Japan a small player in global supply chains?

Here’s a news flash for you: Japan is not as important to global supply chains as you may think. If you recall, in the immediate aftermath of the Japan’s devastating earthquake and tsunami there was a major concern around the world that the disaster would have serious impact on global supply chains, particularly those involving […]


Here’s a news flash for you: Japan is not as important to global supply chains as you may think. If you recall, in the immediate aftermath of the Japan’s devastating earthquake and tsunami there was a major concern around the world that the disaster would have serious impact on global supply chains, particularly those involving the automotive and electronics industries. Now more than two months after the natural disaster and lingering nuclear danger, any remaining effects on industry outside of Japan as result of disrupted supply chains is fairly limited and restricted to largely Japanese companies. Original concern had centred around items like automotive micro controllers, silicon wafers and chip packaging components for the global industry, for instance. But the largely lack of impact shows these concerns to be unjustified. The obvious explanation would be the resiliency of global supply chains that, coupled with quick action by companies concerned, mitigated most of the supply chain fall-out. But a recently released study by research firm, the Gartner Group, has shed light on the fact that there might be a vastly different explanation for the unanticipated outcome. In a survey of 750 supply chain managers across a wide range of industries worldwide, it found that Japan, despite being the world’s third largest economy behind the US and China, is actually only a small player in the global supply chain arena. When supply chain managers were asked to rank their first, second and third most important non-home based sources of manufactured parts and materials, China came in on top with 37 per cent followed by the US with 20 per cent and Germany with seven per cent. Japan only showed up at number eight position, along with Canada. “What’s remarkable is how relatively isolated Japan is,” wrote Kevin O’Marah, one of the authors of the report. “It’s far less integrated into the world’s manufacturing supply chains than you would expect, given the size of Japan’s economy.” Although clearly surprising, the explanation for this is fairly simple, according to Gartner. Much of Japan’s global manufacturing prowess and global competitiveness is based on only a few key industries such as the automobile and consumer electronics sectors. And these industries – along with much of large corporate Japan – rely on the traditional model of only one supplier exclusively supplying each large manufacturer. This close-knit relationship has led to many of the efficiency breakthroughs and innovations associated with Japan’s leading companies, according to Gartner. Thus while Japanese automotive manufacturers with plants in the US might have suffered disruption to their supply chains, other non-Japanese car makers were largely unaffected. Surely an interesting take on global supply chains, that most tend to assume are truly global, at least more than just in name. It will be intriguing to watch the recovery of Japanese industry and to see if this traditional relationship has what it takes to lead the recovery.