How Natural Disasters Disrupt Supply Chain and the Solutions to Some Disruptions

Abstract

This report looks into the natural disasters that hinder the process of carrying out supply activities. It further looks into the possible solutions that can help overcome the disruptions that usually occur in the supply chain. The report elaborates the procedures that Nissan Company used to deal with in the global disaster that saw their supply chain disrupted. The report further outlines the methodology and strategies employed to ensure that the supply chain is restored. The practices of sharing information, managing production, and allocating supplies are some of the important issues that the report touches on regarding the restoration of the supply chain. The disasters and their effects on the overall business operation of the company are also discussed, with the counter-activities that enabled the company back on its feet also outlined. The aim of this report, therefore, is to outline the strategies that can help a firm deal with the occurrence of natural disasters that interfere with supply chain, which in essence goes on to disrupt the business activities of a company.

Have any questions about the topic? Our Experts can answer any question you have. They are avaliable to you 24/7.
Ask now

Executive Summary

The objectives of this report are to stipulate the natural disasters that can occur in a business set up, and providing possible solutions on how to handle these disasters. The details about the strategies and methods that are of importance in dealing with disasters that affect the supply chain of a business are well stipulated in the body of this report and in details. It contains the significance of sharing information, which turns out to be helpful from creating a pool of several ideas to provide a solution. The importance of slowing the production is also stipulated in this report to show how costs can be reduced for the supply chain. The report further elaborates the importance of allocating supply in a bid to stabilize the supply chain activities.

Introduction

Every business setup is usually faced with challenges, ranging from financial challenges, social challenges, to even legal challenges. Disasters are part of these challenges, and they come in different forms, such as earthquakes. These natural disasters have great impacts on the supply chain globally and even locally in as far as a firm is concerned. Japan is an example and a first-hand account of a nation that has in years improved its supply chain, thanks to the procedures and strategies it implemented. The automobile industry is one of the major industries that get hit hard when such a calamity as an earthquake occurs. In Japan, the Tohoku earthquake dug a huge dent into the economic status of Japan and the world. The global supply chain was destabilized as a result of the Japanese manufacturing industries succumbing to the effects of the powerful earthquake. This meant that all the economies dependent on Japan for supplies deteriorated. This was evident as the countries that depended on Japan for the supply of automobiles were forced to go short of supplies or find an alternative, making the supply chain distorted. Nissan suffered the same consequences as any other industry in Japan when the Tohoku earthquake happened. It however, employed different strategies that ensured that its supply chain was restored to normalcy, as is going to be discussed in the methodologies in this report. Disaster control plans are critical because a company will need a framework on which to operate to ensure the right steps are taken, and that will lead to better solutions to the problems the disasters cause to the supply chain (YoungWon, Hong, and Roh, 80-83).

Methodology

Sharing Information

This is a critical aspect in the quest of finding a solution to the disasters that causes the supply chain of a business be dismantled. It is evident in the case of Nissan, in the sense that sharing information helps create a common pool of ideas, which essentially leads to the ability to generate a better solution out of the many ideas available. The first step Nissan took after the disaster was to inform all of its global region beneficiaries of the response process. This created the sense of incorporating people from all over the globe such that each one of the people representing a certain region would come and give their contribution on how to handle the disaster. This, consequently, improved the response process and at the same time, the teams working on providing a solution received a boost in the form of many ideas that represented several regions globally. Every person from specific regions where the company is situated represents a possible solution concerning their region because they have a good idea of what the situation looks like on the ground. This helps restore the supply chain in time (Bradley, 485-486).

Supply Allocation

Supply allocation involves distributing the remainder of what can still be sellable in a company based on the need of the products. By need herein it means that areas requiring more of a product should be prioritized. Inventory is reserved for the better part of the market or specific customers. The main reason for allocation of supplies is to provide preference for the customers on the basis of issues like service-level agreements with customers, and for profit purposes. This activity can restore the supply chain to its original form, through ensuring that the agreements between the company and customers are not abandoned even after a disaster occurs. Allocating supplies by specific important issues keeps the line of supply alive; at least until a permanent solution is obtained. The supply processes do not undergo disruption to a large extent if this activity of supply allocation is put to practice. Nissan adopted this procedure after the Tohoku earthquake, and this helps it restore normalcy in the supply chain just two weeks after the disaster happens (Bradley, 487-489).

Production Management

Production management involves controlling the levels of production in the aftermath of a disaster. This means that production is by demand from customers. The resultant effect of this is that the costs decrease significantly because only people who order can receive goods. The implication herein is that the company tries to maintain a supply chain and at the same time avoiding unwanted costs because of an occurrence of a disaster. This also creates time for the company to establish and implement alternative supply. This is the same procedure that Nissan automobile company of Japan adopted after the occurrence of the Tohoku earthquake. Nissan can maintain a supply chain though not as strong as it was before, but at the same time, it has time to find other new alternatives as the goods in transit still dominate the supply chain (Bradley, 489).

Recommendations and Conclusion

This report, therefore, recommends that companies adopt the procedures of managing production, allocating supply, and sharing information whenever a disaster occurs. It is evident from the case of Nissan Company of Japan that these procedures work even though it can take a while before the fruits of these methods are seen. In conclusion, it is paramount that a company formulates a disaster management plan that is applicable in situations that involve the occurrence of a disaster (Min, Peng, and Chen, 16-18). Natural disasters are difficult to prevent but with a disaster management plan, the process of recovering from a calamity can be easy as is evident in the case of Nissan Company.

 

Works Cited

Bradley, James, R. “An improved method of managing catastrophic supply chain distributions.” Business Horizons 57.4 (2014): 483-495.

Park, YoungWon, Paul Hong, and James Jungbae Roh. “Supply chain lessons from the catastrophic natural disaster in Japan.” Business Horizons 56.1 (2013): 75-85.

Peng, Min, Yi Peng, and Hong Chen. “Post-seismic supply chain risk management: A system dynamic disruptions analysis approach for inventory and logistics planning.” Computers and Operations Research 42 (2014): 14-24.