system whereby the raw materials and components for manufacturing vehicles can be obtained from the suppliers before they are actually needed and this could not happen in Japan after the disaster. Since the supply chain requires that the providers avail goods for the company to manufacture vehicles right on time (Benn et al. 2014, p.39). This would mean that the customers can as well get finished products on time. This became a major problem and customers had to rely on smaller companies for a long time. This profoundly affected Toyota Company and the economy of Japan as well. The supply chain of the automobile is not global because, in as much as Japan provides people from outside the country with vehicles, there are also people within Japan who are supplied with vehicles manufactured within that same country (Norio et al. 2011, p.55). This is why it is advisable that a company should also concentrate locally like Toyota has always been doing. This resulted in influencing the small businesses making vehicles as well, but most importantly it catered for locals as well. When a country manufactures vehicles, and its citizens can buy then it means they will buy the cars at a relatively lower price because there will not be import tax and this is good for both parties.

The closure of plants

Japan was constrained to close plants in Louisiana and Europe. This manifests how the disaster brought significant loss to Toyota and how the supply chain got a mortal blow (Herod, 2011, p.61). The government further went ahead to close more plants which were believed to be vulnerable in the event of another earthquake. This decision did not go well with Chubu plant which boasts being located in the most strategic Japan’s auto producing area which is to the southwest of Tokyo (Zaré and Afrouz, 2012, p.47). This profoundly affected Toyota since it is via this route that they obtain the power they use in the company. Power is critical for any business to operate and this is why it should always be in steady supply for the supply chain to remain uninterrupted in any business. The table below shows the impact of Japan’s earthquake on world vehicle production

Area of production

Decline in production from February 2011

The Japan’s output

Japan’s output outside Japan

Japan’s output globally

The output inside Japan

The Japan’s output out maker outside Japan

Japan’s global output

The output in Japan

The Japan’s output out maker outside Japan

Japan’s global output

The output in Japan

The Japan’s output out maker outside Japan

Japan’s global output

The output in Japan

The Japan’s output out maker outside Japan

Japan’s global output

Source: (Matsuo, 2015, p.221)

Unavailability of original parts

The absence of automobile parts also resulted to the unavailability of original parts of Toyota cars since it is only from the company manufacturing that model where one can get the original spare part. Customers always insist on original spare parts, but Toyota could not produce the components to its clients as a result of the earthquake. The supply chain was heavily interrupted as customers could not get what they want o time from Toyota Company. They, therefore, had an option of shifting to smaller companies for these spare parts and were constrained to settle for whatever these little companies had.

Conclusion

In conclusion, the supply chain suffered mortal blow in the event of Tohoku’s earthquake as both Toyota Company and its customers suffered from the hard situation the disaster had caused. The suppliers as well were not spared s this calamity came in plenitude to every stockholder. Raw materials could not reach the company in time, and this definitely slowed down the production.

Reference

Benn, S., Dunphy, D. and Griffiths, A., 2014. Organizational change for corporate sustainability. Routledge.

Canis, B., 2011. Motor Vehicle Supply Chain: Effects of the Japanese Earthquake and Tsunami. Diane Publishing.

Cooper, W.H., Donnelly, J.M. and Johnson, R., 2011. Japan’s 2011 earthquake and tsunami: economic effects and implications for the united states. Analysis.

Fujimoto, T., 2011. Supply chain competitiveness and robustness: A lesson from the 2011 Tohoku Earthquake and supply chain “virtual dualization”. Manufacturing Management Research Center (MMRC) Discussion paper Series, (362).

Herod, A., 2011. What does the 2011 Japanese tsunami tell us about the nature of the global economy?. Social & Cultural Geography, 12(8), pp.829-837.

Jupesta, J. and Suwa, A., 2011. Sustainable Energy Policy in Japan, Post Fukushima. Int Assoc Energy Econ Fourth Quart Newsl, 2011, pp.23-26.

Kurahashi, S. and Irikura, K., 2013. Short‐period source model of the 2011 Mw 9.0 Off the Pacific Coast of Tohoku earthquake. Bulletin of the Seismological Society of America, 103(2B), pp.1373-1393.

Matsuo, H., 2015. Implications of the Tohoku earthquake for Toyota׳ s coordination mechanism: supply chain disruption of automotive semiconductors. International Journal of Production Economics, 161, pp.217-227.

Nanto, D.K. ed., 2011. Japan¿ s 2011 Earthquake and Tsunami: Economic Effects and Implications for the United States. DIANE Publishing.

Nöggerath, J., Geller, R.J. and Gusiakov, V.K., 2011. Fukushima: the myth of safety, the reality of geoscience. Bulletin of the Atomic Scientists, 67(5), pp.37-46.

Norio, O., Ye, T., Kajitani, Y., Shi, P. and Tatano, H., 2011. The 2011 eastern Japan great earthquake disaster: Overview and comments. International Journal of Disaster Risk Science, 2(1), pp.34-42.

Olcott, G. and Oliver, N., 2014. Social Capital, Sensemaking, and Recovery. California Management Review, 56(2), pp.5-22.

Tainton, J. and Nakano, M., 2014. The behavioural effects of extreme events in global supply chains. In Advances in Production Management Systems. Innovative and Knowledge-Based Production Management in a Global-Local World (pp. 62-70). Springer Berlin Heidelberg.

Zaré, M. and Afrouz, S.G., 2012. Crisis management of Tohoku; Japan earthquake and tsunami, 11 March 2011. Iranian journal of public health, 41(6), p.12.